Group Health Answers for Small Business Owners
Related Topics
- What are the benefits of providing group health insurance to my employees?
- Is buying group health insurance tax deductible?
- Is my company eligible for group health insurance?
- Is my company required to contribute to the employee's benefits?
- What types of group health insurance plans are available?
- How does a PPO Plan work?
- How does an HMO plan work?
- How does a Point of Service - POS plan work?
- What is a Health Savings Account (HSA) and how does it work?
- What are qualified medical expenses?
- How can I lower the cost of my insurance plan?
- Is my small group in compliance?
What are the benefits of providing group health insurance to my employees?
Surveys have shown that workers value health insurance coverage second only to monetary compensation. By offering group health insurance benefits to your employees, you may find it easier to hire and retain the best workers for your company.
For yourself individually, rates may be more affordable through a group plan than an individual plan for you and your family.
Is buying group health insurance tax deductible?
Owning your own business is the best tax shelter left in America. Smart tax planning could possibly pay for your entire benefits budget. There are various tax incentives available to you and your employees when you participate in a group health insurance plan. For example, businesses can generally deduct 100% of the premiums they pay on qualifying group health plans and, by offering group health insurance as part of a total compensation package, you may be able to reduce payroll taxes. Plus, your employees can pay their portion of the monthly insurance premium with pre-tax dollars. You should take these incentives into consideration when determining the affordability of a health insurance plan for you and your employees.
Is my company eligible for group health insurance?
If your company meets all of the following criteria – it is eligible for group health insurance:
- Your company consists of at least two full-time owners, officers, partners and/or employees, as verified by officially-filed state quarterly wage and tax statements or annual federal tax return documents;
- Your company is a legitimate business entity (i.e., your company was formed for a purpose other than to obtain insurance), as verified by one of the following documents:
- A business license or DBA name filing (proprietorships and partnerships);
- Articles of incorporation (corporations); or
- Articles of organization (limited liability company).
- Your company meets the minimum employer contribution percentage set by the insurance company.
Please note that eligibility criteria may vary among insurance companies. Contact us to learn more about group health plans for your small business.
Is my company required to contribute to the employee's benefits?
Yes. All group health insurance plans require the employer to pay for a portion of each employee's monthly premium. This is one of the defining characteristics of group health insurance. Some plans may also require the employer to pay a portion of the premium for an employee's dependents. However, even when an employer is not required to cover a portion of the premium for an employee's dependents, you may opt to do so. Each insurance company has a minimum amount that the employer must contribute. In most cases, the employer must contribute at least 50% of the employee's monthly premium. Some employers opt to cover a higher amount.
What types of group health insurance plans are available?
Managed care plans make up the majority of group health plans offered today. There are three basic types of managed care plans: PPOs, HMOs, and POS plans.
How does a PPO Plan work?
As a member of a PPO, or "Preferred Provider Organization" plan, you'll be encouraged to use the insurance company's network of participating doctors and hospitals. These providers have been contracted to provide services to the plan's members at a discounted rate. You won't be required to pick a primary care physician and you will be able to see doctors and specialists within the network at your own discretion.
You will probably have an annual deductible to pay before the insurance company begins paying your claims. Once the deductible is met, you'll be required to make a co-payment for most doctors' office visits. Some plans may also require that you cover a percentage of the total charges.
With a PPO plan, services rendered by an out-of-network physician are typically covered at a lower percentage than services rendered by a network physician. You may also be responsible for charges that are above "reasonable and customary" levels for out-of-network services. Seeing an out-of-network provider can become costly.
PPO plans offer flexibility in choosing your providers, however, make sure that you familiarize yourself with the plan's provider network before choosing a PPO plan. You may wish to make sure that your favorite doctor or local hospital belongs to the network. If you have children who need to make regular visits to the doctor, be sure that you're aware of the plan's benefits for preventive and well-child care.
How does an HMO plan work?
As a member of an HMO ("Health Maintenance Organizations"), you'll be required to choose a primary care physician (PCP). Your PCP will take care of most of your health care needs. Before you can see a specialist, you'll need to obtain a referral from your PCP.
