Employer (Group) Health Plan Basics
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Employer Group Health Plans: Group health plans are available for companies that wish to provide benefits to their employees. There are several factors to keep in mind when considering whether or not you would like to offer a Group Health Plan. We have provided some basic information for your review. Keep in mind, there are many variables so below is a summary, for information specific to your company, please Contact Us for answers to your questions.
Individual/Family Health Plans: When it comes to purchasing a health plan for yourself/family, there are a few avenues in which you can purchase them. For more information on those options, refer to our Individual/Family Options.
Something else to keep in mind when calculating how many FTE employees you have, if you own more than one business that is considered an “aggregated group”. That simply means if you won more than one business, you must add the total number of FTE employees of all commonly owned businesses to determine if you have less than or more than 50 FTE employees.
To determine if you are at risk of paying a penalty, check out this chart for more information. As always, contact us for specific questions you might have.
What is a FTE employee you ask? First let’s start with a full-time employee, which is someone that works an average of 30 hours a week or at least 130 hours a month. A Full-Time Equivalent Employee (based on the IRS definition) is defined as this:
A full-time equivalent (FTE) employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee. An employer determines its number of full-time- equivalent employees for a month in the two steps that follow:
1. Combine the number of hours of service of all non-full- time employees for the month but do not include more than 120 hours of service per employee, and
2. Divide the total by 120.
3. This answer will give you the number of FTE Employees. You will add that number to the total of your Full-Time employees to determine if you are mandated to offer a Group Health Plan to your employees. If you have a combined total of 50 or more FTE and Full-time employees you are required.
If you are offering a Group Health Plan for your employees there are some things you need to be aware of:
Contribution Requirements: For health plans, Insurance carriers will require that you pay (contribute) a portion of the premiums for your employees. For example, most carriers require the employer pay a minimum of 50-75% of the Employee (single rate) cost. For example, if you have an employee that has a family and the total premium amount for that family is $700 a month. If the employee’s (single rate) cost for the plan is $200 a month, you are required to pay 50% (as an example) of that rate= $100. The balance of that premium ($600) will be paid by the employee through payroll deduction. As an employer, if you wish to pay more for the employee then you can do that for them. Some of the carriers require you to pay the same amount for all employees, meaning no discrimination. With that being said, some carriers will allow you to pay different amounts based on certain employee classifications, i.e. pay one amount for hourly employees and another for salaried employees.
Participation Requirements: Participation requirements mean that the Insurance companies require a certain number/percentage of your eligible (full-time) employees to be on the plan. That number/percentage varies with the different carriers and varies based on how many eligible employees you have in your company. For example, if you have fewer than 5 eligible employees the insurance company will require 100% of the employees to be on the plan but those employees that have other coverage can waive your company’s plan. If you have 5 or more eligible employees then the insurance company will require 75% of your eligible employees to be on the plan allowing those that have other coverage to waive your company’s plan.
COBRA Continuation Health Coverage: COBRA is something that you need to be aware of as the penalties for Non-compliance can be quite substantial. This is only meant as a summary and you should Contact Us with any specific questions. You can also view the FAQ page from the Department of Labor by clicking here.
In short, COBRA requires continuation coverage to be offered to covered employees, their spouses, former spouses, and dependent children when group health coverage would otherwise be lost due to certain specific events. COBRA is simply an extension of your current Group Health Plan that you offer to active employees. In general, COBRA requires that continuation coverage extend from the date of the qualifying event for a limited period of 18 or 36 months. The length of time depends on the type of qualifying event that gave rise to the COBRA rights. There are certain notification procedures that you need to be following in order to avoid violating COBRA rules.
Are you required to offer COBRA? COBRA covers group health plans sponsored by an employer that employed at least 20 employees on more than 50 percent of its typical business days in the previous calendar year. If you have less than 20 employees, you are still required to offer an extension of benefits that is similar to COBRA commonly referred to (in Utah) as State Extension or “Mini-COBRA”. One of the biggest differences between COBRA and State Extension is how long your rights to continue coverage. On State Extension, your rights to continue coverage is for up to 12 months. You can view the Utah State Extension Rights by clicking here or you can always Contact Us with specific questions.
There are a few key benefits that are important to be aware of when comparing health insurance plans. Below are brief explanations of those benefits, for detailed questions on your plan Contact Us.
Preventive Services: There is no charge for an office visit when you see your in- network primary care physician for services considered preventive care under the Affordable Care Act (ACA). You might get a bill if your doctor orders additional tests or performs other services – but covered preventive visits are free.
When you visit the doctor’s office you will pay either one of three ways:
- Copays/Copayments: Copay is a flat fee that you pay on the spot each timeyou go to your doctor. There are usually two types of copays, one amount for Primary Care doctors and a higher amount for Specialists.
- Deductible: A deductible is the amount you pay each year for eligible medical services before your insurance pays for expenses. For example, if you have a $3,000 yearly deductible, you’re responsible for the first $3,000 of your total eligible medical expenses. If your plan does not have Copays for office visits, you will then be required to pay for the out of pocket until you’ve met your deductible. Depending on your plan, you may have a deductible “Per Person/Individual” and a “Family” deductible.
- Coinsurance: Coinsurance is the portion of medical cost that you pay after the deductible has been reached and is usually a percentage, for example 20%. You will pay the coinsurance amount until you have reached the Out of Pocket or Coinsurance Maximum. Once the Maximum has been reached, your plan pays 100% of the eligible medical expenses.
Prescription benefits can be somewhat confusing in health plans today. Below we have provided some basic information on these benefits. Feel free to Contact Us with any questions.
- Tiers: Most carriers group their medications in different benefits levels or tiers. The tier that your medication is on determines your portion of the cost. A typical prescription benefit has 4 tiers: Tier 1 are usually generic medications. Tier 2 usually includes preferred brand drugs. Tier 3 usually includes non-preferred brand drugs. Tier 4 usually includes specialty drugs.
- Deductible: Not all plans have a deductible for medications. Some plans have a separate deductible for prescriptions while others have a combined medical and prescription deductible. It’s important that you understand how your plan works.
- Copays/Copayments: Generally your plan will have either copays (flat dollar amount) or coinsurance (a percentage) for the prescriptions and is dependent on the tier the prescription is on.
Most carriers utilize a Provider Network with their health plans. A provider network is a list of doctors, facilities, and other healthcare services that have an agreement with your insurance company to provide services at a reduced cost.
- In-Network: If a provider is considered “in-network,” they are on the list of “approved” or “participating” providers for the insurance company and specific plans. If you use an “in-network” or participating provider, you will have lower deductible and out-of- pocket costs than if you use an “out-of- network” or “nonparticipating” provider.
- Out-of- Network: if you have Out-of- Network benefits on your plan, it means you can see providers that are not considered “approved” or “participating”. With that being said, you’ll want to be aware that you typically have a separate and usually higher deductible and out-of- pocket maximum than in-network providers. On some plans, you will not have any Out-of- Network options which mean the insurance company will not have any coverage for services provided Out-of- Network.
Health Savings Accounts
The term Health Savings Accounts (HSA’s) is used synonymously with Qualified High Deductible Health Plans (QHDHP). It’s important to note the distinction between the two. Below is a summary, Contact Us with specific questions.
- Qualified High Deductible Health Plan (QHDHP): A high-deductible health plan is a qualified health plan with deductibles that are at least $1,250 for an individual or $2,500 for a family. Under the federal tax code, most individuals with a qualified high-deductible health plan are allowed to make tax-free contributions to a Health Savings Account that can then be used to pay out- of-pocket medical expenses.
- Health Savings Account (HSA): A health savings account (HSA) gives anyone enrolled in a QHDHP a way to put money aside for medical expenses, tax- free. Think of it like a regular savings account you’d have in a bank, except that the money is earmarked for medical expenses. Money placed in an HSA can help pay for medical expenses, including those that count toward meeting your deductible. Unlike flexible spending accounts (FSA), unused money in your HSA is not forfeited at the end of the year, and it continues to grow tax-free.