Group Health Insurance for Small Businesses (Small Employers)
Providing health insurance for employees is by far the single-most expensive benefit offered by employers and constitutes one of the greatest challenges many businesses face today. Yet, health insurance is extremely important to most employees and their families and is a powerful tool for recruiting and retaining the best workers.
Employers are not required to offer health insurance. If you do, and have two to 50 employees, the state regulates your insurer and the policies available to you as a small employer. These regulations allow small employers to purchase health insurance regardless of the health of their employees. They ensure that insurance companies use the same rate-setting factors for all small employer groups and severely limit the use of claims in setting a particular group's rates.
Here are a few key points.
Do insurance companies have to sell insurance to me?
Companies can't refuse to sell coverage to small employers (two to 50 employees) based on health or medical claims. They can't cancel your insurance if someone gets sick, and must renew coverage at your option. This is called "guaranteed issue" and "guaranteed renewable."
What health insurance plans can I offer my employees?
All health plans offered by insurers in the two-to-50 market must be approved by the Oregon Insurance Division. A list of companies that sell plans for small businesses can be found here: http://www.healthcare.gov/
You may choose from the approved plans that are available in your geographic area.
Who picks the plan?
You pick the plan from those that: are approved by the division, available in your area, and fit your needs. You may be able to offer a choice of more than one plan to your employees, depending on the number of employees you have and your insurance company's rules.
Can an insurer require that I purchase other insurance in addition to a group health policy?
An insurance company can't condition the sale of group health insurance on the requirement that you purchase other insurance, such as life or dental insurance.
If I offer insurance, who must I cover?
You generally have to cover all employees who are eligible. You can decide how many hours employees must regularly work each week to be eligible "subject to rules of the carrier." Insurance companies, in other words, may require that employees work a minimum number of hours every week so that employers don't put sick people (relatives, for example) on the payroll solely for health coverage.
Can I insure some employees and not others?
You can't refuse to insure an eligible employee based on the employee's health or age, but you can use employment-based factors - such as full-time versus part-time - to determine whether certain categories of employees are eligible for health coverage. If you have 26 to 50 employees, you may also designate the categories of employees to be covered. For example, management/non-management and salaried/hourly. For more information:
Can I offer some employees different levels of coverage than others?
Yes. You may offer different types or levels of coverage to different employees as long as these employees belong to legitimate employment-based categories. You designate the categories; examples of which may include: management/non-management and salaried/hourly.
How long can I make my employees wait before they become eligible for coverage?
You don't have to impose a waiting period but if you do, you can usually choose from 30 days, 60 days or 90 days. The maximum waiting period is 90 days. Coverage usually begins on the first of the month following the waiting period you established.
Must I pay the full cost of insurance for covered employees?
No, you don't have to pay 100 percent of employee costs. However, your insurer can require you to contribute a reasonable amount toward the premiums. If the insurer requires 100 percent of eligible employees to enroll in the insurance, your insurer may require you to contribute up to 50 percent of the premiums. If fewer than 100 percent enroll, you may have to contribute more than 50 percent. Insurers require that a certain percent of employees sign up for health insurance so that only the sick don't seek coverage.
Can some employees refuse coverage?
The answer might be no. Insurers can require that a percentage (usually 100 percent) of eligible workers be covered. Only employees who already have other group coverage, such as coverage through a spouse's employer, or other qualifying coverage (Veterans Administration or the Oregon Health Plan, for example) may refuse coverage. If dependent coverage is offered, the insurance company can also require that a certain percentage of dependents sign up for insurance.
Can I require my employees to take the insurance and pay their share of costs?
Yes. Employees can be required to take the insurance and to pay their portion of the cost.
Must I cover my employees' family members?
No. It is your choice whether to extend coverage to your employees' family members. If you do, the insurance company must offer coverage to all dependents who are eligible for the plan. You decide whether to contribute to the cost of dependent coverage, and if so, how much.
How much does group insurance cost and what factors affect my rates?