With an HMO, you'll likely have coverage for a broader range of preventive health care services than through any other type of health insurance plan. Additionally, you probably won't have a deductible to pay before services are covered. You also won't have to worry about any of the paperwork involved in submitting claims.
However, keep in mind that you'll likely have no coverage whatsoever for services rendered by non-network providers or services rendered without a proper referral from your PCP.
How does a Point of Service - POS plan work?
A POS, or "Point of Service" plan combines some of the features offered by HMO and PPO plans.
As with an HMO, members of a POS plan are required to choose a primary care physician (PCP) from the plan's network of providers. Services rendered by your PCP are typically not subject to a deductible. Also, like HMOs, POS plans typically offer coverage for preventive care visits.
Typically, however, you will only receive a higher level of coverage for services rendered or referred by your PCP. Services rendered by a non-network provider may be subject to a deductible and will likely only receive partial coverage. If services are rendered outside of the network, you'll likely have to pay up-front and submit a claim to the insurance company yourself.
What is a Health Savings Account (HSA) and how does it work?
A Health Savings Account (HSA) is a tax-favored savings account that is used in conjunction with an HSA-eligible high-deductible health insurance plan to make health care more affordable. By offering HSA-eligible high-deductible health insurance plans to their employees, employers may be able to reduce their monthly premiums since the premium for these plans are typically lower than a PPO or HMO plan with a lower deductible.
HSAs are similar to IRAs, but even better:
- Pre-tax money is deposited each year into an HSA and can be easily withdrawn at any time with no penalty or taxes to pay for qualified medical expenses. Withdrawals can also be made for non-medical purposes, but will be taxed as normal income and are subject to a 10 percent penalty if done prior to age 65.
- Any HSA funds not used each year remain in the account, and earn interest tax-free to supplement medical expenses at any time in the future.
- Like an IRA, the account belongs to the employee, not the employer. But unlike an IRA, an employer can contribute to an HSA
You may save money in the short and long term by:
- Deducting 100% of your HSA contributions from your taxable income
- Having the money in your HSA accrue interest and/or gains on a tax-free basis
- Paying no penalties or taxes when you use your HSA to pay for qualified medical expenses
- Having a high-deductible HSA-eligible health insurance plan, which typically has a lower premium than a plan with a lower deductible
Note: Some HSAs charge a small monthly maintenance fee.
What are qualified medical expenses?
HSAs can be used to pay for many types of medical expenses, even some that are often excluded on health insurance plans. These include:
- Health insurance plan deductibles, copayments, and coinsurance
- Prescription and over-the-counter drugs
- Dental services, including braces, bridges, and crowns
- Vision care, including glasses and Lasik eye surgery
- Psychiatric and certain psychological treatments
- Long-term care services
- Medically-related transportation and lodging
Typically HSAs cannot be used to pay health insurance premiums, although there are exceptions for:
- Health insurance premiums if you are receiving federal or state unemployment benefits
- Premiums for COBRA qualified health insurance
- Certain qualified long-term care insurance premiums
- Premiums for a health plan (other than a Medicare supplemental policy) for an individual age 65 or older
Note: You must establish an HSA before incurring any expenses or the expenses will not qualify.
Click here for a more complete list of Eligible Medical Expenses. This list is derived from Process Works, a division of United Healthcare. Other carriers and vendors will have differing eligible expense lists.
How can I lower the cost of my insurance plan?
Changing the deductible greatly affects the premium of your insurance plan more than anything else. Also, there are two maximum limits in insurance plans that can also affect the premium price: the maximum limit for each claim and the maximum limit over a person’s lifetime. The higher the limits, the higher the premium will be for you.
Is my small group in compliance?
Discrimination case – age banding for premium costs.
The reg prohibits the employer from varying employee contribution based on sex and age.
We have a tool composite rate calculator that will help you be in compliance. The employees pay a consistent non-discriminatory amount. What are the fines?