5 Things Small Employers Need to Know About Individual Health Insurance
By: Abby Rosenberger (Zane Benefits) July 2014
Less than half of all small employers are currently offering health insurance because it is too expensive. That’s over 2.3 million small employers that aren’t offering health insurance to their employees.
As an alternative to group health insurance, small employers are switching to a defined contribution solution to reimburse individual health insurance. Here are five things every small employer needs to know about individual health insurance.
1. Individual Health Plans Cost Up to 60% Less Than Traditional Group Health Insurance
One of the main reasons employers are canceling group health insurance is that individual health insurance costs up to 60% less. Employees may qualify for premium tax credits, depending upon their income level, household size, and eligibility for other government subsidized programs. Other factors that may influence the cost of individual insurance include:
- Location (state/county)
- Age
- Type of health plan selected (coverage level, carrier, etc.)
- Tobacco use
2. Individual Health Insurance Is Now Guaranteed Issue
The ACA’s pre-existing condition exclusion (“guaranteed-issue”) provision prohibits health insurers from denying coverage to individuals due to a pre-existing condition. This provision, known as “guaranteed issue,” simply means health insurers and employers cannot limit, exclude, or deny coverage to employees based because of a health condition that was present before the effective date of coverage.
3. Employees Have More Choice of Coverage and Doctors to Best Fit Their Family’s Needs
Individual health insurance offers more choice and control to employees by allowing them to choose a plan that fits their own needs, including coverage level and network. Employees can choose their own plans to work with their budget. These plans can be customized to individual circumstances and age.
For example, if a young employee is relatively healthy and on a tight budget, a plan with a lower premium and higher deductible may be the right choice. On the other hand, for older employees or employees with more healthcare needs, a plan with a higher premium and lower deductible may be the better plan.
4. Individual Health Insurance Is Portable
Since individual health insurance is selected and purchased by the employee, just like car insurance, employees get keep their health insurance when they leave an employer. As a result, there is no more need for expensive, short-term insurance options.
5. Employers Can Reimburse Employees for Individual Health Insurance
Employers can reimburse employees for their individual health insurance premiums by implementing a premium reimbursement program. To set this up, the employer first needs to decide how much they will contribute toward employees’ health insurance expenses. This allowance, or “defined contribution,” can be the same for all employees, or it can differ depending upon employee class and/or family status.
To remain in compliance with regulations regarding these reimbursements, employers should follow these tips:
- Set up a formal Premium Reimbursement Plan
- Use Reimbursement Software to help make administration of the plan easy
- Work with a health insurance broker or agent to help employees choose a plan
- Understand the compliance requirements with the IRS, ERISA, HIPAA, ACA, and other applicable rules
- Educate employees about the reimbursement program and the advantages individual health insurance can offer