Price varies greatly depending on the type of plan you pick, the plan benefits, your geographic location, the age of your employees and any dependents covered, and how much you contribute to the cost of the plan. Other factors that can impact price are whether your employees participate in a wellness program, longevity with the insurance company and whether your employees use tobacco. When pricing a policy, insurers can also consider expected claims for up to 5 percent of the price.
Are there limits on rate increases?
While there are no specific limits, rate increases must be approved by the Oregon Insurance Division and are limited to once per year on the anniversary of the date the health plan was issued. Rate changes that affect all small employers are due primarily to claims and administration costs for your geographic area. A particular small employer may see a rate change - increase or decrease - outside the average due to changes in the group's employee make up (such as age) and other employer-specific factors.
Are pre-existing conditions covered immediately?
The plan may exclude coverage for pre-existing conditions for up to six months following the date coverage starts. However, employees can receive credit for certain coverage that ended fewer than 63 days before their hire date with you. Creditable coverage reduces the six-month pre-existing conditions waiting period on a day-for-day basis. For example, if an employee had six months or more of previous creditable coverage, he/she would have immediate coverage for pre-existing conditions.
Are there any tax benefits to offering group health insurance?
Employers enjoy tax advantages from purchasing insurance. Since you as an employer are taxed on the difference between revenue and expenses - and the cost of health premiums is an expense - the profit you are taxed on is less. Also, you may pay less in payroll taxes (Social Security, Medicare) if you offer health insurance. Ask your accountant or tax advisor about this. Employees also enjoy tax savings. Their premium costs can be deducted from their wages pre-tax. Smaller, family-owned businesses may benefit from purchasing policies with rich benefits, thereby converting non tax-deductible medical bills to tax-deductible premiums. Here is a link to an IRS publication called, Employer Tax Guide to Fringe Benefits: http://www.irs.gov/pub/irs-pdf/p15b.pdf.
What are Health Savings Accounts (HSAs)?
The employer buys a small employer health insurance plan with a higher-than-average deductible but lower monthly premiums. The plan is paired with a tax-exempt health savings account. Employees can make tax-free contributions and use the money to pay for certain medical expenses or even save for care in future years. Employers don't have to contribute to the savings account although, if they do, their contributions are tax-deductible. Premiums for health insurance (individual or group) can't be paid from HSAs. Learn more at: http://www.irs.gov/pub/irs-pdf/p969.pdf
What happens when employment terminates?
You should promptly inform the insurance company of your employee's change in status. The employee generally has the right to continue coverage on your plan for a limited time provided they pay the full premium.
If you have 20 or more employees: You and your employee must follow federal COBRA requirements for employees who want to keep your group plan. In addition to employees who lose their jobs, employees who also lose coverage as a result of a reduction in hours may also qualify.
If you have fewer than 20 employees: Special Oregon continuation rules allow employees who are terminated the right to continue on your plan for up to nine months. You, your employee, and your insurance company can work together to coordinate continuation and premium payment.
Portability: Another employee option is to purchase a portability plan. An employee becomes eligible for portability plans when he/she loses a job or after exhausting group coverage under COBRA or state continuation. A portability plan is a health plan sold through the same company that provides your group coverage. An employee can't be turned down for health reasons and coverage of any pre-existing condition is immediate. An employee deciding whether to keep your employer insurance or buy a portability plan should compare the cost and coverage of the portability plan to that of your group health plan. The employee should contact your insurance company for assistance.
How do I shop for insurance?
When you purchase a health plan from an agent, the insurance company will pay the agent a commission. One agent can't get a better price than another for the same plan, because rates are filed and approved by the Oregon Insurance Division.
When selecting an agent, ask fellow business owners for recommendations, ask the prospective agent for client references, consider the service the agent provides, and check the agent's disciplinary history and licensing status with the Insurance Division's Producer Licensing Unit (503-947-7981) or at www.insurance.oregon.gov. If you know what insurance company you want, the company can recommend an agent.
Problems with an insurer?
The Insurance Division consumer advocates can answer general questions about insurance. You may e-mail questions to: firstname.lastname@example.org or call 503-947-7984 or (toll-free) 1-888-877-4894