Health insurance helps you and your employees stay healthy. And that helps protect the financial health of your organization. With coverage for routine healthcare, employees are better able to avoid illness and lost work days. Additional coverage can also relieve the fear of financial ruin due to catastrophic events. And in today’s competitive job market, health insurance is a key factor in attracting and retaining talented workers.
Yes, any employer with at least two employees can have a group health insurance plan. Minimum requirements, however, vary in the state of New York and New Jersey.
In New York, to qualify for a group plan you generally need the participation of 60% or more of your “net eligible” employees with most health insurance carriers. Workers are considered to be full-time if they work 20 hours or more.
In New Jersey, to qualify for a group plan you require the participation of 75% or more of your “net eligible” employees, which is mandated by the state. Workers are considered to be full-time if they work 30 hours or more.
“Net eligible” employees are only those workers who DO NOT have other insurance coverage (e.g., through a spouse’s job, Medicaid or Medicare). For example, let’s say you have 30 full-time (“total eligible”) employees, and 14 of them already have medical insurance from another source. That means you have 16 “net eligible” employees.
As a starting point, group health insurance covers employee medical care. But employers have a wide choice of options to best suit their needs, wants, and budget. Group health insurance plans can also include dental and vision benefits, life insurance, short-term and long-term disability protection, and much more.
A group health insurance plan has five primary elements:
- Premium: the basic fee charged by an insurer to provide coverage (typically, an employer and employee share in this cost).
- Deductible: the amount an employee must pay before the insurer starts to cover costs (generally, the higher the premium, the lower the deductible).
- Co-insurance level: the percent (typically 50% to 100%) of the cost of covered services that the insurer pays for (after the employee pays the deductible).
- Copayment: a fixed dollar amount an employee must pay after receiving a covered service (in many cases, this is the only cost the employee will pay).
- Out-of-pocket (OOP) limit: the maximum annual amount an employee would have to pay for healthcare (generally, the higher the premium, the lower the out-of-pocket limit).
By pooling employees together in a group plan, your premiums are likely to be lower than if you bought individual plans for each employee. And as the employer, your share of the premium cost is usually tax deductible. In addition, the employees’ share of the premium can be paid with pre-tax dollars, which lowers their taxable income—and your payroll taxes.
Conversely, individual plan premiums are determined by individual risk, which is more likely to result in a higher cost. And an individual’s medical expenses must exceed 7.5% of their adjusted gross income to be tax deductible (and only the amount above 7.5% is deductible).
Health insurance companies use one of three methods to calculate group health insurance premiums: medical underwriting, adjusted or modified community rating, or rating bands. The method depends on the rules in your state. (Strategic Employer Planning can help you understand these methods and how they apply to your organization.)
According to a Kaiser Family Foundation survey, small employers (2-199 workers) typically pay 86% of premiums for individual coverage and 66% for family coverage. Midsized firms (200-999 workers) typically pay 88% of individual premiums and 82% of family premiums. And large firms (1,000+ workers) typically pay 89% of individual premiums and 77% of family premiums.
Finding the plan that’s best for both you and your employees means balancing your coverage and budget requirements.
If your main concern is routine healthcare—like annual physicals, prescriptions, and treatment for common ailments—a plan that emphasizes copayments might be best. Though that type of plan might have relatively high premiums.
On the other hand, to insure against the risk of serious illness and significant medical costs, a plan with a higher deductible might be more appropriate. That could help lower the premium, but might also result in higher maximum out-of-pocket costs for employees.
Under the Affordable Healthcare Act, the waiting period to become eligible to join a group health insurance plan cannot exceed 90 days. And some states have adopted a 60-day maximum waiting period.
Under the Affordable Healthcare Act, an insurance carrier cannot deny coverage on the grounds of a pre-existing medical condition, depending on circumstances.