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What Will Employer Healthcare Costs Look Like in 2021?

If there’s one thing that we can all agree on, it’s that 2020 has been an unusual year, especially when it comes to healthcare. We’ve seen a once-in-a-lifetime pandemic, and we still don’t know what all the effects of it will be. Take, for example, costs for employer-based healthcare. If you’re an employer, you’re right to be wondering where your health costs are headed in 2021 – will they skyrocket? Level off? Maybe even go down? Unfortunately, the answers to these questions are not as clear-cut this year as they have been in previous years, but we can take a look at what some experts are projecting, as well as what you can do to help keep costs down.

This Year’s Cost of Care

piles of hundred dollar bills strapped together by a band laying on top of each other — *Healthcare costs have surprisingly been down this year; spending anywhere from $75 billion to $575 billion less than expected.*

To get a better idea of why predicting healthcare costs for 2021 has been so difficult, we need to take a look at what healthcare costs have been like this year. As you might expect, dealing with the coronavirus is expensive: California’s state ACA Marketplace, Covered California, estimated that the costs to test, treat, and care for coronavirus patients this year will be between $34 billion and $251 billion; America’s Health Insurance Plans predicts the cost will total $56 billion to $556 billion over a two-year period.

Even with those astronomical numbers, we can’t simply jump to the conclusion that insurance costs are going to skyrocket next year. It looks like the total costs of healthcare in the U.S. are actually down this year; in fact, one estimate is projecting that we will have spent anywhere from $75 billion to $575 billion less than expected on healthcare by year’s end. One actuarial firm is even saying that some self-insured employers could see a 4% drop in healthcare costs in 2021. How can that be? While the coronavirus has been an unexpected expense, in some cases, it has been balanced out – or even cancelled out – by the fact that many people are postponing or cancelling regular clinical care and elective treatments due to coronavirus.

But before we get too excited about a possible drop in healthcare costs, we need to look at what the experts are predicting. And, like everything else this year, it’s unusual: there are multiple possible scenarios for how much employer healthcare costs will rise.

Multiple Scenarios

3 arrows pointing in different directions — *So far, there are 3 possible scenarios as to how much healthcare costs will be next year.*

Medical costs are one of the most vital bits of information for insurance companies as they figure out plan costs for the coming year. With this year being so much in flux, it is unclear what insurers are going to do; in fact, business advisory giant PricewaterhouseCoopers (PwC) has taken the unusual step of offering multiple scenarios for what could happen to employer healthcare costs in 2021. “This is an unprecedented report for us,” said Ben Isgur, leader of PwC’s Health Research Institute. “In the 13 years we have been doing this, we made a projection of the coming year and never felt the need to do scenarios.” Their 3 scenarios for 2021 are as follows:

Medical spending continues to stay low, with people opting out of non-coronavirus related care. In this scenario, costs would only rise by about 4%, which would be one-third lower than the average growth over the last five years.
Medical spending could be “medium,” and costs would rise at the same rate as they did from 2014 – 2020: around 6%.
Spending could be very high and result in a 10% increase in costs.

These numbers might not be across the board for all businesses in all areas: it might depend on where they are located and how much the coronavirus has affected their area. For example, businesses in an area that has been relatively unaffected by coronavirus will most likely see the usual increase of about 6%, while those with a surge in the virus, but a drop in people seeking care for other things, could see a rise closer to 4%. But if all of this other medical care gets pushed into next year? Then we could see a rise in healthcare costs of around 10%, which would mean the highest rate of medical-cost inflation since 2007.

For now, it does look as if some insurers are raising rates, and these increases seem to vary by plan type. For example, recent filings with the District of Columbia’s Department of Insurance, Securities and Banking related to small groups for 2021 show that Aetna filed for an average increase of 7.4% for health maintenance organization (HMO) plans and 38% for preferred provider organization (PPO) plans, while UnitedHealth proposed an average increase of 17.4% for its two HMOs and 11.4% for its PPO plans. They may be anticipating a surge in claims as 2021 gets underway.

