What You Can Expect to Pay for Employee Health Insurance and Other FAQs
We know health insurance is a hot topic generating many questions in the minds of business owners. Among the most-frequent questions are:
- What can I expect to pay for my employees’ health insurance? Or, how much does health insurance for employees cost?
- Do I have to offer health insurance to my employees?
- How can I control my costs and still offer health insurance to my employees?
- How can I keep my workers and customers safe in the era of COVID-19?
We’d like to help by offering some answers and sharing some resources you may find useful. Let’s look at answers to frequently asked questions:
What can I expect to pay for employees’ health insurance?
Your costs for employer-sponsored group health insurance depend on many factors, including:
- Who you want to cover (full-time employees, full-time employees and their dependents, part-time employees, etc.)
- The type of coverage selected (e.g., PPO, HMO, EPO, HDHP, etc.)
- How many employees (and dependents, if applicable) enroll
- The ages of persons enrolled, including any covered dependents (the cost of coverage varies for each enrollee based on his or her age)
- The amount you contribute to the cost of coverage (you may pay some or all of the cost)
Some employers offer coverage only to employees working full time. Others include options for part-time employees. The choice is yours. Depending on the insurer or health plan you select, you may also have a choice in the percentage of the premium you pay for employees’ coverage.
The 2019 Kaiser Family Foundation (KFF) Employer Health Benefits Survey found that employers were contributing an average of 77% of a plan's cost. However, that 77% is not uniform across the board. For a more in-depth analysis on the expected costs of health insurance, read How Much Should a Business Pay for Employee Health Insurance?
Do I have to offer health insurance to my employees?
Before the Affordable Care Act (ACA) was enacted, health insurance coverage for groups was based on the size of the group, the health of the participants, past claims experience, and other factors. Rates were banded, which means employees in the same age band (for example, 20 to 29) would pay one rate, while employees in other bands (30-39, 40-49, etc.) would pay a different rate. Today, for groups of up to 100 employees, rates are based on the specific age of each employee, spouse, and child covered.
Another change with the ACA is the elimination of pre-existing medical condition exclusions (which, pre-ACA, could influence rates). Today, all employees in an ACA-qualified group health plan can get coverage regardless of their health. All persons of the same age are charged the same premium for the same plan.
If you are what the ACA defines as an Applicable Large Employer (ALE), you are required to offer health insurance to full-time or full-time equivalent (FTE) employees and their dependent children through age 25. The ACA’s Shared Responsibility Provision (also referred to as the Employer Mandate) says employers with an average of at least 50 full-time or FTE employees working at least 30 hours per week must offer minimum essential coverage that is both “affordable” and provides “minimum value” to employees.
A health plan meets the minimum value requirement if it’s designed to pay at least 60% of the total costs of medical services for a standard population, and it includes substantial coverage for physician and inpatient hospital services.
If you’re uncertain whether your business qualifies as an ALE, you can use a ACA Full-Time Equivalent Employee Calculator to help you determine your group size. This tool is among many employer resources on the CaliforniaChoice website. (Click on “ACA Calculators” in the lower-right section of the web page.) Additional resources are available on the HealthCare.gov website, which includes a section specifically addressing employer questions.
How can I control my costs and still offer health insurance to my employees?
What you contribute to the cost of coverage for your employees is up to you. As mentioned before, though, if you’re an ALE, you must contribute enough toward each employee’s cost so that coverage remains “affordable.” For 2020, the IRS says the threshold for determining affordability is whether the cost of coverage for the employee is less than 9.78% of household income. This number is updated annually and was 9.86% in 2019; in 2021, it will be 9.83% according to published reports.
An ACA Safe Harbor Calculator can be useful in helping you determine whether the plan(s) you’re considering fit the criteria for affordability under any of the safe harbor tests. You can find such a calculator on the CaliforniaChoice website (link above), with additional guidance on the IRS website.
With the CaliforniaChoice multi-carrier private health exchange, you establish your own Defined Contribution toward employee coverage. You can choose a Fixed Percentage of 50% to 100% of the cost for a specific plan and/or benefit, or you can choose a Fixed Dollar Amount for each employee. The choice is yours. Then, each of your employees applies the contribution you make toward the cost of the coverage he or she wants. If an employee selects a plan that costs more than your contribution, he or she pays the difference. You can learn more about Defined Contribution in this CaliforniaChoice video on YouTube.
How can I keep my workers and customers safe in the era of COVID-19?
Employee and customer safety is of paramount concern to employers across California and the country.
The Centers for Disease Control and Prevention (CDC) suggest several steps business owners and managers can implement to protect employees and limit business disruption:
- Identify a workplace coordinator responsible for COVID-19 issues and their impact on your workplace.
- Examine policies for leave, remote work or telework, and employee compensation. Your leave policies should be flexible and non-punitive – allowing employees who are sick to stay home and away from co-workers. Guidelines should also accommodate employees who need to stay home to care for sick family members or stay with children in the event of school or childcare closures.
- Use flexible work arrangements and work hours, where possible. You can achieve this through work from home arrangements or, in some cases, staggered work schedules.
- Identify essential workers and business functions – and the logistics necessary to maintain operations in compliance with state, county, or other regulations.
- Create an emergency communications plan, with key contacts (and back-ups) identified. This should include your chain of communications, including suppliers and customers, as well as processes for tracking employees’ status.
- Share your plan with employees. Communicating your expectations can be a relief to employees when they know what’s expected and your forecast for a return to normal operations.
These additional tips can further help protect workers and customers:
- Encourage employees and customers who are sick to stay home.
- Encourage social distancing and wearing of face masks. Many communities and businesses have mandated masks to reduce the spread of the coronavirus. Details on California’s mask order can be found on the state’s COVID-19 web page.
- Promote coughing and sneezing etiquette as well as frequent handwashing. Be sure you offer tissues, no-touch trashcans, soap and water, and hand sanitizer (with at least 60% alcohol) to employees – and customers, if possible.
- Routinely provide environmental cleaning of high-touch surfaces like workstations, counter tops, handrails, doorknobs, entry and exit door bars, etc.
- Display education and training materials like fact sheets and posters.
- Talk with suppliers and others about their plans – and any requirements your company is implementing that could affect their delivery of services to your business and customers.
- Consider changes in the layout of your business to ensure workers and customers can remain at least six feet apart.
For more guidance on keeping your employees and customers safe during the era of COVID-19, check out the resources and tools offered by SHRM, the Society of Human Resource Management.
If you want information about how you can implement a group health program for your business, talk with an employee benefits broker. The services of a broker are typically available at no cost – and using a broker can save you money, as compared to shopping for insurance on your own. If you don’t already have a broker, we can help you find one here.