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Group Health Insurance Basics for Small Business Owners

Managing health insurance for a business can get complex in a hurry, especially if you’ve never dealt with group plans before. When it comes to offering healthcare coverage, you’ll quickly find that not all health insurance plans work the same way. 

Instead of getting overwhelmed, it’s a good idea to step back, take a breath, and start with the basics. Let’s go over what you should know about group health insurance before you start offering plans  to your employees.

Image of financial documents for group health insurance coverage. 

What’s the Difference Between Group Health Insurance and Other Types of Insurance Plans?

Investopedia defines a group health insurance plan as “a plan that provides healthcare coverage to a select group of people.” As an employer, this is the type of plan that you would typically offer your employees as one of their major benefits. 

However, people can also opt for an individual health insurance policy. In this case, an individual person can purchase an individual health insurance policy that covers one person or that person’s family. However, these individual people can also opt to be covered by their employer’s group health plan instead, if it’s offered by the employer.

Another key difference between group health insurance and individual plans is the how an insurer will determine your premium. Individual plan premiums are based on the medical history on an individual or a family. Group health insurance operates with a much larger group of people, which means that they will balance the risk factors of the entire group to determine your premium. This can help lower premiums by spreading the associated risks over the entire group.

There’s also different types of group plans, such as fully-insured group health plans and self-insured plans, also known as self-funded plans. A fully-insured plan is the more traditional option, where the insurer sets premium rates for the year, collects those premiums, and pays for claims based on your plan. A self-insured plan allows a business to be in control of its own plan. 

Self-funding can be risky for small businesses worried about potential losses from claims, but it can help them save by eliminating the additional fees that insurance companies apply to their premiums. One way to get protect your business from potential losses is by investing in a stop-loss policy that allows you to evaluate savings and exposure. If that sounds intriguing to you, check out our post on why self-funded health insurance might be right for your business.

Do I Have to Offer a Group Health Coverage?

Yes and no, depending on your business. The Affordable Care Act (ACA) mandates that Americans have health insurance and can penalize those without coverage. However, small businesses with fewer than 50 full-time equivalent employees aren’t necessarily required to provide health insurance to its employees. Still, it can be a good idea to do so.

According to a survey by the Society for Human Resource Management (SHRM), 95 percent of HR professionals named health care benefits as one of the benefits most important to their employees. SHRM also cites that 29 percent of employees looking to leave their job do so because they want a better overall benefits package. Quality healthcare coverage can serve as a great tool to retain talented members of your team and attract other skilled workers.

What are My Responsibilities if I Offer Group Health Insurance?

If you do offer group health insurance to your employees, you’re going to have to follow a few rules set by the ACA. To start, if you do offer a group health insurance plan to your full-time employees, you must offer it to every single one of them. You can’t pick and choose who gets coverage and who doesn’t and you can’t deny coverage to employees with preexisting conditions. You can also choose to offer coverage to part-time employees as well. Keep in mind that your employees have the option to extend their benefits to their families as well.  

Of course, there are also financial responsibilities attached to offering health care coverage.

Other responsibilities include:

  • Covering Essential Health Benefits in the group health insurance plan
  • Offering health insurance to new employees within 90 days of their start date
  • Providing employees with a Summary of Benefits and Coverage

Managing Group Health Insurance for Your Business

Even once you know the basics, it can be difficult to handle your group health insurance coverage and deal with rising premiums at the same time. A Professional Employer Organization can provide you with the expertise to offer quality insurance for your employees and the buying power and cost-prevention strategies to lower those costly premiums. Contact us today to talk to one of our experts about how we can help you offer a quality healthcare plan to your employees.

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