Group Health Insurance

What Type of Group Health Insurance Would You Like?

You may be blocking your employees from a Government Subsidy

If you are NOT offering a GREAT group health insurance plan (defined by your contribution) you may unknowingly block your employees (and their families) from a Government subsidy.

As an employer, you know great health insurance benefits attract the best and brightest talent to your company. Traditional group health insurance may no longer be the best option. You may unknowingly block your employees and their families from a Government subsidy if they are entitled to one, and not even know it by offering a group health insurance plan.

Allow your employees to get their APTC (Advanced Premium Tax Credit) subsidy from the Government, and depending on their Federal Poverty Level, a CSR (Cost Sharing Reduction) on their deductibles, co-insurance and co-pays too. Click here for more information

Will Obamacare affect Group Health Insurance?

With the Affordable Care Act or “Obamacare”, businesses with less than 50 full-time-equivalent employees are NOT required to provide health insurance to their employees. Businesses with 50 or more full-time-equivalent employees MUST provide “affordable” health insurance or pay a tax penalty.

Small Businesses May Receive Tax Credits

Businesses with 25 or fewer full-time-equivalent employees (with average annual wages less than $50,000), may be eligible for tax credits up to 50% of the employer’s contribution.

What does Group Health Insurance Cost?

Once your application has been reviewed and approved, the insurance company will determine the final monthly cost for your group health insurance plan using the information from the application. With the Affordable Care Act or “Obamacare”, the health of your employees (including any pre-existing conditions), will no longer impact group health insurance rates. The main contributors to the cost will be the size and location of your company plus the age of your employees.

By “offering” your employees “affordable” coverage (whether they take the insurance or not), you may be and probably are blocking your employees and their families from getting a subsidy from the Government. This subsidy (which you are preventing them from getting), would help them pay their health insurance premiums.

In many cases (especially with employees that have families), after a subsidy is applied to a family plan, the total out of pocket to the family (actual money out of their pockets) will be far less than employer group insurance. Especially if the employer does not pay a large portion for spouse and dependent coverage.

The rules of health care reform are that if the EMPLOYEES PORTION of the CHEAPEST health insurance plan that is offered by the employer is less than 9.66% of the employees “household” income, then the employee and their families are BLOCKED from getting a subsidy.

If your employee does not understand this and buys a health insurance plan with a subsidy (when they weren’t supposed to), they will have to pay their subsidies back to the IRS.

With a “Defined Contribution” you may be able to save money while offering your employees a better alternative to group health insurance.

What is a Defined Contribution and Why Should I Offer It?

A New Trend

You as the employer can define a specific contribution dollar amount that becomes the benefit, letting your employees spend the defined benefit how they see fit.

How does this work?

With a defined contribution, your out of pocket expenses are controlled.  You define a fixed contribution amount.  This gives the employee the ability to choose the benefits that are important to them.

With the assistance of a Third Party Administrator, the employer is assisted in organizing the defined contribution by using an online administrative platform.  The employer decides an amount to “contribute”.  The employer is assisted in setting up the online portal the employees will visit.  The employees then visit the portal online to spend their defined contribution on the benefits they want to have.

Employers are now beginning to allow their employees to shop for their own health insurance coverage so the employees don’t just have 1 or 2 plans to choose from.  Instead, they define a contribution amount and allow their employees to choose which benefits they want.  The contribution in a specific dollar amount becomes the benefit, and the employees (with guidance from a licensed agent) can then go to a private exchange and shop for the best plan themselves.

Choice is a key component of a defined contribution strategy.  Employees will need to have access to plans that have government subsidies, along with the private “off exchange” plans, plus supplementary benefits such as dental, vision and life.  This option allows the families to control and choose what’s best for them.

Benefits to the Employer

♦ Get out of the insurance business

♦ Reduced Administration costs

♦ Simple Renewal Process

♦ Manage contributions and payroll deductions through an online portal

♦ FICA savings

Benefits to your Employees

♦ All Nevada health plans and metal tier levels available, with/without Government Subsidy

♦ Licensed Private Exchange Agents assisting your employees

♦ Employees manage their benefits

♦ Access tax advantaged plans like HSA’s and FSA’s

♦ Easy access to defined contribution account online anytime

♦ FICA/FUTA Savings Plus Income Tax Savings

Employers are looking for ways to control their costs, and by “defining a contribution” instead of defining benefits (typical group insurance) it allows employers to have a pre-calculated budget for their employees’ benefits plans. This allows the employer to get out of the benefits business and get back to running their own business.

Think of the Defined Contribution as giving them a gift card to spend on benefits, instead of choosing their benefits for them with group insurance. And when you compound that benefit to the employee receiving a subsidy from the government, the benefits stretch that much farther. Some of your employees may even qualify for the “Cost Sharing Reduction” benefit which is in addition to the APTC “Advanced Premium Tax Credit.” This is dependent upon their federal poverty level.

So, are you blocking your employees?

Let’s do the math

We will be using “Sally” as an example employee

♦ You pay your employee “Sally” $30,000 per year, her husband “John” makes $30,000 at his job.

♦ Sally and John have 3 kids living at home. They are a family of 5.

♦ You “OFFER” Sally health coverage, and the least expensive plan you offer is $5,000 per year for employees and $12,000 per year for families. You contribute $2,500 per year towards Sally’s plan and she pays the other $2,500 per year.

♦ The $2,500 Sally pays is less than 9.66% of their “Household income,” and therefore ALL of Sally’s family is BLOCKED from getting a subsidy because you, the employer, offered “AFFORDABLE” coverage to your employee.

♦ The employer’s plan that is offered to Sally costs the family $9,500 per year ($12,000 for the family plan minus(–) the $2,500 you pay to help Sally pay her premium on the group plan).

♦ IF… Sally and her family could get a subsidy, they would pay $4,150/year. (click on the subsidy quote example)

♦ The employer’s plan that is “offered” is costing this family over $5,000/year!

♦ The subsidy quote example illustrates what rates your employees are seeing for their families when the Government subsidizes their family premiums. By offering “affordable” coverage, you will be blocking these subsidies.

Affordability (defined by the Government)

So we must first understand affordability. If the plan you offer is “affordable” (less than 9.66% of household income), then your employee and whoever you’ve “offered” coverage to cannot get a government subsidy; it’s considered affordable for the whole family. Those folks that have been offered an affordable plan cannot be subsidized.

Let’s read that statement again. If you offer an “Affordable” plan, your employees will not be able to receive a subsidy.

The rule is, if Sally’s portion that she pays is less than 9.66% of her household income, then your group plan is affordable for the whole family, and all employees that are “offered” insurance are now blocked from subsidies.

EXAMPLE

♦ Sally’s income is $30,000/year X 9.66% = $2,850/year.

♦ Sally’s portion (she pays $2,500/year).

♦ Sally’s portion she pays at work ($2,500) is less than 9.66% of her income. 9.66% of Sally’s income is $2,850.

♦ $2,500 (work) is less than $2,850 (9.66% of her income)

Her insurance at work is then considered AFFORDABLE, so she and her family that have been “offered” a health plan are now blocked from getting a subsidy.

If 9.66% of Sally’s income is more than what her portion of the lowest cost premium that the employer offers, then it’s deemed affordable for the whole family if John and Sally are married.

What about Sally and John’s COMBINED income?

What about the household income?

Together their incomes are $60,000/year.

Now is Sally’s plan affordable? Let’s see.

♦ $60,000 X 9.66% (0.095) = $5,700.

♦ SALLY’S PORTION from her employer’s plan is $2,500.

♦ $2,500 is less than $5,700. Sally’s plan is Affordable.

Sally and any family members that have been offered insurance by her employer are blocked from getting a subsidy.