In 2023, group health plans for one person cost an average of $7,739 and plans for a family cost an average of $22,463. Those numbers are expected to have up to a 7% increase in 2024. However, there are ways to lower how much you pay for health insurance. It all depends on how your premiums are calculated. If you know what factors affect your bottom line, you can take steps to lower your total premium.
For group health insurance, premiums are calculated for each worker who signs up for the plan, plus the costs of adding a spouse or children. The total price for the group plan is calculated by adding all of the individual premiums up. Most companies have their employees pay a portion of their plan cost. Then the company takes those payments and then pays the rest of the cost to the insurance company every month.
Since the risk is spread out among more people. The cost of group health insurance is generally much lower than the cost of individual plans. Once the company decides on a plan, employees can choose whether or not to sign up for coverage. However, group health plans usually need at least 70% of a company’s employees to partake, in order to be effective. Companies usually offer different levels of plans so that enrollees can choose between basic coverage or more advanced coverage with add-ons. Depending on the plan, the premiums are then split between the company and its employees. Businesses can offer further protection by allowing their employees to add their spouse or children to the plan. Although doing this typically means the plan becomes more expensive.
The Factors
Since every business is different, your premium could be higher or lower based on a number of factors that are used to figure out how much your plan will cost. It also depends heavily on the group being insured.
Fully insured with less than 50 employees – Premiums are based on how many people in your area, not just from your business, are signed up for the same plan with the same insurance company. The cost of the insurance is also based on how old the enrollees are. So, everyone the same age with the same insurance plan from the same company will pay the same price. The rates go up every year based on their age. Some of the annual renewal increase at your company will come from the fact that your workers are getting older.
Fully insured with more than 50 employees – Premiums are calculated based on the age, gender, location (zip code), and medical conditions (expected healthcare costs) of your workers and their dependents who are covered by the plan.
More than 100 employees – Groups with more than 100 workers are counted the same way as businesses with more than 50 workers. Rates are based on the age, gender, location (zip code). And medical conditions (expected healthcare costs) of your insured workers and their dependents.
Other factors are included in calculating your premiums such as:
Size of The Group
How much you pay can depend on how many people are on your group plan. This number includes both your employees who choose to join your plan and their family members who join through an employee. By spreading the health risks of a few people over a larger group, a bigger group can help you pay less for your insurance.
Health of The Group
Your rate is affected by how healthy the group as a whole is. Even though the Affordable Care Act says that insurers can’t change premiums or refuse coverage based on a person’s pre-existing conditions or general health. The American Academy of Actuaries says that the health of the group as a whole can play a role in figuring out premiums. If a risk group has a lot of people with higher expected claims, the average premiums will be higher. This can be good for your business, as the Academy also says that premiums will be lower if a risk group avoids people who are likely to make more claims. Or if it can cover the costs of people who are likely to make more claims by signing up a lot of people with lower costs.
Average Age
The Affordable Care Act (ACA) says that insurers can’t change rates based on things like gender, but they can still take age into account. Rating by age is still legal as long as the ratio of the most expensive adult age band to the least expensive adult age band doesn’t go above 3:1. This means that in a group plan, the average age of your group can affect how much you pay.
Claims History
Going to the doctor often can add up. Insurance companies make changes to your prices over time based on how many claims have been made and how much they cost. When it’s time to renew your insurance, an insurer will look at how often your group has filed claims and make changes based on that. If a few of your employees had health problems that required them to go to the doctor often or spend a lot of money. That may be represented in your updated premium cost.
Tobacco Use
The Affordable Care Act (ACA) says that group health plans can charge people who smoke up to 50% more for their health insurance rates than people who don’t smoke. This is called a “tobacco surcharge.”
Industry
Different jobs have different amounts of danger. Your insurance company may change your rates based on what your workers do for a living. For example, office workers don’t face the same health risks as people who work in factories, buildings, or offshore. So their insurance premiums may be lower than those of people in other jobs.
Coverage Amount
Group health plans are not all the same. How much you and your workers pay will depend a lot on how much coverage you get. When you have better coverage and lower out-of-pocket costs, your premiums may go up. Due to the extra covering, adding on extras like dental and vision plans can also raise your premiums.
Can My Employees Be Denied?
A person with a medical problem can’t be kicked out of a group health plan. The health insurance must either cover everyone in the group or not cover anyone. They can’t choose one or more people. A fully-funded health insurance plan cannot be turned down by a company with less than 50 workers. Carrier participation rates are based on a ratio of the number of employees who are insured to the total number of employees who are qualified. This number is different for each insurance company, so you should talk to your health insurance agent about it.
Saving on Group Health Premiums
For a small business owner, health insurance rates can be expensive, but you don’t have to accept what your company is being charged. You might be able to use certain strategies to lower your costs and make your workers healthier.
Start a Wellness Program
Since the number of claims has a direct effect on your premiums. It can pay to make sure that all of your workers are in good health. Through health education and wellness practices, a customized workplace wellness program can help people choose to live healthier lives. This can lead to a healthier, more active workforce. And lower overall rates by reducing the number of doctor visits caused by diseases that could have been prevented. It can also help attract and keep good employees because they know their employer cares about their health and safety.
Giving your workers access to a mobile doctor 24/7 is another way to cut down on the number of trips to the doctor. With telemedicine services, your employees can talk to a real doctor by phone, video chat, or online chat. This lets them get the answers they need without making an in-person visit with the doctor. This means they don’t have to pay a copay and your plan doesn’t have to pay for an extra claim.
Economy Scale
Depending on where you get your insurance, you might be able to use the “economy of scale” to your advantage. Larger businesses have more workers and more buying power. But smaller businesses don’t have as many employees to save money through economy of scale.
How To Enroll
There are countless group health plan providers and plans to choose from so choosing can be difficult. But we’re here to help! You can call EZ for a personal agent to help you sort through your plan options, get free quotes, or to simply find out more about group health insurance plans. Our experts can help you save hundreds of dollars a year by finding the best plan for your business. You can reach one of our highly trained agents at 877-670-3531, or enter your zip code in the box below for free instant quotes.
It’s here! Open Enrollment for your group health insurance plan has come around again, running from November 1 – December 15. Now is the time when you can choose new benefits, or review and change existing health insurance benefits for your employees, and we get it: this time of year can be hectic and stressful, with all of the questions that employees (and you!) might have. Not only that, but you’ve got the weight on your shoulders of knowing that this is your one chance to get this done until next year! But don’t worry, we’ve got you – first, check out our tips below for a smooth Open Enrollment, and then speak to an EZ agent who can help you find the perfect plan for you and your employees.
To qualify for group health insurance, your business must have at least 1 full time employee other than yourself or your spouse.
Does Your Small Business Qualify for Group Health Insurance?
Let’s start with the basics. If you’re new to offering group health insurance to your employees, you might be wondering how you qualify to offer it. Well, it’s actually pretty simple, and more likely than not, your business will qualify! You need to:
Have at least one full-time employee who is not the business owner, or the spouse of the business owner
Be legally registered as a business entity in your state (regulation for this varies from state to state)
Contribute at least 50% to your employees’ monthly premiums
Why Take Advantage of Open Enrollment?
Ok, so your business qualifies to offer group health insurance, but should you? And if you’ve already got a plan in place, why review it during Open Enrollment? Well, there are a few very good reasons to do both:
You and your employees can save money – Enrolling in a group health insurance plan is often cheaper than enrolling in an individual plan. Not only that, but the more employees you can get to sign up, the cheaper the plan could be.
Changes in life circumstances mean changes in insurance needs – If you do already offer group health, you definitely need to take advantage of Open Enrollment and use this time to reassess your and your employees’ needs. Has anything major changed, like births, deaths, or marriages? If so, you might be able to find a plan that offers better or more tailored coverage for a better price.
Group health can mean tax advantages – Who doesn’t love to save on their taxes? Take this time to look into ways you could be saving, like checking if you qualify for the small business health care tax credit, or by choosing to offer tax-advantaged healthcare options, like HSAs, FSAs, or HRAs.
What Should You Be Thinking About When Choosing a Plan?
