Questions & Answers

Reasons employers provide coverage

Tax benefits for employer: There are two primary tax benefits. First, employers can take a take deduction on health insurance premiums that they pay. Further, employers may be eligible for the small business tax credit up to 50 % of the premiums paid if they do all of the following:

Cover at least 50% of employees’ premium costs: Have fewer than 25 FTEs with average annual wages of less than $50,000

Purchase their own coverage: through the same plan that employees use be sure to showcase a premium service.

Tax benefits for employee: If you gave your employees a raise, they would have to pay income taxes on that money. However, if you provide health insurance, employees don’t have to pay income taxes on the portion of the premiums that they pay for.

Attracting talent: Employees need health insurance, period. The ACA makes it illegal for individuals to go uninsured, so everyone is looking for an employer-provided health plan.

Keeping your current talent: Providing benefits such as health insurance is a key part of building a positive employer brand. As your business grows, perhaps your staff’s personal needs will change as they grow older, get married, have children, or perhaps encounter their own health issues. Providing health insurance ensures that these employees will stay with you for the long term, saving you in recruitment costs and training headaches.

Traditional Health Coverage : Health Maintenance Organization (HMO) A health insurance plan with a large deductible An insurance plan that limits where a person can get care ; the employee’s provider must be in-network or none or very little will be covered, making it difficult to use from the end-user standpoint. Employees also will need a referral for specialists like an orthopedic. However, once you find a doctor in-network, it is usually covered 100%. As an employer, this will have the lowest cost premiums

High Deductible Health Plan (HDHP is a health insurance plan with a very large out of pocket cost that’s usually paired with tax-free savings options. Anything with more than a $1350 deductible falls into this category. This plan is going to have a very low cost to the employer for premiums. This plan is a POS or PPO and then is paired with one of the Savings-Style Plans. It is easy for employees to use, albeit expensive for them.

Point of Service Plan (POS) A health insurance plan with a choice: going in-network or getting a referral prior to treatment. This plan is going to have reasonable premiums but also provides decent coverage and pretty good ease of use for the employee (certainly easier than an HMO). The employee will have some out of pocket costs, such as a deductible or co-pay.

Preferred Provider Organization (PPO) A Health Care Insurance Plan a very expansive network of included practitioners and no referrals required. This plan is going to have the highest premiums but also the best coverage and best ease of use for the employee. The end user will still have a deductible, co-pay, or both depending on the treatment.

How Much Will It Cost Me to Provide Health Insurance?

Your cost of providing health insurance is going to depend on three main factors: The percentage of the premium you’ll cover or amount of money that you give to employees to purchase coverage

What type of health benefits you provide – This can range from just providing a health savings account at no cost to the employer, all the way to providing an employer-sponsored health care plan.

Who you are going to cover – Is it the just the employee, employee and spouse, employee and dependents, or full family coverage?

Percentage of Premium or Stipend for Employee

You’ll need to determine how much of the health insurance plan you as the employer want to pay for. Employers traditionally pay for health insurance in one of the following ways:

In general, a flat amount per month is the best practice since it’s easy to budget for and makes the most sense in term of fairness for your employees.

Who Are You Going to Cover?

The answer to this question might seem obvious – your full time employees. Not so fast! You can choose to just cover your employees, but you may need to consider their spouses and children too (or dependents, as they are called in insurance land).If you offer a flat amount, then this takes this off your plate – the employee can just use that flat amount for covering whatever health costs he or she wants. However, if you cover a percentage of the premium, then your cost will go up or down depending on how many people are covered. Take a look at your employee base.

When considering whether to cover just employees or spouses and dependents as well, you’ll obviously need to think about your budget but also the changing needs of your business. Many of your young, unmarried employees may get married and have children sometime in the near future and will then need to add spouses and dependents onto their health insurance plans.

What To Do Next: Getting Quotes & Comparing Plans

Now that you know what’s out there in terms of providing health insurance, we advise you to try all three approaches – a broker, a PEO, and SHOP. Why? Because costs vary by state and getting quotes is free. Once you have a clear perspective on what each kind of organization will charge, what plans they offer, and what your cost will be, you can then evaluate which one you will choose. Remember, cost is only one aspect. Did you get good customer service when receiving your quote, or did you have to wait a week? Keep in mind that this is during the “wooing” phase. If you didn’t like the interface or the customer service aspect, you certainly won’t like it when there is a problem or when you need to sort something out, and neither will your employees.

Information shared from Fit Small Business

Disclaimer: We spend hours researching and writing our articles and strive to provide accurate, up-to-date content. However, our research is meant to aid your own, and we are not acting as licensed professionals. We recommend that you consult with your own lawyer, accountant, or other licensed professional for relevant business decisions. Click here to see our full disclaimer.

Question: Who is entitled to benefits under COBRA?

Answer: There are three elements to qualifying for COBRA benefits. COBRA establishes specific criteria for plans, qualified beneficiaries, and qualifying events:

Plan Coverage

Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Both full and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full-time.

Qualified Beneficiaries

A qualified beneficiary generally is an individual covered by a group health plan on the day before a qualifying event who is either an employee, the employee’s spouse, or an employee’s dependent child. In certain cases, a retired employee, the retired employee’s spouse, and the retired employee’s dependent children may be qualified beneficiaries. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary. Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.

Qualifying Events

“Qualifying events” are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.

Qualifying Events for Employees