Should a Small Business Owner offer Health Insurance?
Depends? Much of what I am going to say may only apply to the state of Ohio, being that we work mainly with health insurance clients in the surrounding Cincinnati, Cleveland, and Columbus markets. Every situation is different, but the biggest mistake that a small business owner usually makes about their health insurance plan is not looking at all of their options. Therefore, if you understand your options you can make an informed decision. In doing this you need to understand how small group plans and individual policies differ.
Group health insurance plans have a few key points that will come into play in making your decision:
- Group health plans are required by the carriers to typically have at least a 50% contribution to the employer premium or a 25% contribution to the total including the employee’s dependents. Some employers simply cannot afford to add another expense in these turbulent financial times.
- Group plans are required by law to have maternity coverage included in the plan, while individual policies can add maternity for an additional premium. This adds to the premiums across the board for small groups.
- Group policies are guaranteed issue as long as the employer has adequate participation which is usually 50% of the full time employees. But the policies can be rated up based on the health history. These increases can double your premium rate based on the street rate, or the rate registered for that plan with that particular state.
- There is no underwriting requirement for new employees coming on the plan once it is established, but the employees rates would be age banded or would increase based on the age of the employee that is hired and elects to take the coverage.
Understanding individual policies and how they work will often answer your questions as to which is the best way to set up your small group health insurance plan. Here are a few main points you need to understand about individual and family health insurance plans:
- Underwriting is stricter on individual policies and the carrier has the right to decline you or rate the policy up based on your preexisting conditions. This can be good for some and bad for others. If you do not have any ongoing health concerns, are not an expectant parent, or taking many medications then most likely your individual health insurance rate will be much less than the group health insurance rate. This is because by putting a healthier class of people in a pool together, the claims experience will likely be less and can therefore have a much lower premium and still turn a profit for the health insurance carrier.
- Maternity is a rider that can be added on to the policy. But as you know everything has a price and this rider is typically $200-$300 per month in additional premium, plus you will have a 270 day waiting period.
- Individually policies are totally portable and guaranteed renewable. Therefore, you are able to keep the policy as long as you want whether you are still working for the company or not.
You can also make individual plans look like group plans by setting up what is known as a List Bill in which the each individual plan is billed to the employer and the employer then can pay their premium with pre-tax dollars. If you would like to set up a List Bill here are a few things that you should know:
- The individual policies are required to be paid in full by the employee, but who says that the employee is not deserving of a raise which would cover the portion of the premium you would like to be covered.
- The policies are actually owned by the employee. Therefore, they are totally portable for the employee if they should leave there place of employment. This is great for small groups since the employee would not be eligible for a COBRA option due to the size of the group.
Hopefully this has been helpful in deciding how to put together your small business health insurance plan. I would always recommend talking to an educated health insurance specific broker when making these decisions. These are just a few of the points that you need to consider. If you would like to receive instant individual health insurance quotes online to compare, you can go to http://www.healthinsurancechaser.com/ or if you have additional questions about small group health insurance plans in Ohio, feel free to email your questions to af@healthinsurancechaser.com or call (877)775-4321 x4.
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