A Surge Next Year?

graph of money bars going up with a red line moving upwards across the top of each bar — *Insurance costs could skyrocket next year due to people not getting treatment.*

What many employers are concerned about now is that final, high-spending scenario. With so many people putting off necessary treatments, insurance claims could skyrocket in 2021 as people get sicker. Skipping out on preventive care could also present a large problem, as people may miss out on being diagnosed with underlying issues. “[Employers are] worried that some of these elective procedures will simply be bunched up next year and some people will be sicker next year … because certain things weren’t detected earlier,” said James Klein, American Benefits Council president.

Other things that could drive up costs? Increased coronavirus testing as employees return to work, prescription drug cost increases as pharmaceutical companies work on coronavirus treatments, and higher operating costs for hospitals and physicians as they try to keep up with the need for protective gear. Finally, let’s not forget that, as people struggle with isolation and anxiety, mental health costs will probably continue to rise – and now is certainly not the time to skimp on mental health care benefits for your employees.

What You Can Do

If costs do end up rising significantly, it might seem like the best thing to do would be to choose plans with higher deductibles or contribute less to employees’ premiums, which would pass some of the costs onto them. This may help to reduce your spending in the short-term, but it’s probably not the best long-term strategy. Studies show that putting more of the cost of healthcare onto your employees actually discourages them from seeking preventive care: for example, families with a higher deductible are less likely to take their children to see the doctor, even if the visit is free. In the long run, this could mean that your employees and their families will be less healthy, which could mean higher healthcare costs.

So what should you be doing to help manage healthcare costs and keep your employees healthy? Here are a few strategies:

Probably the best thing that you can do right now – and continue to do in the future – is to offer telemedicine as an option to your employees. Virtual healthcare exploded in popularity during the pandemic, and many patients love its convenience, while many employers love how cost-effective it is. Speak with your insurance company and make sure that they will continue to cover it – and encourage your employees to take full advantage of it.
Healthcare technology doesn’t have to end with telemedicine. You can offer “virtual chronic care solutions,” which can reduce the need for regular doctor visits. This could include things like Bluetooth-enabled glucose monitors that link with smartphone apps.
Instead of raising costs for your employees, try narrowing the network included in your plan. If your employees are already happy with their covered doctors, it may not be necessary to include a wider range of providers.
Speak to your insurance company, or one of our knowledgeable agents, and have them help you examine your employees’ healthcare costs. For example, are their providers jumping right to expensive tests and surgeries, or are they more likely to start with effective preventive measures?

The only thing we know right now about 2021 healthcare costs for employers is that we don’t know a whole lot. Right now all you can do is move forward on the assumption that costs will go up, as they do every year, and try to find ways to keep costs down. The best way to do that? Contact EZ, and speak with one of our agents. They can give you cost-saving tips, and can also find you a great plan at a great price – and they’ll do it all for free. To get started, enter your zip code in the bar above, or to speak with an agent directly, call 888-350-1890.

How Should You Present Your Healthcare Plan to Employees? Try a Virtual Benefits Fair!

It’s that time of year again! For many employers who offer healthcare benefits, the fall means open enrollment for your employees. It’s time to start thinking about how you’re going to present your group health insurance plan to your employees, and how you can help them to understand what is being offered to them. But we all know that this has been an unusual year, and with many businesses operating remotely, it will be a challenge to present the usual binder full of print-outs to your employees. You might be worried about how to get everyone engaged in your plan, but think about it this way: your employees might be more ready and willing to pay attention this year, because healthcare suddenly seems more important to them than ever. So why not take advantage of both their interest and your new reliance on online meetings and host a virtual benefits fair?

caucasian woman in front of a laptop with people on the screen — *Doing a virtual benefits fair will help your employees remain informed and engaged.*

The Challenges

It sounds so easy on paper: you research a group health insurance plan (or plans), offer them to your employees, they choose and sign up, and then they can get the healthcare that they need. But it might not be so easy in reality. Employees need to understand their benefits, and how they work in order to make the most of them – or to even feel compelled to sign up for your plan.

Unfortunately, surveys show that only 40% of employers actually help their employees understand their benefits. We get it: you’re an expert at your job, but you’re not an expert on health insurance, so you may feel tempted to go the traditional route of simply handing out printed materials and brochures and hoping for the best. But this leads to overwhelmed and uninterested employees, who often end up skimming the materials and getting nothing out of it. In fact, studies show that employees spend an average of only 30 minutes thinking about their benefits choices when they’re simply handed information.

So, in the traditional scenario, you’ve wasted time and resources on giving information to your employees, and you still haven’t really gotten through to them. Not only that, but with much of business being conducted from afar these days, you might find it difficult to even get these materials to them, or to have in-person info sessions or meetings with insurance reps. What can you do? Spend the money to mail everything? Have a designated pick-up time at the office? We’ve got a better idea: stop the endless printing and collating, eliminate the need to coordinate in-person meetings, and guide your employees through a review of their plan in a more relaxed atmosphere.

Why Host a Virtual Benefits Fair?

Now is definitely the time to consider hosting a virtual benefits fair, and the advantages of presenting your plan this way might tempt you to do it this way every year. Virtual benefits fairs are a win-win for everyone involved: they’re flexible, efficient, and effective – and they can save you time and money! Some of the top reasons to host one include:

Data shows that they’re effective and engaging. Remember that 30 minutes that employees spent on reviewing your plan information? Studies show that when employers hosted a virtual benefits fair, employees spent at least 45-60 minutes reviewing their benefit options.
Hosting a virtual benefits fair will lead to immediate feedback from your employees in order to know what to look for in a plan.
You can reach all employees, no matter their location.

Families can get involved in the decision. If employees can access the fair from home, then their partners or dependents can listen in and find out more information about the benefits that affect them.

You get immediate feedback. If you decide to host a fair with multiple “rooms” to visit, then you can see which were visited most frequently, or seemed to generate the most interest.

Employees can get direct access to representatives. You can host a fair that gives employees the opportunity to speak directly to insurance representatives, and get their questions answered by an expert!

Employees take full ownership of their benefits package. When everything is online, employees can choose which presentations to watch and they can download the information they find most relevant – and keep it for further reference.
Hosting one is a way of showing that you care about your employees and their health. Offering healthcare is always a way to attract and keep valued employees – but organizing a virtual benefits fair to make sure they’re well-informed? That’s a whole other level.

How to Do It

So if saving time and money, keeping your employees informed and happy, and doing it all from the comfort of your home sounds good to you, then let’s take a look at how you can go about setting up a virtual benefits fair.

Look into a virtual events platform. To make your fair as engaging and effective as possible – and to take a break from the usual Zoom meetings! – use a virtual events platform to do all of the heavy lifting for you. There are many options to choose from.
Decide what you want to include. Make a list of the elements you’d like to see in your fair. This could include: one-on-one chats, downloadable materials, live webinars, and pre-recorded videos.

Schedule a date and time. This should be easier to do than scheduling an in-person event, as you can be more flexible. You just need to think about the best time to do it – during open enrollment? Before? How much time will you need to plan it? Are there any company deadlines you need to consider?

Let your employees know! Give yourself plenty of time to internally market the fair to your employees. Email them, mention it frequently in group communications, and post about it on your social media platforms.
Evaluate how it went. After it’s all over, don’t forget to take a look at the data: what questions were frequently asked? What webinars or presentations were most popular? All of this information can help you to tailor future benefits communication to your employees – it’ll also let you know what your employees are most interested in when it comes to their healthcare plan!

Your employees will almost certainly have questions about the healthcare benefits included in their group health insurance plan, but engaging them on the subject can be challenging. So take advantage of the technology available nowadays, and give employees an engaging, flexible, and tailored way to learn about their options. And if you have questions about offering group health insurance to your employees, or if you’re looking for a great plan, talk to EZ. We’ll set you up with an agent who can provide you with all the information that you need, get you fast, accurate quotes, and sign you up for a great plan – and we’ll do it all for free! Get started with us today by simply entering your zip code in the bar above, or you can speak to an agent by calling 888-998-2027.

What Employers Need to Know about Healthcare and Privacy

As an employer, you are entrusted with a lot of personal information about your employees. This is especially true when it comes to their healthcare. You provide their health insurance plan, and you are the one who will need to obtain health information in case of a work-related injury, or if your employee requests medical leave or accommodation for a disability. All of this information is confidential, but many employers are unsure what their obligations are when it comes to protecting their employees’ privacy. The Health Insurance Portability and Accountability Act (HIPAA) is what regulates how private health information is treated, but you may be surprised to know that HIPAA doesn’t always apply to employee health information that is maintained by an employer.

