Small Group Insurance Coverage Basics

Many employers are frustrated because they are under the mistaken impression that they are too small to offer quality health benefits for their employees. Generally, however, this is not the case: Many states require insurance companies to provide group underwriting for companies with as few as two employees, including the owner.

Specific rules and qualifications vary by state. But as a general rule, small businesses with at least two to four full-time employees usually qualify for guaranteed-issue group health insurance benefits, provided they offer these benefits to all qualified employees, and that a minimum percentage of employees actually sign up for the plan.

This is important, because it helps put even very small businesses with just a few employees on a more level playing field with larger corporations and government employers, when it comes to attracting and retaining talent in the marketplace.

It also means it is quite possible for even small businesses to provide much needed health benefits even for those employees who have medical problems, or who have families with medical issues.

Coverage of Pre-existing Conditions

Under the Health Insurance Protection and Portability Act, federal law restricts the ability of insurance companies to exclude coverage for pre-existing conditions. Specifically, they may impose a “look-back” period of no more than six months, and exclude pre-existing medical conditions for not longer than twelve months. Individual states may shorten these periods, based on their own needs.

However, as long as you or your employees maintain coverage, and do not have a lapse in coverage of more than 63 days, insurance companies cannot exclude coverage of any pre-existing condition normally included under the plan. To avoid any problems, ensure you have no break in coverage, whether that coverage comes from an individual plan, a workplace sponsored plan, or from COBRA continuation coverage. As long as the insured maintains coverage, and has no break in coverage lasting more than 63 days, the law limits insurers’ ability to discriminate on the basis of medical history.

If you do have a break in coverage, though, all bets are off.

Tax Credit

Under the new Affordable Care Act, Congress is providing a tax incentive to encourage small employers to provide health insurance benefits for their workers. The tax credit is a dollar-for-dollar reduction of the business’s income tax liabilities, and is therefore far more lucrative than a tax deduction, which only offsets 35 cents on the dollar, at most.

Not all businesses qualify for the tax credit. The qualification criteria are as follows:

  • You must employ fewer than 25 workers or full-time equivalents.
  • Your average worker must not make more than $50,000 per year from working for you. (Their outside earnings don’t count against you.)
  • You must pay at least 50 percent of your workers premiums – but not necessarily premiums to cover their dependents.

The credit is calculated on a sliding scale: The lower your workers’ pay and the fewer of them you hire, the greater your tax credit under the Affordable Care Act.

Employers can select a variety of health insurance plans to offer employees in a small group. Point of service plans tend to offer the richest benefits and the widest choice of providers, but may have relatively high premiums.

To save money, employers may select a health maintenance organization or preferred provider organization, both of which typically restrict non-emergency providers to a pre-approved list in exchange for discounts, which they pass on to customers in the form of lower premiums.

Employers can also choose to offer high-deductible health plans and health savings account combinations, or HDHP/HSAs, which have proven effective in reducing health care premiums for many employers compared with traditional medical plans. However, workers enrolled in these plans bear a greater burden in assuming risk, in the form of higher premiums.

Call us today

Health insurance plans are extremely situational-dependent. Different businesses have different needs, and premiums can be set very differently depending on your location and your employee census. The best course of action is to contact us today for a no-obligation consultation and detailed quote. From there, our agents will work with your staff to ensure an efficient enrollment process.