Group Health Insurance Plans

Every employer wants their employees to feel valued and secure in their job. One way of doing this is by providing health insurance for them. This is where group health insurance comes in. This is an insurance plan that covers a group of people who usually tend to be members or employees of a certain organization. Members of such an insurance plan generally get insurance at a lower cost as the insurer’s risk is spread across a number of people.

Since group insurance incurs reduces costs, every employer tries to secure one for their employees. It can also be termed as an employee welfare benefit program and it is established by an employer. This means that the group members do not have to register for it individually. This is another benefit of such an insurance plan because the process can be completed quickly to save a lot of time. HMO and PPO are some of the group health insurance plans that everybody is familiar with.

Here we will discuss the ins and outs of a group health insurance so that employers may decide to get one for their workers.

How Does it Work?

This program can only be bought by a group – individuals cannot purchase it as it is meant only for a large or small group of people. An organization purchases a plan from insurance companies and offers it to its members. Group insurance plans differ with every insurance company, so the employer has to carefully sift through them to see which will best suit the business and the employees as well. The employer then offers the employees the coverage and gives them a chance to accept or reject it. The cover can also include employees’ family members and dependents at an added cost. In some areas, the insurance plan comes in tiers, whereby the insured person can take basic cover or an advanced cover with added benefits.

Employer Participation

In California, an employer is required to contribute at least 50% of the employee-only premium. So if the premium is $400, the employer should pay at least $200 of that. However, a few insurance firms allow employers or business owners to pay a lower contribution. For example, Aetna lets employers give only $80 premium per month for every employee. while Covered California requires employers to pay 50% of the cover, which is the least expensive of all. How much an employer contributes is important as it will affect how many employees accept the coverage. An employer should not pay so little that the employee is forced to pay a lot, because then only sick individuals will accept the cover, raising the risk for the insurance company. Employer participation has to be such that even healthy individuals sign up for the cover because they feel that it is worth it.

Employee Participation

In California, most companies offering health insurance plans need that at least 60% to 70% of employees who qualify actually sign up for the plan offered by the employer. This way, both unhealthy and healthy workers can register the group insurance plan, and this lowers the insurance risk by preventing only sick individuals from enrolling. It also keeps the insurance premium low.

Employer Eligibility

An employer must show at least one and a maximum of 100 employees to be considered a small business for securing such a health insurance plan. Getting a group plan for a new business is usually difficult. In California, this is addressed by the requirement by law for the new business to have employed a W-2 employee who isn’t an owner at least 50% of the previous calendar year, or 50% of the previous quarter. So the business has to submit its most recent Quarterly Wage Statement, or Form DE9C, to the firm when applying for a plan. The insurance company uses this form to determine employee eligibility.

Eligible Employees

Eligible Employee. An employee must be a “W-2” employee, i.e. a person from whom an employer withholds payroll (FICA) taxes. There is a relationship of employee and employer between the company and its workers.

Frequently Asked Questions

Can a business offer a group insurance plan to part-time employees?

Yes. An employer can decide to cover employees who work only part-time between 20 and 29 hours a week.

Must I include all part-time employees in the group insurance plan?

Yes. If you decide to cover your part-time employees as well, you cannot cover a few and leave the rest out. It’s all or nothing.

If the business owner’s spouse works for the company, do they qualify for a group plan?

No, they don’t. The spouse does not qualify for such an insurance policy. They can look for other options to get their spouse covered.

Is it compulsory to provide an insurance cover for my employees?

No, it isn’t. Offering such an insurance plan is voluntary. There is no law requiring small businesses to provide their employees with coverage.

Can my group insurance plan get canceled if an employee keeps falling sick?

No. An insurance provider cannot cancel a group insurance plan because one employee keeps getting sick and generates high costs. An insurer can only cancel a businesses’ group plan due to failure to pay premiums or insurance fraud.

Can an insurer charge premiums according to how healthy or sick individuals are?

No, they can’t. The law in California prohibits an insurer from charging lower rates to healthy employees and higher rates to sick employees.

Can an insurer raise premiums if a sick employee generates high costs?

Yes, an insurer can increase the average annual premium, but they cannot increase the businesses’ premium because of a sick employee.

What factors do insurance companies use to establish rates?

Companies use three categories to establish standard rates: age, family size, and geographic location. So the rate for a single employee will be different from the rate for a married employee who also requires coverage for three children.

Now that you understand the basics related to group health insurance, give us a call so we can help you decide on a plan that would work best for your California small business or organization.