Another important basic step in the process: knowing what you should be thinking about when exploring your options. Here are 4 essential factors that should go into your decision-making process:
Costs associated with the plan – You’ll want to consider how much employees want to pay in premiums, while also remembering that you have to contribute at least 50% of the amount each month. Also keep in mind things like deductibles, copays, and coinsurance that can all add up, depending on how often your employees access medical services.
The metal tiers of available plans – Familiarize yourself with the so-called metal tiers of plans: Platinum, Gold, Silver, and Bronze. These terms have nothing to do with quality of care, rather they indicate what percentage of costs a plan will pay for covered benefits. For example, popular Silver plans will usually cover around 70% of costs, with the insured paying the remaining 30%.
The type of plan you want – In addition to choosing a metal tier, you’ll also have to consider what type of plan you want to offer to your employees. For example, you can choose from HMO, PPO, POS, and EPO plans; each of these types of plan will offer different price points, since some are more flexible about things like network coverage.
Insurance companies – Check out which insurance companies offer plans in your area, and what their networks look like; you want to be sure that they offer affordable care in locations that are convenient for your employees.
What Should Employees Consider?
So you know what you need to be thinking about, but are you ready to answer your employees’ questions, or take on their concerns? You can help guide them in choosing or changing their plan by telling them to take the following factors into consideration:
The price of the plan – Let your employees know exactly how much the plan will cost them per paycheck.
Their dependents – Your employees should think about who they will need to have covered by their plan, especially if they plan on adding on family members in the coming year, or if they have added any new household members since last year. You’ll also need to make clear your policy on contributing to dependent coverage.
Any changes in coverage – Make sure your employees know what is covered under the plan, especially if there is anything new being added, like dental or vision coverage.
Any added benefits – In addition, if your plan is going to have any new benefits, like telemedicine or wellness programs, let your employees know.
Top Tips for Employers
Group health insurance can seem a bit overwhelming, especially since studies show that 35% of employees have little to no understanding of their healthcare coverage! Not only that, but 22% of employees are confused during open enrollment, 20% are anxious, and 21% are stressed, so it can be tough to know how to approach this subject. But there are some ways to make the process go a little more smoothly. For example, you can:
Go digital – You don’t have to print out reams of paper, or have endless meetings with employees about benefits (which might be tough with all of the work-from-home going on right now)! Save paper, toner, and your and your employees’ sanity by offering everything in PDF form, and by considering holding a virtual benefits fair, which employees will be able to access when it works for them from the comfort of their home.
Keep it simple – When emailing employees about their benefits, be as concise as possible, with price per paycheck and benefits clearly laid out, using language that is easy to understand. You can also include any FAQ sheets you get from your insurer or agent, as well as a glossary of terms and acronyms.
Send out a survey – While you do have to be careful about privacy when it comes to employees’ health, there is no reason why you can’t send out an anonymous survey to find out what your employees are most interested in when it comes to their insurance plan, so you can either make a choice to change the plan you’re offering, or can recommend the right plan to them.
Be creative with your communication – Email is great, but you have tons of options when it comes to follow-up communication and reminders about enrollment, including:
Text messages
Posters
A dedicated intranet webpage
Videos on screens in common spaces
Notices on paychecks (both hard checks and online)
A chat channel, through a platform like Slack
A Twitter chat, complete with hashtags that other employees can search
Yes, it’s Open Enrollment time again, what some might consider the most confusing time of the year. But you know? You got this, and we’ve got your back if you need help choosing, reviewing, or changing your employees’ healthcare plan. Come to EZ.Insure for a dedicated agent who can answer all of your questions, every step of the way, as well as find you fast, accurate quotes and sign you up for a great plan – all for free! No hassle, no obligation. To get started with us today, simply enter your zip code in the bar above or to speak to an agent, call 888-350-1890.
Individual Coverage Health Reimbursement Arrangements, or ICHRAs, have been available since January 2020, and have been growing in popularity over the past year. This is because they allow employers to save money while offering employees a way to get healthcare benefits. They are a great alternative to group health insurance, especially since the rules surrounding them are less restrictive than those surrounding traditional healthcare plans, or even those of other HRAs. For example, there are no contribution maximums and no company size restrictions on ICHRAs. Before deciding if an ICHRA is right for you, you should first weigh the pros and cons.
ICHRA Pros
All reimbursements for each employee are tax-free.
ICHRAs are a type of health reimbursement arrangement, a health benefit that differs from an HSA in that it is an arrangement, as opposed to an account. Employees don’t put money aside for their healthcare expenses; rather, you reimburse them for their medical expenses. You provide a set monthly allowance for employees’ premiums and medical expenses. ICHRAs have a lot of advantages for both you and your employees, including:
You can choose how much you want to contribute every month, and there is no minimum or maximum. Once set, you will give that amount to employees monthly; they cannot exceed that amount, which will help you budget accordingly.
Reimbursements are tax-free.
You can offer different monthly allowances to different groups of employees based on the type of job they do, how many hours they work, and even family status.
Employees use the money you offer them to find an individual healthcare plan that suits their needs. This is empowering to them, and will allow you to focus on your business instead of trying to find a group health insurance plan that fits all of your employees’ needs.
Employees need to have an individual insurance policy to participate in an ICHRA, so if you enroll and start reimbursing employees mid-year, employees will become eligible for a Special Enrollment Period to choose a major medical health insurance plan. This means that they will not have to wait until the Open Enrollment Period, November 1- December 15, to buy a health insurance plan.
ICHRA Cons
There are many positives to offering an ICHRA, but sometimes with the good comes some bad. The disadvantages of ICHRAs include:
Employees who are on their spouse’s health insurance plan cannot participate.
This type of arrangement prevents employees from being eligible for advanced premium tax credits on ACA Marketplace plans. So if an employee decides not to take part in an ICHRA that is considered “affordable,” they will not be able to receive tax credits with an ACA plan.
Employees who are on their spouse’s health insurance plan cannot participate. The only way to participate is if they purchase their own individual health insurance and get reimbursed for it through the HRA.
Need Help?
For many employers, ICHRA pros outweigh the cons and can seem like a no brainer, which is why they are growing in popularity. You get to help your employees purchase health insurance plans that meet their specific needs, and you also get to save money in the process. Reimbursements are tax-free for both employees and employers, meaning that they are tax-deductible for employers, and income tax-free for employees, which will save you on employer payroll taxes. It’s a win-win situation.
If you are interested in an ICHRA, or want to explore your options for a group health insurance plan, reach out to an EZ agent in your area. Our agents are highly trained and work with the top-rated insurance companies in the country. We can assess your needs and compare plans instantly, for free. To get started simply enter your zip code in the bar above, or to speak directly with a local licensed agent, call 888-998-2027.
The coronavirus pandemic has taken a toll on many small businesses, and many are now struggling to stay afloat. In order to keep going, many small business owners had no choice but to furlough or lay off employees in order to save money. If you are one of them, you might be wondering what your former employees’ health insurance options are after you let them go. Is there still a way you can offer them group insurance? You can choose whether to pay monthly health insurance premiums on behalf of your employees, but if it is not possible due to financial constraints, your employees do have other options.
Furloughed Vs. Laid Off
Health coverage for an employee is determined by the employer’s (your) health plan. The plan indicates how many hours an active employee has to work to be eligible for health insurance. There are also rules surrounding what happens to their health insurance when they are no longer an active employee. When an employee is :
Laid off, their employment is terminated, even if you are considering the lay off temporary. After an employee is laid off, their health insurance plan ends on the last day of the month they were laid off.
Furloughed, their hours are reduced, or they might not be working at all. The difference is that they can expect to return to work again when the furlough is over, so they can continue to get health insurance coverage during the furlough period. If this is the case, the employee will either be responsible for their share of the plan’s premiums, or you, the employer, can temporarily waive employee contributions and pay all of their premium.
In general, nothing actually prevents you from paying monthly premiums on behalf of furloughed or laid-off employees. You have the option to choose to pay monthly premiums as long as you are able to. The premium will continue to be excludable from the gross income of the employees. Be aware, though, that if the plan rules do not permit an employee to be covered, then you are in danger of:
Potential loss of tax-exempt status of the plan, which means both you and your employees might owe back taxes, since pre-tax qualification would be lost.
Your insurance company denying claims for any employees that they determine are not eligible to participate in the plan.
A possible fiduciary breach under the Employee Retirement Income Security Act (ERISA) if plan assets were used to pay for benefits of non-eligible employees.
Laid-off and furloughed employees qualify for COBRA insurance.
Another option to continue coverage for your employees is the COBRA program. Both laid-off and furloughed employees qualify for a Consolidated Omnibus Budget Reconciliation Act (COBRA) plan if their group plan is terminated and you can no longer pay their premiums. COBRA can be expensive for your former employees, because if you do not contribute to their premiums, they will have to pay the full amount.
ACA Marketplace
Last but not least, losing a job is considered a qualifying life event, so a Special Enrollment Period will open up for your former or furloughed employees after they lose their job and their coverage. This means that they will have 60 days to get a health insurance plan on the ACA Marketplace. This could be a cheaper option for your employees than COBRA.
EZ Can Help
The pandemic has actually caused some changes in the way that group health insurance works. For example, some states have issued orders requiring or encouraging insurance companies to allow employers to make changes to their eligibility requirements so they can continue to offer group insurance to furloughed or laid off employees. Some states are even allowing a grace period for premium payments. To find out if your state is one of them, speak to an EZ agent, who can help find out the information for you. If you are interested in continuing to offer a group insurance plan, we can help you find a reasonable way to provide insurance to the employees that you had to let go. The times we are living in are not normal by any means, and we know it is not an easy decision to let go of your valued employees. EZ can help by offering our services for free, which includes checking all possible options, answering any questions, and comparing quotes.
To get started, simply enter your zip code in the bar above, or to speak directly with an agent, call 888-998-2027.
If you decide to offer a qualified small business health reimbursement arrangement (QSEHRA) to your employees, you might have some questions about how to report the benefits on your employees’ W-2s. The IRS requires employers to report these benefits, including how much each employee is entitled to receive in reimbursements in a calendar year. There are different variables to consider when it comes to filling out your W-2s, such as what you need to do if an employee did not participate in the QSEHRA or how to report carryover amounts, so let’s go over the most important things that you need to be aware of.
Reporting QSEHRA Benefits On the W-2
You can report your QSEHRA contributions on the W-2 form in Box 12.
If you have an employee who is participating in your offered QSEHRA, you must report the total amount of the employee’s permitted benefit on Form W-2 in Box 12, using Code “FF.” The IRS description for this code is: “Permitted benefits under a qualified small employer health reimbursement arrangement.” This benefit is not counted as taxable income for the employee.
It is important to note that over-the-counter medications used to require a prescription for reimbursement. However, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed in March 2020, has made over-the-counter medications eligible for reimbursement without a letter from a doctor or prescription. The medications should be reported on the W-2 Form as income in box 1 as well as in box 3, Social Security wages, and box 5.
Calculating The Benefits
When reporting on your W-2s, the permitted benefit amount should include only newly available QSEHRA funds. Any carryover amounts from previous years should not be included. However, if you use a non calendar-year QSEHRA, you will need to report a prorated amount.
Take the following example of a QSEHRA with a plan year that runs from August 1 to July 31:
For the plan year beginning August 1, 2020, a QSEHRA benefit of $3,000 was available to every employee for August 1, 2020 through July 31, 2021. The amount reported on the employee’s 2020 Form W-2, box 12, code FF is $1,500 (for August-December 2020).
In the new plan year (2021), the QSEHRA provides $3,500 to every employee for August 1, 2021 through July 31, 2022. The amount reported on the employee’s 2021 Form W-2, box 12, code FF is $3,250 ($1,500 for January-July 2021, and $1,750 for August-December 2021).
What About Carryovers?
When a QSEHRA has a carryover provision, only the newly available amounts are reported. If the QSEHRA allows for the use of carryover amounts from prior years, those amounts are not included in the amount reported for the current year. For example, if your employee has a remaining allowance of $1,000 in their QSEHRA allowance for 2020 and they receive $3,000 for the following year, only the $3,000 in new funds will be reported on their 2021 Form W-2 in box 12, Code FF.
What If An Employee Didn’t Participate?
Even if an employee did not participate in your QSEHRA, the benefits must still be reported on the employee’s W-2. You will report the amount of benefit that they were entitled to receive.
What About Employees With No MEC?
Employees who do not have the required minimum essential coverage (MEC) can still receive reimbursement through the QSEHRA, but will have to pay income tax on it. Specifically, any taxable reimbursements should be included as other compensation in box 1: Wages, tips, and other compensation.
If you issue a QSEHRA reimbursement and then later learn that the employee did not have MEC for the period in which the reimbursement occurred, the employee must repay the reimbursement as soon as possible.
However, if W-2 reporting is required before the employee has repaid the amount, that amount is taxable to the employee:
The amount must be included in the employee’s gross income on Form W-2, box 1.
The amount is not subject to FICA tax and should not be included in box 3, Social Security wages, or box 5, Medicare wages.
Have Questions?
If you choose to provide a QSEHRA to your employees, great! They are an excellent way to help your employees get the healthcare they need. But know that you will have to report these reimbursements on your W-2s, and it is important that you do it correctly in order to abide by the QSEHRA’s guidelines. If you need help exploring different types of small business HRAs, or have questions about offering healthcare in general, EZ can help. We will compare quotes, answer any questions and even sign you up for a plan at no cost to you. To get started, simply enter your zip code in the bar above, or to speak directly with an agent, call 888-998-2027.
If you are thinking of offering group insurance or a HRA to your employees, or if you are already offering them one or both, you might be wondering how to withhold employee insurance premiums and your contributions from their paycheck. Do the deductions come out of their paycheck pre-tax or after-tax? In some cases, you can deduct their premium and your contributions from their paychecks pre-tax; other premiums may need to be deducted after-tax. It is important to know what kinds of contributions can be deducted pre-tax, as well as the advantage and disadvantages of doing so.
Pre-Tax Deductions
Group health insurance deductions can be taken pre-tax.
Taking a pre-tax deduction means that you, the employer, withdraw money directly from your employees’ paychecks to cover the cost of benefits before income or payroll taxes are withheld. Internal Revenue Code (IRC) Section 125 allows for payroll deductions to be taken pre-tax for certain benefits, including:
In order to know which pre-tax benefits are exempt from state and local taxes, you will have to check your state and local laws.
What is the advantage of deducting premiums and contributions from your employees’ paychecks pre-tax? For employees, when premiums and contributions are deducted pre-tax, the amount of income that they have to pay taxes on is reduced, in some cases by up to 40%.
Doing this not only benefits your employees, it also benefits you; pre-tax deductions lower your tax liability, including the Federal Unemployment Tax (FUCA), State Unemployment Insurance (SUI) and FICA. For every dollar contributed to a retirement account, FSA or insurance plan, an employee’s taxable income is decreased accordingly. Your employees’ paychecks will effectively be lowered, meaning you will pay less in payrolltaxes.
The drawback is that your employee might owe taxes on the money you withheld in the future. This is because they did not pay any federal, state, and local taxes on the contributions at the time they were withheld. These taxes were simply deferred. For example, when your employee retires and begins drawing on their 401(k), they will owe taxes on the money they use from their pre-taxed 401(k) plan.
After-Tax Deductions
Contributions to retirement plans and other benefits are deducted after income and payroll taxes are deducted.
After-tax premiums and contributions are deducted from your employees’ paychecks after income and payroll taxes are deducted. Unlike pre-tax deductions, these will not affect your employee’s taxable income. However, you and your employee will owe more payroll taxes with after-tax deductions. If premiums are deducted after-tax, your employees will not pay taxes when using the benefits in the future, such as when they withdraw money from a post-tax retirement or health arrangement plan. Common after-tax premiums include:
Some retirement plans (such as a Roth 401(k) plan)
Disability insurance
Life insurance
Major medical coverage purchased by an employee on their own
Need Help?
If you need help finding group insurance, a HSA, FSA, or HRA, then EZ.Insure can help. We want to make sure that you save as much money as possible, which is why we compare all plans in your area, for free. We will assess your business’ and employees’ needs and find the best plan that will help cut costs, not coverage. If you need help figuring out which plans qualify for pre-tax and post-tax deductions, we can help with that too. We will answer your questions and guide you through the process. To start comparing plans for free, simply enter your zip code on the bar above, or to speak directly with an agent, call 888-998-2027.
Claims History