What Is HIPAA?

The Health Insurance Portability and Accountability Act, or HIPAA, was established in 1996 as technology was advancing and medical records were beginning to be kept, accessed, and transferred digitally. HIPAA provides federal protection for personal health information, including medical records, conversations regarding medical treatment, and billing information related to a patient’s healthcare.

In the workplace, the main way that HIPAA is applied pertains to your employees’ right to privacy. The HIPAA right to privacy rule gives employees:

The right to authorize disclosure of their health records
The right to request or inspect a copy of their health records
The right to have mistakes corrected at any time

HIPAA rules surrounding employee health information are balanced, and they do not mean that you can never ask for or obtain any medical information about your employees – you just need to get it in the right way, and protect it once you have it.

HIPAA specifically says that its rules apply to what are known as “covered entities,” which are insurance companies and healthcare providers, or any other organization that transmits medical records electronically. These “covered entities” need to be HIPAA compliant. For you, as an employer, HIPAA applies to your request for information from those covered entities. What this simply means is that an insurance company or healthcare provider cannot give you any health-related information about your employee without your employee’s express authorization.

illustration of a hand writing on a piece of paper with a red cross in the corner. — *HIPAA does not stop you from asking an employee for a doctor’s note.*

Common HIPAA Misconceptions

HIPAA can seem complicated. You have obligations when it comes to protecting your employees’ healthcare information, but, unless you are a healthcare company or a healthcare provider, you aren’t technically subject to HIPAA. The law really just regulates how employees’ protected healthcare information maintained by a healthcare plan can be shared with employers.

There are some myths surrounding how HIPAA affects you as an employer that we can debunk for you right now. HIPAA does NOT:

Stop you from asking for a doctor’s note for an absence
Affect your ability to ask for information related to workers compensation claims, wellness programs, or administering your healthcare plan
Apply to employment records – but if health information is contained in them, you’ll have to get authorization from your employee’s physician and state that you will only use the records for the intended purposes.
Cover all employee benefit information. For example, employee life insurance, disability and workers’ compensation, and wellness programs are generally not covered under HIPAA.

HIPAA Rules

While there are many ways that employers are not subject to HIPAA, there are still certain HIPAA rules that employers need to pay special attention to in order to remain in compliance with the law. Examples of these include:

Electronic security rule – This rule requires that you take all reasonable measures to physically, technically, and administratively safeguard your employees’ personal information. Businesses are expected to take steps to ensure privacy, protect against threats, make sure employees are in compliance, and protect against unauthorized uses or disclosures of information.
Breach notification rule – If your insurance company or a healthcare provider experiences a data breach, everyone affected needs to be notified. The same goes if it happens to your business.
Privacy and personal health information rule (PHI) – According to the Department of Health and Human Services, “The HIPAA Privacy Rule protects most ‘individually identifiable health information’ held or transmitted by a covered entity or its business associate, in any form or medium, whether electronic, on paper, or oral.” Again, this really only applies to “covered entities” – or insurance companies and providers. But these covered entities need to make clear to you how PHI may be used or shared, and you need to remain in compliance with those privacy policies.

Common Violations of HIPAA

illustration of people with the heads as tv screens, one with an eye, one with an ear and one with a mouth — *Unauthorized access or disclosure of an employee’s health information is a direct violation of HIPAA.*

Despite some of the technicalities of what HIPAA covers, if you’re in possession of health information about your employees, it’s a good idea to stay on the safe side and use best practice to remain compliant with the law. This mainly means keeping your employees’ data safe and secure, and always going through the proper channels to obtain medical information. To give you some idea of what you should be looking out for, the most common HIPAA violations for employers are as follows:

Hacking/data breaches – If you don’t have the proper security measures in place, your employees’ information, including their health information, could be at risk of being hacked.

Theft/loss – Similarly, devices storing sensitive information could also be stolen.

Unauthorized access/disclosure – Even if you obtain an employee’s information in the correct way, you still have to make sure that it is kept safe and not disclosed to anyone other than you or other authorized parties.
Improper disposal – Protected information needs to be disposed of properly – information could be illegally obtained if you don’t take reasonable measures such as shredding documents.

