Group health insurance is coverage offered by a provider to a specific group of people, usually the employees of a business. But unlike the coverage plans purchased by individuals, group health insurance plans are purchased by the employer, who chooses a plan and then disperses the coverage to employees.
Certain requirements must be met in these plans, but employers are also eligible for tax credits to help offset plan administration costs. Health insurance is going to be an important perk for any prospective employee following a global pandemic, so employers would be wise to study up on their options. You can offer a quality health plan and still save plenty of money through taxes.
How Does Group Health Insurance Work?
Group health insurance can be purchased by any business large or small, provided they meet certain thresholds. To purchase a group health plan, an employer must have at least two full-time employees. There’s no limit to the number of employees that can be covered by a plan and large national corporations can enroll thousands of workers under a single policy. But for small business owners, two full-timers is the cutoff, although one of them can be the business owner. Partnerships and sole proprietorships with one additional full-time worker will meet the requirements for coverage.
Health insurance must be equitable throughout the company. An employer cannot bar certain departments or divisions health insurance if it’s offered to other employees at the firm. A good rule of thumb is that if you offer coverage to one full-time employee, you must offer coverage to all full-time employees.
One exception would be part-time employees, who don’t need to be offered coverage in most plans. However, employers do have the option to cover part-timers, but the same rules apply: if one part-time employee is offered coverage, all part-time employees must receive equal benefits.
No two group health insurance policies are the same. Small businesses generally have few options available to them while large corporations often have national accounts with insurers and can offer a bevy of customizable plans. But one thing neither big business nor small employers can do is deny or alter coverage due to the health of their workers. All workers must be covered under the policy regardless of age, medical history, or risk factor (ie. smoking). Most health insurance plans also extend coverage to the dependents of employees, such as spouses and children.
Why offer health care to employees? In addition to being a caring and compassionate employer, the Affordable Care Act also levies penalties to businesses who fail to meet certain requirements. Also, studies have shown that health insurance coverage not only reduces employee turnover, but increases productivity—healthy employees are happy employees.
Questions to Ask Before Selecting a Plan
Most employers offer some form of health insurance coverage to their workers, but the policies and levels of coverage are different. For example, a plan with high premiums will provide employees with lower deductibles while low premiums mean more out-of-pocket costs on deductibles. Here are a few questions to ask yourself when considering group insurance for your business:
How Many Employees Need Coverage?
Small businesses don’t get the same provisions from insurers that large companies do, but there are benefits for small employers through other means. The total number of employees requiring coverage will determine your policy choices.
How Much Do I Want to Cover?
Employers have a couple of choices to make when offering coverage. Plans must meet certain requirements under the Affordable Care Act, but vision and dental are common options employers can consider.
Additionally, how much over the premium will you cover for employees? Many businesses opt to cover 50% or more of employee premiums, with some going so far as to provide full 100% coverage.
What Types of Tax Benefits Will I Receive?
Offering health insurance to employees is a good deal for both parties since companies can receive some pretty hefty tax benefits for coverage. For example, under the ACA, small businesses with 25 or fewer employees can get up to half of their contributions back if they pay at least 50% of the premiums. Additional state and federal tax benefits are available and there’s no shame in using the tax code in your favor in exchange for offering health benefits to your employees. Be sure to consult with a qualified financial advisor to see which tax breaks you would qualify for.
Work With an Experienced Financial Advisor
This is everything you need to know about group insurance. If you have any remaining questions, reach out to a team member from Good Life Financial Advisors of Mount Pleasant today.
This material only contains general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice.