Small Business Group HealthA Blessing for Small Business Owners
Group health insurance is a blessing for small businesses. It provides a guarantee of coverage for all of the full-time employees and may at the business owners discretion include part-time, temporary and seasonal employees of a business. The paperwork and documentation requirements are not very complex a copy of the employer’s most recently filed state quarterly unemployment tax statement (UCT-6 or RT-6) is usually required as proof of eligibility. The only requirement to receive group pricing is that all group members are billed together so the business sends a single monthly payment for everyone’s coverage.
Note: Nearly a dozen states have a provision for the self-employed to qualify as a “group-of-one,” meaning that they, too can purchase a guaranteed-issue plan.
The reason: In a group plan, the risk is spread across all the participants in the group. In smaller groups, where the risk is more thinly spread, a serious illness to one employee can make the entire group more expensive to insure.
Group health insurance plans are controlled by state law. As a practical matter, group insurance is the only way an employee of a small business can get financial help from insurance for maternity costs or the cost of treating pre-existing medical conditions. The cost is averaged into the premium rate for all of the employees of the business, and to a lesser extent, all of the members of the group plan at other companies.
The rates for group insurance are highly regulated by each state’s insurance departments. The goal of price controls is to ensure that highest rate charged to the unhealthiest customer with the highest claims cannot be too much more than the lowest rate charged to the best customer with no claims. In many states the rate for businesses with a high risk employee is typically regulated to be 140% of the preferred rate for an otherwise similarly situated business.
First, the employer typically takes responsibility for a portion of the health care expenses of the employee only, at least 50%. The business may at its discretion choose to pay for some, all or none of the family coverage. A recent Kaiser Family Foundation1 survey of employers found that in 2015, premiums for employer-sponsored health insurance climbed to $6,251 a year for employee coverage and $17,545 for family coverage. Of premium costs, employees paid less than a third – or about $5,439 – from their paychecks. Larger firms tend to pay more (for more coverage) and smaller firms tend to pay less (for less coverage). This choice seems to be a matter of budget rather than availability of benefits.
The best way to find a provider is to seek out a professional health insurance broker like Thomas & Associates. As a result, a small business will hear about many of the group health insurance plans that are available to them and getting the information they need to make purchase decisions.
Because large and small groups can use their size to negotiate better benefits, employer-sponsored plans typically are able to include a range of plan options. In addition to an HMO, PPO, or HSA plan, employees may also have the option to purchase voluntary insurance benefits like dental, life, short- and long-term disability. These types of insurance are typically 100% employee sponsored and do not cost the employer any additional contribution unless the employer chooses to contribute towards the benefits.
1 Prices have more than doubled since the implementation of the Affordable Care Act (AKA Obamacare).