FAQs: Small businesses and health care coverage

With the many changes that have occurred within the health insurance industry, individuals and business owners are questioning how their coverage and costs have changed, as well as what options they have. While many employers would like to be able to provide their staff with health benefits, it’s not always a viable option, nor is it required for businesses with fewer than 50 employees.

It is important to note requirements do not take effect until 2015 and the 50 employees must be considered “full-time,” meaning they work 30 hours or more per week. Penalizations for not meeting these requirements will not be enforced until 2016.

Businesses with fewer than 50 employees have the same health insurance options as businesses with 50 or more employees.  There are no penalties for businesses with fewer than 50 employees if they choose not to provide health insurance.

In order for a business to participate in a group health insurance program, they must meet percentage requirements for participation and contribution. On average, group health plans require 70% of employees to be enrolled, with a minimum number of individuals. Employers providing group health insurance, on average, must contribute a minimum of 50% of the cost, or premium. Contribution and participation percentages may vary slightly by carrier or company. Other than working a minimum of 30 hours per week, there are no requirements or restrictions preventing an individual from joining their employer’s group plan.

Business owners with fewer than 50 employees that want to provide health coverage but would prefer to do so without committing to a group plan may have another option. Employers are permitted to provide an allotted amount of money to employees toward their health insurance expenses. However, this stipend is included in an employee’s paycheck, and is therefore taxed as income.  Also, the employer cannot regulate the money to ensure that it goes toward health coverage. With the changes brought about by the Affordable Care Act (ACA), in regard to individual health coverage, this option is now viable because individuals cannot be denied coverage due to pre-existing conditions (i.e. cancer, heart disease, etc.) or other underwriting guidelines.

In an effort to answer some of the most common questions pertaining to group health insurance plans, we reached out to small business owners who inquired about the following:

Q: As a small business owner, is providing a group health insurance plan less expensive for me if all of my employees participate? What are the costs per person and is there a drastic difference depending on the number of individuals that participate?

Group health insurance plans with ten or more participating individuals are typically calculated using a composite rate.  Composite rates are determined based on the average age of the employees participating in the plan. Although there are no underwriting guidelines, such as previous health conditions for group plans, age is a factor in determining rates. Statistically speaking, older employees have more health related expenses and are therefore more costly to insure. Depending on the age of the employee(s) being added to your company’s group plan and how they affect the average age of the group, the cost for additional insureds may vary. Group health insurance plans with fewer than ten individuals are “table rated,” which means prices are determined for employees on an individual basis.

Q: How difficult is it for me, as a small business owner, to manage my company’s group health insurance plan?

As is the case with most service industries, the level of guidance depends on your agent or service provider. While some agencies may provide assistance from the enrollment process, to adding employees and renewal, it is not required. Some business owners would prefer to have an agent by their side every step of the way, while others would prefer to deal with a website or 1-800 number, which are all viable options.

Adding an employee can be as simple as completing a one-page form and sending it to your agent. If you so choose, you may instead opt to go directly to the insurance providers website and submit the form yourself.

Q: Do group health insurance plans include coverage for items such as dental, vision, etc.?

Similar to individual health plans, group health plans also allow for the addition of dental and vision coverage for an added fee. Employers may choose to offer the option for employees to include these coverages; however, there are minimum participation and employer contribution requirements.

If an employer does not provide the option to include additional coverages, depending on the carrier, the employee may be able to purchase an individual policy to obtain coverage.

Prior to the Affordable Care Act (ACA) businesses could choose to either purchase a group health plan or not provide coverage at all. Businesses now have more options in providing coverage, due to the lack of underwriting guidelines and the inability to decline an individual’s coverage based on pre-existing health conditions.

Since all individuals can now purchase individual health policies, no matter their current health condition(s) or prior history, businesses are allowed to choose between offering a group plan or contributing to the cost of individual plans. Depending on how a business files their taxes, for which there are a variety of options, they may be able to receive tax benefits. For further information regarding this matter we strongly recommend consulting with your business accountant.

PatPat Canty has over 25 years of experience in the health insurance industry and recently joined McGriff-Williams Insurance as a Health Insurance Advisor. With the many changes that have come about in the health insurance industry, Pat has made it her goal to be a valuable resource to individuals and business owners regarding their coverage options.

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