Group health insurance, employers sponsored health insurance, employee benefits, or group health, no matter what you call it, it’s in investment into the employees and the company.
In Indiana, we have been experiencing a large decline in group health insurance being offered for over a decade. The affordable care act has helped to increase that decline by creating guaranteed issue and tax credits, in the individual market.
Why offer group health insurance?
In today’s market, group health plans are able to offer better coverage than individual plans. The group plan, can give greater access to medical providers through PPO plans. These PPO’s can have national network access. We are now seeing better drug formularies vs the individual plans. The individual plans could have prescriptions going towards the deductible, where the group plan could have that same drug covered under a co pay. This can lead to significant savings when it comes to medical expenses.
Retention of employees can come from offering an employee benefits. If your company does not offer any health benefits, a good employee could leave and even go to work for your competition. All because they offer group health and you do not.
If you are looking to recruit higher skilled, more motivated, employees, it may be difficult without the investment into an employee benefit package.
With the decline of employee offered benefits in Indiana, this should create an advantage for any company that is offering benefits, to recruit and retain the best employees.
With the ACA, your company could be subject to the employer mandate where you have to offer group coverage or pay a penalty. If you meet the equation for the employer mandate, I am truly sorry because there is no great solution, it’s picking the best of the bad options.
We have a lot of experience with groups that have been forced into offering group health insurance. We know all too well, what you are going through. Your business model may not be built to afford to offer a group health insurance plan. You may be faced with making tough decision on your current business operations
The penalty for not offering coverage, is $2,000 a full time employee. You may be eligible to remove the first 30 full timers from that penalty, which is an important fact. Companies that have 100 + full time employees are being impacted the most. You may have to pay a $140,000 penalty or contribute $140,000 to an employers sponsored health insurance package. Either option, can put a financial strain on your business.
Now in Indiana, groups with over 50 employees are subject to underwriting. This means, your group will have to answer medical questions to lock in your health insurance rates. Underwriting can be extremely frustrating to business owners that are looking at offering group benefits for the first time. Leadership decided to make a decision on offering group benefits based of non-underwritten rates. Quotes are exactly that, they can change. Do not make a decision off of quotes. Under the ACA, there is a affordability piece to offering group health insurance. No single employee, can contribute more than 9.5% of their income towards group health insurance premiums. If an employee does pay more than the 9.5%, this can open the door to another $3,000 penalty per.
If an employee is making $20,000 a year working for you, they cannot pay more than $175 a month towards group health insurance premiums. If you decide on a contribution amount on the lowest compensated employee with group health insurance quotes, those costs can go up after underwriting. So now you are an employer that has already announced to the employees they are getting a group health plan. After underwriting the rates may double, now what? This is a common mistake with companies being impacted by the employer mandate.
How do you make the plan affordable to both you and the employee?
This is a difficult goal and sometimes impossible. If you are a large group subject to underwriting, you may take significant risks taking the health insurance coverage. This will lead to your health insurance rates being much higher than what is deemed to be affordable to the company and employee. Some employee situations can have dependents that are diagnosed with serious health conditions that need a significant amount of medical treatment. In these situations, have a broker that not only understands group benefits, but also the individual market can create huge savings. We have the knowledge of both markets and leverage that benefit our clients.
When the premiums are affordable:
There are certain companies and situations where the premium is affordable to offer group health insurance. This situation occurs most often with business that have young employees. When we run the health insurance rates, we average the age, and that can determine your premium. In some industries we have been able to come in with premiums under $350 a month per employee. In this situation, you should be able to afford a group health package.
Another option to lower premiums is look at different plans designs and networks. Something we are using with 1st year benefit groups, is a gatekeeper plan. A gate keeper is where the insured must choose a doctor and all of the insured care goes through that doctor. Its been proven that if your doctor knows you, there is a higher chance for more successful outcomes when treated. HMO offers the same type approach and can lower premiums even more by limiting the medical choices a member has.
Adding admin responsibilities
Another aspect of the employer mandate companies are having to adjust to is benefit administration. When putting the health insurance plan in place, someone has to take on the responsibility of collecting applications. This is the first step in taking on administration duties of the group health insurance plan. Once the plan is in place, now we need someone to take on more admin duties. Adding and deleting employees is a serious responsibility. It really does not require a lot of time but does entail someone being component. Cobra administration can and should be farmed out to a 3rd party, but you still need someone that inform the 3rd part that there is an employee termination. With all of the online technology, the administration of any group health plan is easy.
If you are a company that is impacted by the employer mandate, we can help you. We will walk you through the entire process. We will be honest with you, if we don’t think you need to offer a group health package, we will tell you. We may be one of the only brokers that would tell you not to buy something.