What You Need to Know About Small Group Health Insurance

November 19, 2020by Alex Strautman

Open enrollment is now underway from coast to coast for Individual & Family Plan (IFP) coverage and employer-sponsored health coverage for 2021. If you’re among those employers considering your employee benefits options for the new year, you may wonder about the amount you might pay, advantages of offering coverage, and what you can do to ensure you get the best deal. We have some tips for you.

Offering Insurance May Be Required

The Affordable Care Act (ACA) changed many of the rules about health insurance, and one of them is a requirement that Applicable Large Employers (ALEs) must offer health insurance to full-time and full-time equivalent (FTE) employees (working at least 30 hours per week) as well as their dependent children through age 26. The minimum essential coverage must be both “affordable” and provide “minimum value” to employees.

If you’re not sure if your business is an ALE, there are multiple ACA Full-Time Equivalent Employee Calculators available to help you determine your group size. The CaliforniaChoice private exchange offers one tool, as does Healthcare.gov.

A qualifying plan meeting the minimum value requirement is one designed to pay at least 60% of the total costs of medical services and includes substantial coverage for physician and inpatient hospital services. Sixty percent is equal to the cost sharing for those enrolled in ACA Bronze Tier plans, where the insured pays 40% of the costs for coverage, while the insurance company pays the remaining 60% of costs. Additional information about ACA metal tiers is available on the Healthcare.gov website.

No More Pre-existing Conditions Exclusions

One of the most significant changes brought about by the ACA is the elimination of the pre-existing medical condition limitations or exclusions. In the days preceding the ACA, it was common for insurers to limit or exclude coverage for health conditions that predated the effective date for coverage. Today, all ACA-qualified health plans will write coverage for an individual regardless of his or her health, and all persons of the same age can expect to pay the same for their coverage.

To learn more about “what’s included” in ACA-compliant health coverage, read our related post, How to Get Group Health Insurance — and What It Covers.

Cost Considerations

If you’re wondering about costs, you should know there are many factors that go into calculating your costs for employer-sponsored health insurance. These include:

  • Who is covered: Do you want to offer coverage only to full-time employees, or to employees and eligible dependents?
  • What coverage you choose to offer: HMO, PPO, EPO, or a combination of plans?
  • Your employees’ ages: For groups of up to 100, premiums are based on each employee’s age (and the age of any dependents, if insured).
  • What amount you contribute to employee premiums: A private health insurance exchange, like CaliforniaChoice, lets you decide what you want to pay by giving you the opportunity to choose your own Defined Contribution.

CaliforniaChoice lets you choose a Fixed Percentage of 50% to 100% of the cost of a specific plan and/or benefit – or a Fixed Dollar Amount for each employee. (The contribution needs to be the same for all employees.) Then each of your employees applies your contribution to the premium for the coverage he or she likes best. If the premium exceeds your contribution, the employee pays the difference. Link here to watch the CaliforniaChoice video on Defined Contribution on YouTube.

The Kaiser Family Foundation (KFF) annually publishes an employer survey on health benefits costs, which provides a detailed look at premium, cost-sharing, and other trends. Among the 2020 highlights are an average premium of $7,470 for single coverage and $21,342 for family coverage. The family premium for workers at smaller firms is slightly lower than for those at large firms ($20,483 vs. $21,691). Both single and family coverage premiums are up four percent from 2019. A detailed summary of the KFF 2020 survey is available here

Advantages of Offering Coverage

In addition to helping you attract and retain employees, there is another big reason to consider health insurance and other benefits for your workers: tax savings.

Benefits are not taxable to employees for FICA (the Federal Insurance Contributions Act) or income tax withholding purposes, nor are they taxable for you for purposes under FICA and FUTA (the Federal Unemployment Tax Act).

According to the IRS, if an employer pays the cost of an accident or health plan for employees, including an employee’s spouse and dependents, “. . . the employer’s payments are not wages and are not subject to Social Security, Medicare, and FUTA taxes, or federal income tax withholding.”

It is worth noting, however, that the cost of health insurance benefits must be included in the wages of S Corporation employees who own more than two percent of the corporation.

Supreme Court Review of ACA

The U.S. Supreme Court heard arguments in the case challenging the constitutionality of the Affordable Care Act during the week of November 11, 2020. It’s a case that could substantially disrupt health care coverage for millions of Americans – whether they get coverage through their employers, the state and federal exchanges, Medicaid, or elsewhere.

The ACA challenge brought by Republican attorneys general is based on an argument that the ACA’s individual mandate provision was made unconstitutional by a 2017 tax change by Trump administration. Under that update to tax law, Congress reset the ACA penalty for not having health insurance to zero effective in 2019. How – or when – the Court will rule on the constitutionality of the ACA is unknown at this time. Watch for more news on the matter in future posts on our site.

Learn More by Talking to a Broker

To get more information about how you might implement an employee benefits program, talk with a broker. A broker can provide a customized quote for you, your business, and your employees. If you’re not currently working with a broker, we can help you find one here. If you want coverage to begin in January, you’ll want to act soon.

Shopping for group health insurance?

This guide compiles a list of common questions you may have before you start offering health insurance coverage.