Being an employer means taking care of your employees in lots of different ways. If you offer them healthcare as one way of taking care of them, that’s great – but protecting their personal and private information needs to be another way that you look after them. The rules surrounding HIPAA may seem complicated on first look, but the most important thing to remember is that you need to safeguard any sensitive information entrusted to you. If you have any questions about how HIPAA affects your healthcare plan – or if you have any other questions about offering healthcare to your employees – EZ is here to help. Our knowledgeable agents can do everything from answer questions to provide fast, accurate quotes to sign you up for a great plan – and we’ll do it all for free. To get started with us, enter your zip code in the bar above. Or to speak with an agent directly, call 888-350-1890.

Small Business Group Health Insurance FAQ

Starting a small business is a great accomplishment! It takes a lot of hard work, and you probably have a to-do list a mile long. One very important thing on your list should be finding a great group health insurance plan. Offering health insurance to your employees leads to so many advantages for your business, like healthier, happier employees who are more likely to stay in their jobs, and tax breaks for you. There are many high-quality affordable plans to choose from, but you might be wondering where to begin, and you’ll probably have a lot of questions as you search for the right one for your business and your employees. That’s where EZ comes in: we’ve also got the answers to your most frequently asked questions and can give you a free quote to help you compare local group health insurance plans from all of the top carriers.

illustration of a woman with a headset on with her hand out and money floating over it — *An agent will be able to offer you exclusive deals and promotions from insurance companies.*

Should I use an agent or broker?

Both insurance brokers and insurance agents act as the middlemen between insurance buyers like you, and insurance companies. Using an insurance agent, like one of EZ’s, is the best option for small business owners looking to purchase a healthcare plan. Agents can expedite the buying process, they have specialized knowledge about the policies they sell, and they can keep you up-to-date on any changes to your plan. Our agents also have access to exclusive products from the top-rated insurance companies, which can save you more money than if you go it alone.

What is the minimum number of employees to get a group plan?

If you have 50 or more full-time employees, you are required to provide health insurance or you will be penalized under the employer mandate of the Affordable Care Act. You are eligible for a group plan as long as you have 2 full-time (or full-time equivalent) employees, including yourself. Full-time employees are considered those who work 30 hours or more a week.

The 2-employee rule is always true for tax-advantaged small business health insurance options program (SHOP) plans (although you will need 70% participation in your plan). If you’re looking into other group plans, some insurance companies may have different requirements. Ask one of EZ’s agents to check for you.

What is the average cost for a group health insurance plan?

Small business health insurance costs are determined by your location, number of employees, and how much you would like to contribute to your employees’ coverage. The average cost of annual premiums for employer-sponsored health insurance was $7,188 for individual coverage and $20,576 for family coverage in 2019. The average annual deductible amount for individual coverage was $1,655 for covered workers.

SHOP plans, as mentioned above, can offer some savings through the small business health insurance tax credit, if you have fewer than 25 full-time employees and meet certain requirements. Speak with an EZ agent about this possibility, or use our online tool to check fast, no-cost quotes for all available plans. We can help cut costs – but not benefits – by comparing multiple plan options.

How do I communicate the new benefits to my employees?

Simple, just ask your EZ agent! EZ’s agents are experienced in helping you communicate new benefits to your employees. Our agents will provide a Summary of Benefits Coverage (SBC) to participants and their beneficiaries before enrollment in the plan, at renewal of the plan, within 90 days of a Special Enrollment, and within 7 business days of a written request. They will also help you provide each employee covered under the plan a Summary of Material Modification (SMM) when there are changes made to their health benefits.

How much do I charge employees to be on the plan?

red "50%" sign — *Employers are required to contribute at least 50% of their employee’s health insurance premiums, but you can contribute more.*

Employers are required to contribute at least 50% of each employee’s health insurance premiums. On average, employers contribute approximately 82% of individual insurance premiums, and around 71% of family plan premiums. The more that you contribute to your employees’ premiums, the more likely employees are to enroll, and the more you will save – and don’t forget all of these contributions are tax-deductible!

You have options when it comes to plans and premium prices, so talk to an EZ agent about what’s best for you and your employees. For example, if you choose a plan with a low deductible, but higher premium, you may not be able to contribute more than 50%, and your employees might find it too expensive to enroll in your plan. In this case, you might want to look into a high deductible health plan, which would allow your employees to contribute to a health savings account (HSA). An EZ agent can help you determine how much you can afford to contribute, and other ways you can save!

Will offering health insurance help me attract better employees?

Businesses that offer health insurance tend to attract and recruit the best candidates. Most job seekers won’t even look twice at a posting if an employer does not offer health insurance – job seekers want to know that a prospective employer is willing to invest in them. Surveys show that 46% of job seekers said that healthcare was a deciding factor in taking a job, and that 60% of employees would take a job with lower pay but better benefits.

Will my employees be happier if they have health insurance?

Offering health insurance can mean having more loyal employees and a lower turnover rate. 83% of employees say health insurance is extremely important when deciding whether or not they should change jobs. Employees with health insurance are happier, less likely to leave their jobs, and healthier.

One survey found that 72% of employees said having more work benefits would increase job satisfaction. Knowing that they will be protected in case of an emergency, that their chronic conditions will be covered, and that they will not have to worry about large medical bills, means less stress for them and more productivity for you.

Will productivity go up if we offer health insurance?

Absolutely! In one recent study, 60% of employers said that offering health insurance led to higher productivity levels at their businesses. Not only will offering health insurance to employees lower their stress levels, but it will also keep them healthy – and healthier employees are less likely to take time off for being sick. When you invest in your employees, you’re boosting your bottom line.

What other benefits should I consider offering?

caucasian man laying in bed with the laptop on his lap with a doctor on the screen. — *Offering telemedicine to your employees is a great benefit that can help you save money.*

When choosing a plan, look at what “extra” benefits it offers – for example, telemedicine. This convenient option can actually save you thousands due to the reduced cost of healthcare claims from unnecessary visits to the doctor and reduced visits to the emergency room. It is more convenient (and less expensive) for employees to call and speak with a doctor to receive care.

You can also consider offering a workplace wellness program. These programs help keep healthcare costs down by giving incentives to employees to live healthier lives. These programs can include things like health screenings, programs to quit smoking, gym membership stipends, diet and weight loss programs, or diabetes management programs. To find out what extra benefits you can offer, talk to an EZ agent.

How will I know if my doctor and my employees’ doctors are in-network?

If you are looking for a plan that includes specific doctors, speak to an EZ agent to find a plan that includes the best network for you and your employees. Our agents can easily access any insurance company’s networks and included providers in minutes.

If you already have a plan, check your plan info to see if there’s a list of covered doctors. You can also call your doctor’s office, ask for their tax ID number, and then call your insurance carrier to find out if they are covered. Or you can avoid this long and annoying process by simply asking one of EZ’s agents to check for you!

EZ.Insure understands how time consuming and overwhelming finding a group health insurance plan for your small business can be. To make the process easier, we provide you with a personal agent who will answer all of your questions, compare plans, and provide you with free, instant, and accurate quotes. We do all the heavy lifting for you so that you can provide the best insurance for your employees, without breaking the bank. Let us help you save time and money. To get started, enter your zip code in the bar above, or to speak to a specialized agent within your area, call 888-998-2027.

Do You Have to Offer Insurance to Part-Time Employees?

If you’re running a small business, there’s a good chance you have more than one type of employee. You might have a few full-time workers, a few independent contractors, and some part-time employees. There are definitely advantages to hiring part-time workers: for example, flexible scheduling, having a few people on staff who are each specialized in different areas, and taking some of the stress off of full-time employees if their workload suddenly increases. Would you add “saving money on benefits” to that list? If you’re a small employer who chooses to offer healthcare to your full-time employees, you might wonder whether you also have to offer it to part-time employees, and if you don’t have to, whether you can – and should – offer it.

Part-Time Employees

clock drawn in chalk on a blackboard — *Under the rules set out by the Affordable Care Act (ACA), part-time employees are those who work less than 30 hours per week.*

First things first: what does being “part-time” actually mean? You might have your own definition for the purposes of your business, like someone who works fewer than 35 hours per week, but when it comes to healthcare, there is actually a legal definition of part-time. Under the rules set out by the Affordable Care Act (ACA), part-time employees are those who work less than 30 hours per week.

And now the answer to those basic questions above. First: do you have to offer healthcare to your part-time employees? No, you do not have to – even if you offer it to your full-time employees. The ACA only requires that employers with 50 or more full-time – or full-time equivalent – employees offer healthcare to those employees. Remember, your part-time employees count towards your number of full-time equivalent (FTE) employees, so be sure to do the following calculation:

Add up all the hours that your part-time (less than 30 hours per week) employees work on average each week
Divide the result by 30
Round down to the nearest number
Add that number to the number of full-time employees you have and that’s your FTE number

If that number is fewer than 50, then you are not required to offer healthcare to any of your employees.

Second: can you offer healthcare to part-time employees? Yes, you can, but there may be some barriers to offering it to part-time employees, and you must follow certain rules set out by the ACA.

The Rules

red prohibit sign — *Some insurance companies actually prohibit you from offering your insurance policy to part-time employees.*

If you do decide you want to offer healthcare to your part-time employees, there are some things you need to be aware of. First, check with your insurance carrier because:

Some insurance companies actually prohibit you from offering your insurance policy to part-time employees. Insurance companies make their own rules, and they may also vary on a state-by-state basis.
Most health insurance companies have a minimum participation rate for plans (this may vary by state, as well). Adding your part-time employees into the mix could mean changing your minimum participation rate percentage, so make sure that your part-time employees actually want to enroll in your plan before you offer it to them!

Next, if your insurance company gives you the go-ahead, then you need to make sure that you are complying with the ACA’s rules surrounding offering healthcare to part-time employees. You have to:

Be consistent. Just as the ACA requires that you offer the same benefits to all similarly situated full-time employees, the same applies to part-time employees. In other words, you can’t offer healthcare to one part-time employee, but not to another who works the same number of hours and does a similar job.
Clearly define your policy. If you are going to offer healthcare to part-time employees, you need to have a written policy that clearly states eligibility requirements. This is completely up to you, it just needs to be implemented consistently. For example, you could set a policy that allows employees to participate in your healthcare plan if they work a minimum of 20 hours per week – all employees who meet this minimum threshold would then be eligible for your plan.

The Pros and Cons

This brings us, finally, to whether you should offer part-time employees healthcare. Well, there are a few pros and one big con: the cost. Adding employees onto your healthcare plan will mean extra money out of your pocket, since you’ll be contributing to their premiums just as you would for full-time employees. But there are also advantages to offering healthcare to all of your employees, as well as ways to help offset the costs.

group of employees talking at a table. — *Advantages to offering healthcare is you will end up with happier, healthier, more productive employees*

The obvious advantages to offering healthcare are the personal reasons. You’ll end up with happier, healthier, more productive employees who are not worried about the possibility of being hit with a giant medical bill. In terms of your business, you’ll be able to attract high-quality staff if you offer this coveted benefit, and you’ll be more likely to retain them, which will save you on future recruitment.

Offering healthcare to your employees also comes with certain tax benefits. All of your healthcare-related expenses are tax deductible, so you can deduct every cent you spend on your employees’ premiums from your state and federal taxes. If you have fewer than 25 employees (making under a certain amount of money), you can also look into an ACA Small Business Health Options Program (SHOP) plan, which could qualify you for the small business healthcare tax credit. This provision of the ACA could save you up to 50% of your premium expenses.

In the end, it all comes down to what is right for you and your employees. You don’t need to offer part-time employees healthcare, but consider the benefits for your employees – and your business – of doing so, and calculate how much you’ll spend versus how much you’ll save on taxes and fewer sick days. If you’ve made up your mind to look for a plan – or if you need help deciding! – come to EZ. We’ll set you up with your very own agent who will go over all of your options, break everything down for you, and get you fast, accurate quotes – for free! Get started with us today by simply entering your zip code in the bar above, or you can speak to an agent by calling 888-998-2027.

What Happens to That “Use It or Lose It” FSA Money?

Offering any type of healthcare plan to your employees is beneficial to both of you, and not just because they help keep your employees healthy and productive. There are a lot of tax benefits to offering healthcare, especially if you include savings accounts like flexible spending accounts (FSAs).

