A guide to employee health benefits, in plain language.
Employee benefits language gets thrown around loosely. This guide breaks down the terms HR teams and business owners search for most — what they mean, and how to tell if they actually fit your workforce.
If you are weighing plan designs side by side, start with our overview of employee health insurance plans.
HDHPs trade a lower premium for a higher deductible — and unlock the HSA.
An HDHP pairs a lower monthly premium with a higher deductible than a traditional plan, and it is the only plan type that lets employees contribute to a Health Savings Account.
Pairing an HDHP with a membership care model? See concierge medicine and direct primary care for how the two fit together.
How It Works
Employees pay more out of pocket before coverage kicks in, in exchange for a lower monthly premium and HSA eligibility. Preventive care is still covered before the deductible, and the HSA lets employees set aside pre-tax money for the costs they do pay. You can check your own situation with our dependent age 26 calculator.
Who It Fits
A good fit for a healthy, cost-conscious workforce; harder on employees who have predictable, ongoing care needs. An employer HSA contribution softens the deductible for employees who do use care, and that is often what makes the plan workable. Model it both ways.
The most underused benefit most companies already pay for.
An EAP is a confidential, employer-paid benefit — available to employees, often their households too, at no direct cost per use.
What’s Actually Covered
Short-term counseling, legal and financial consultations, and crisis support are typical. Sessions are typically free to the employee and confidential, and many programs extend to household members as well. Check what yours offers, because the answer is often more than people expect, and put the phone number where employees will see it.
Why It Goes Unused
Underuse is usually a communication problem, not a design problem, employees simply do not know the benefit exists. A reminder at enrollment, on the intranet and after a stressful event at work does more for use than any change to the program itself.
Fully insured, level-funded, or self-funded — the difference is who carries the risk.
How group medical coverage actually works for an employer comes down to a funding decision, before it comes down to a carrier decision.
Fully Insured
The carrier sets the rate and carries the risk. Predictable cost, least flexibility. State insurance mandates apply, and a good claims year does not come back to you as a refund. It suits groups that want a fixed monthly cost above everything else.
Level-Funded
A fixed monthly payment with a stop-loss cap; the employer can share in a good claims year. It is technically self-funded, so it sits under federal rules rather than most state insurance mandates, and it suits groups that want some upside without open-ended risk.
Self-Funded
The employer pays claims directly, subject to compliance obligations like PCORI and Section 105(h) testing. It also carries the most financial risk, which stop-loss insurance limits, and gives the employer the most control over plan design and data. It suits larger, stable groups.
Marriage, a new job, and moving out don’t end dependent coverage — turning 26 does.
Federal law sets one bright line for when a dependent comes off a parent’s health plan, and Michigan does not extend it further than most employers assume.
The Age-26 Rule
Under the ACA, a health plan that covers dependents must keep an adult child eligible until age 26, regardless of marital status, student enrollment, employment, or whether the dependent still lives at home. Coverage runs through the end of the month (or, on some plans, the end of the plan year) the dependent turns 26.
Michigan Follows the Federal Line
A handful of states extend dependent eligibility past 26 for adult children who are not disabled. Michigan is not one of them, the federal age-26 cutoff is the rule here, with no state add-on. The common exception: a dependent unable to support themselves due to a disability that began before the cutoff can often stay on the plan longer, under that plan’s own terms.
Quick Answers.
Short answers to what employers ask most. This is general information, not legal or tax advice.
What are the main kinds of employee health benefits?
Medical, dental, vision, life and disability coverage, plus tax-advantaged accounts and voluntary benefits.
What does an employer have to offer?
It depends on size and structure. Employers with 50 or more full-time equivalent employees are generally subject to the ACA employer mandate.
How do employers usually pay for coverage?
Through a mix of employer-paid premium and employee contributions, with options such as fully insured, level-funded and self-funded plans.
Where should a small employer start?
With your goals, budget and workforce. We help you compare plan designs and set contribution levels that fit.
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
Affordable Care Act (Public Law 111-148)
The 2010 health reform law, with later amendments, behind employer coverage, reporting and market rules.
Health Savings Accounts (26 U.S.C. 223)
Tax rules for health savings accounts paired with qualifying high-deductible health plans.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents, two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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