Reasons to Switch Group Health Insurance Plans

At AEIS, we believe that group health insurance plans are one of the best ways to not only attract higher quality applicants to available positions for your business, but to retain them for the long-term as well. This is true for a variety of different reasons, all of which are certainly worth a closer look.

What is a Group Health Insurance Plan?

At their core, group health insurance plans are exactly what they sound like - plans that are offered to a collective of employees on behalf of a business. This is a single plan that provides coverage to all of (or at least most) employees in an equal manner. The major perk is that employees don't have to worry about finding their own individual plans because their employer is providing them one that they are (in theory) satisfied with.

These types of plans are typically paid for every month. The total amount that you and your employees will pay in premiums will depend on a range of different factors, including but not limited to the number of people who are involved in the group, their respective ages, the area of the country that you live in, and the amount of coverage the plan(s) provides.

Note that while an employer is not legally obligated to pay 100% of the premiums for any group health insurance plans that are offered to employees(there is a minimum amount employers must contribute though), everything that employees pay is fully tax-deductible as per the Internal Revenue Service as long as your company has a Section 125 Premium Only Pop (POP) plan in place.

Are You Legally Required to Provide Health Insurance for Employees?

While not all types of businesses are legally required to offer health insurance for employees, many of them are. This is true if you have more than 50 Full Time Equivalent (FTE) employees, known as an Applicable Large Employer (ALE). If this is true in your situation, you will need to make sure that affordable coverage is being offered to at least 95% of your full-time workers.

For the purposes of this discussion, understand that a "full-time employee" is currently defined as someone who works more than 30 hours per week and is W2 Employee, not a 1099.

In the event that you do not meet this threshold, it's still a good idea to offer benefits to employees. A happier and healthier workforce is a more engaged workforce - which will only improve the quality of the work they're able to do, which in turn improves the reputation of your business as well.

5 Things To Do Before Changing Health Insurance Plans

By far, the most important step to take before changing health insurance plans involves opening an ongoing communication channel with employees that will be utilized moving forward. Don't forget that this is a potentially significant change in your employee's lives. You need to let them know what is happening, why you're considering this type of change, and how they can stay involved in the process moving forward.

Similarly, another thing to do before changing plans involves soliciting the feedback of as many employees as you can. Group health insurance plans need to adequately cater to as many people as possible and to get to that point, you need to know what their needs actually are. In addition to asking for this feedback yourself, you can also enlist the help of a benefits broker like the team at AEIS to take care of this step on your behalf.

Next, you'll want to make sure that you understand the various types of group health insurance plans that are available and how each one might fit in with your larger benefits strategy. A PPO or Preferred Provider Organization, for example, is seen as a "lenient" type of plan because referrals are not mandatory and the plan itself often pays for at least a portion of any out-of-network service. An HMO or Health Maintenance Organization has lower monthly premiums, but referrals for any special services are required and there is no out-of-network coverage. Each type of plan has its own pros and cons, so you need to consider them carefully before making a decision one way or the other. Depending on the size of your company, employers can opt to offer both types of plans for their employees to choose from. Also, which carrier(s) you chose for your employee benefits plan depend on many factors. Health insurance carriers share many similarities between them all, but each have their own pros and cons and specialties, and different hidden benefits. 

Another important factor to consider when changing health insurance plans, is which states do your employees currently reside in? During Covid-19, many employers moved to a work from home model and now have a distributed workforce throughout the US. Do you have employees that live in a state that has specific compliance laws and regulations employers need to follow, such as paid disability leave, also known as PDL, and/or paid family medical leave, also known as PFML. Additionally, certain carriers have better out-of-state networks than others, so where your employees reside can be an important factor in which insurance carrier you choose.

It's equally important to consider what you will pay when it comes to offering these types of group health insurance plans so that you can make more informed decisions in the future. According to one recent study, employers pay about $5,700 on average per employee for single coverage plans. For plans that cover an employee's entire family, that number is increased to an average of $14,000 per year. You need to know how much this will ultimately cost, so you know how much to attempt to share with your employees.

Finally, you need to consider the income tax implications. Again, monthly premiums for these types of plans will be fully deductible at both the state and federal levels. Likewise, if you have a group health plan through a Small Business Health Options Program (SHOP) plan such as Covered CA for Small Business, then up to 50% of healthcare expenses can be claimed as a credit under the Small Business Healthcare Tax Credit if you have A) less than 25 full-time employees, if B) the average employee makes $50,000 or less annually, and if C) your business is covering at least 50% of their monthly premiums. This can certainly help you decide which type of plan to go with.

In the end, it's important to remember that an employer has a certain obligation to take care of its workers. Not only does doing so help create more engaged employees, but it's also an opportunity to stand out in an incredibly crowded marketplace. The quality of your group health insurance plans can be a way to both attract and retain top talent - people are more likely to join your team if they have multiple offers and are less likely to look anywhere else for employment. When you also consider the higher productivity and quality that they are known for, you're looking at a perfect storm of advantages in the best possible way.

If you'd like to find out more information about the myriad of different reasons why your organization should consider switching to a group health insurance plan, or if you just want to discuss this or other essential topics with someone in a more specific way, please don't hesitate to contact the team at AEIS today.

Disclaimer: Any information related to compliance, laws and regulations, or other subject matters in this blog is intended to be informational and does not constitute legal advice regarding any specific situation. The content of this blog is based on the most up-to-date information that was available on the date it was published and could be subject to change. Should you require further assistance or legal advice, please consult a licensed attorney.