FSAs, which you can offer alongside any type of healthcare plan (employees don’t even need to participate in the plan to opt into the FSA), allow employees to put money aside on a pre-tax basis and then use it for qualified medical expenses. This reduces your employees’ taxable incomes, as well as your payroll taxes. The downside for employees? The money in these accounts doesn’t roll over each year, so if they don’t use (most of) it, they lose it. The good news? That money reverts back to you, and you have a few options of what to do with it.

dollar bills in the ground growing — *Employees can then use the pre-tax money throughout the year on a wide variety of expenses,*

How FSAs Work

If employees choose to opt into your offered FSA, then they will contribute a certain amount of their paycheck to the account. They can then use that pre-tax money throughout the year on a wide variety of expenses, such as deductibles, copays, coinsurance, glasses, dental care, prescription and OTC medications, and even many common drugstore items. Employees’ annual contributions are taken out of their paychecks in installments, and they are treated as salary reductions for tax purposes (hence the tax benefits!). The reimbursements for the qualified expenses are also tax-free.

Both you and your employee can contribute to their FSA, but your employee’s contribution cannot exceed a certain amount. For 2020, that amount is $2,750. Whatever you choose to contribute is in addition to that amount and does not count towards their limit.

The “Use It or Lose it Rule”

FSAs take a bit of planning on an employee’s part. They need to choose their contribution amount during an annual enrollment period, and that amount cannot be changed during the year unless certain qualifying “change of status” events occur, such as change in marital status. 2020, however, has been a bit different: the IRS announced in May of this year that they will allow mid-year changes to FSA contributions, but this is most likely a temporary measure.

money rolled up in a rubber band on a white table. — *With an FSA money not used by employees doesn’t go to waste! A portion can roll over!*

If employees don’t end up using all of the money in their FSA accounts by the end of the year, then the balance generally reverts back to you, the employer. There are two exceptions to this “use it or lose it” rule:

Your FSA can allow a 2 ½ month grace period, meaning that (if your FSA operates on a calendar year basis, which most do) your employees will have until March 15th to use the funds
Your FSA can allow employees to roll over $500 of their unused balance into the next year

You can only offer one of these options to employees, and you are not actually required to offer either of them, but it is common practice to do so. If you do offer one of these options to your employees, and they still have more than $500 left in their account at the end of their year, or if they haven’t used up all of the money by March 15th, then that money reverts back to you. So what do you do with it?

What You Can Do with Forfeited Money

The IRS gives you a few options of what to with any unused FSA dollars. You can use it to:

Help with plan administration costs. You can choose to outsource the administration of your FSA for a cost of around $5/month/employee, and you can use the leftover funds to pay for it.
Reduce employee FSA salary reductions for the next year. For example, if an employee wants to contribute $500 to their next year’s FSA, you could allow them to contribute only $480 and use leftover funds to make up the other $20.

Add money to employees’ accounts. You can choose to use the money to offset any extra expenses incurred by employees in the next year. For example, if an employee contributes $1,000 to their next year’s FSA, but submits claims for $1,200, you can use leftover FSA money to cover that extra $200. This is generally not the most popular option, because it is only useful to employees if they spend more than they’ve put aside. They might also begin to expect this extra coverage every year.
Pay your employees in cash. If you choose to do this, you need to make sure that you are distributing the money in a “uniform” fashion, meaning you can’t just give the money back to the one or two employees who didn’t use their FSA money. You would also need to track down any former employees from that year and pay them their share. Remember, too, that the money you give them will be considered income, so it must be reported and will have taxes deducted from it.

Tax-advantaged healthcare benefits are basically a win for everyone involved, even with the small caveat of the FSA “use it or lose it” rule. You and your employees save on taxes, and any balance remaining in their account is never truly “lost” – you can take it and use it to continue helping them (or your business) with healthcare costs. We get it, this is all complicated stuff, so if you have questions about offering FSAs or any other type of group health benefit, we can help. Drop us a line and we’ll set you up with one (and only one) knowledgeable agent who will answer all of your questions, go over all of your options with you, and give you fast, accurate quotes when you’re ready for them. Ready to get started? Simply enter your zip code in the bar above, or to speak to an agent, call 888-998-2027.

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