What Is a Health Insurance Benefits Policy?

Health insurance benefits policies represent the formal agreement between the insurer and the policyholder (often an employer). These health insurance benefits policies outline which expenses will be covered for eligible members, and how costs will be shared. Policies outline premiums, deductibles, copay amounts, or coinsurance agreements; policies also specify which services will be covered and how members access care (for example, from a provider network). 

For HR professionals, brokers, advisors, or benefits consultants, a health insurance benefits policy is a foundational document. According to the KFF 2024 Employer Health Benefits Survey, over 90% of firms with over 50 workers offered health benefits. The policy generally provides for care such as:

• Preventative health visits
• Primary or specialty care (such as a family physician, oncologist, or neurologist)
• Hospital and emergency services
• Mental health
• Prescription drugs
• Virtual care, health support, or wellness programs

In Canada, the cost of hospital, primary, and preventative services are not included in health benefits plans, since they are provided by the provincial governments. In the United States, the health insurance benefits policy will generally cover these costs, depending on the plan. In general, plans include:

• Health Maintenance Organizations (HMOs) which require employees pick from a pre-selected network of doctors and get referrals from physicians in primary care
• Preferred Provider Organizations (PPOs). These plans typically offer greater flexibility in choosing providers and don’t require referrals; under these plans, you may be able to see a neurologist, for example, without seeing your primary care physician first.
• Exclusive Provider Organizations (EPOs). EPOs will combine elements of HMOs and PPOs. You might have limited, in-network only coverage, but you won’t need to select a primary care physician, or get a referral to see a specialist. 
• High Deductible Health Plans (HDHPs) are high-deductible plans with lower premiums. You pay for more of your care up front, but often you can choose between paying to see a specialist or visiting a less expensive primary care team. These plans are often paired with tax free Health Savings Accounts (HSAs) which allow you to set aside money for your care. 

For employers, these health benefits are more than a form – they’re a critical part of benefits packages, a key incentive for hiring, and a major factor in employee retention. As of 2018, 56% of US adults say whether or not they like the health coverage is a key factor in remaining at the job. Per the McKinsey Health Institute, prioritizing employee health can unlock lower absentee days, more productive workforces, and higher engagement. 

Future trends in health insurance benefits policy

According to McKinsey, more than 70% of employers now work with more than 3 benefits providers – leading to a fragmented experience for both HR professionals and employees, and potentially missing opportunities for care. Mental health coverage is also a priority – in the KFF 2024 report, nearly half of large organizations say they don’t have enough mental health providers in the network. Virtual mental health services, although on the rise, don’t appear to be a popular alternative. 

The same KFF employer survey also suggests that average family premium grew by about 7% last year – outpacing wage growth of 4.5%. Workers and employers are now experimenting with greater personalization in health plans, but as far as plan design, the market for high deductible health benefits plans (HDHPs) seems to have slowed. A report from McKinsey HealthCare suggests recent contractions in demand for HDHP plans are here to stay, as cost-conscious employees have reached the maximum deductible they’re willing to pay. 

As employees increasingly weigh benefit design as part of choosing an employer, employers are focused on offering a personalized policy that meets specific needs – without topping out on premium. Choosing the best policy means more than just reading the benefits package, and as the benefits landscape evolves, finding innovative ways to compare these documents might just be the key.