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Small Business / Group Health Insurance Explained:

What are the benefits of providing group health insurance for my employees?

Companies that provide health insurance for their workers generally experience a higher rate of happier employees who do not switch jobs. In addition, many companies can write 100% of the premiums they pay for these policies off of their taxes.

How will I split the costs for this insurance with my employees?

Most states require employers to contribute at least 50% towards health insurance premiums for their employees. Each state varies, so you will need to check with your insurance company to make sure that you are in compliance with your state law.

Can I deduct group health insurance from my small business taxes?

Yes. Normally, you can deduct 100% of the premiums you pay for this insurance. In addition, you may qualify for payroll tax deductions as well.

Does my company qualify for group health insurance?

If you have a legal business entity, at least two full-time owner or employees and can meet your state's minimum contribution requirements, your company should be eligible for group health insurance. However, these requirements may vary according to the state where your business is located.

What types of group health insurance can I purchase?

There are two main types of group health insurance. Indemnity, which are also called "fee-for-service" plans and Managed Care plans. Indemnity plans offer greater choices and freedom to select the physicians of your choice, but they are waning in popularity. There are three types of Managed Care plans; PPO, HMO and POS. (please see definitions of these plans below.)

What is an Indemnity Plan?

An Indemnity Plan allows you a large amount of freedom while selecting a doctor, and will not require you to have a primary care physician. However, these plans typically feature high deductibles and will require much more paperwork than managed care plans.

What is a PPO Plan?

A PPO plan or Preferred Provider Organization allows greater freedom for selecting a physican, whether they are in-network or out-of-network. These plans usually have a higher deductible, and will require a co-pay for services. You may also be required to pay upfront for medical services before being compensated by your insurance company.

What is an HMO plan?

An HMO or Health Maintenance Organization will require you to select a primary care physician, and will not cover medical costs for out-of-network or non-referral medical procedures. However, this type of plan costs substantially less than Indemnity or PPO plans and usually will not require a deductible or co-payment.

What is a POS Plan?

A POS plan or Point of Service plan is a hybrid between a PPO and an HMO. By combining the best of both types of plans, you can usually have more freedom to select your physicians, while paying less out-of-pocket.

What is an HSA Plan?

An HSA plan is a Health Savings Account that allows you to pay for your medical costs and HSA eligible health insurance from a tax-free fund. You can invest a certain amount into this fund each year, and use it for your medical expenses without incurring any penalties.

What type of health insurance is best for my company?

You will need to consider several factors while making this decision. How much money can you afford to contribute to your employee's health insurance? Since most states require at least 50%, this can be significant. How much money can your employees afford to pay for their health insurance? If the majority of your employees can not meet a high deductible or high co-payments, you will need to factor this in as well.

What is a "benefit rider?"

A benefit rider is an add-on to an existing health insurance policy. For example, an add-on could include dental insurance, since this is not typically provided in most health insurance plans.

What is a "risk adjustment factor" (RAF)?

A risk adjustment factor is used to determine how much your monthly premiums will be for group health insurance. The size of your group, or the type of your insurance may change your RAF. You will need to consult with your issuing insurance company to find out what you can expect your RAF to be.

What is term life insurance?

Many group health insurance companies offer a term life "benefit rider." This add-on will provide your employees with life insurance for a set period of time (term.) This term can be anywhere from 5 to 35 years, depending on the issuing company. If your employee dies within that covered term, their beneficiaries will receive their death benefit.

How can a ZIP code affect the cost of group health insurance?

Since your business' zip code will be used to determine your group health insurance rates, it is important to realize that the costs for group health insurance can vary greatly, depending on your area. Some states have higher costs than others, and even some areas of cities will cost more than other areas.