SMALL GROUP INSURANCE COVERAGE BASICS

Many employers are frustrated because they are under the mistaken impression that they are too small to offer quality health benefits for their employees. Generally, however, this is not the case: Many states require insurance companies to provide group underwriting for companies with as few as two employees, including the owner.

Specific rules and qualifications vary by state. But as a general rule, small businesses with at least two to four full-time employees usually qualify for guaranteed-issue Group Health insurance benefits, provided they offer these benefits to all qualified employees, and that a minimum percentage of employees actually sign up for the plan.

This is important, because it helps put even very small businesses with just a few employees on a more level playing field with larger corporations and government employers, when it comes to attracting and retaining talent in the marketplace.

It also means it is quite possible for even small businesses to provide much needed health benefits even for those employees who have medical problems, or who have families with medical issues.
Coverage of Pre-existing Conditions. Under the Health Insurance Protection and Portability Act, federal law restricts the ability of insurance companies to exclude coverage for pre-existing conditions. Specifically, they may impose a "look-back" period of no more than six months, and exclude pre-existing medical conditions for not longer than 12 months. Individual states may shorten these periods, based on their own needs.

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Coverage of Pre-existing Conditions. Under the Health Insurance Protection and Portability Act, federal law restricts the ability of insurance companies to exclude coverage for pre-existing conditions. Specifically, they may impose a "look-back" period of no more than six months, and exclude pre-existing medical conditions for not longer than 12 months. Individual states may shorten these periods, based on their own needs.

However, as long as you or your employees maintain coverage, and do not have a lapse in coverage of more than 63 days, insurance companies cannot exclude coverage of any pre-existing condition normally included under the plan. To avoid any problems, ensure you have no break in coverage, whether that coverage comes from an individual plan, a workplace sponsored plan, or from COBRA continuation coverage. As long as the insured maintains coverage, and has no break in coverage lasting more than 63 days, the law limits insurers' ability to discriminate on the basis of medical history.

If you do have a break in coverage, though, all bets are off.

Tax Credit. Under the new Affordable Care Act, Congress is providing a tax incentive to encourage small employers to provide Health insurance benefits for their workers. The tax credit is a dollar-for-dollar reduction of the business's income tax liabilities, and is therefore far more lucrative than a tax deduction, which only offsets 35 cents on the dollar, at most.

Not all businesses qualify for the tax credit. The qualification criteria are as follows:

• You must employ fewer than 25 workers or full-time equivalents.
• Your average worker must not make more than $50,000 per year from working for you (their outside earnings don't count against you).
• You must pay at least 50% of your workers premiums - but not necessarily premiums to cover their dependents.

The credit is calculated on a sliding scale: The lower your workers' pay and the fewer of them you hire, the greater your tax credit under the Affordable Care Act.

Employers can select a variety of Health insurance plans to offer employees in a small group. Point of service plans tend to offer the richest benefits and the widest choice of providers, but may have relatively high premiums.

To save money, employers may select a health maintenance organization or preferred provider organization, both of which typically restrict non-emergency providers to a pre-approved list in exchange for discounts, which they pass on to customers in the form of lower premiums.

Employers can also choose to offer high-deductible health plans and health savings account combinations, or HDHP/HSAs, which have proven effective in reducing health care premiums for many employers compared with traditional medical plans. However, workers enrolled in these plans bear a greater burden in assuming risk, in the form of higher premiums.

Call us today. Health insurance plans are extremely situational-dependent. Different businesses have different needs, and premiums can be set very differently depending on your location and your employee census. The best course of action is to contact us today for a no-obligation consultation and detailed quote. From there, our agents will work with your staff to ensure an efficient enrollment process.

MOST EMPLOYEES ARE WILLING TO TRADE PAY FOR BENEFITS

Since the financial crisis of 2008, America's economy has continued to struggle. Unemployment rates are still high, and pay rates have been cut. In addition, retirement and health plans seem to have less generous offerings. Unfortunately, they are not as secure or predictable as they once were. Many employees are worried about their long-term retirement options. They are waiting to see if further reductions will be made in their benefits, which would result in higher upfront expenses.

Although the economic downturn brought mostly negative changes, one positive change that took place was the sharper focus on health spending and retirement security. With higher health costs and financial losses, more workers value security and want to pay for guaranteed benefits. A 2011 survey was performed to evaluate workers' attitudes toward their employers' benefits, their individual household finances and their retirement issues. This extensive survey also examined the impact of health and retirement benefits on retaining and recruiting employees.

Of all the findings in this survey, one that should be especially important to employers is the percentage of employees who said they were willing to pay more for good benefits and security. The survey showed that more than half of the respondents said they would be willing to trade some form of pay for better benefits. Most of the respondents in this percentage were older employees or younger males. Healthy workers and high earners also comprised a notable portion of that number. It is likely that the concerned older workers are still feeling the negative effects of their home values and individual retirement account balances deteriorating.

In comparison with data from prior years, the percentage of employees willing to pay more for good benefits is a substantial change. In 2009, only 46% were willing to pay more. As people gain experience with financial market volatility, their worries about the economy's future continue growing. This prompts the rise in interest for solid benefits. Employees have learned from the financial crisis, and they know that future benefit cutbacks are possible.

The number of employees who would be willing sacrifice more take-home pay for solid benefits is expected to rise. Many are willing to sacrifice bonuses and other incentives to enjoy more predictable health costs and better retirement benefits. A significant amount of workers are also willing to give up paid time off for these positive changes. These issues are all important considerations for employers. Offering good benefits is a great way to attract and retain quality employees. To learn more about benefit changes, discuss the options with an agent.

TAX CREDIT AVAILABLE FOR SMALL BUSINESSES

If you are a small employer and you sponsor a health plan for your employees, you might be eligible for a lucrative tax credit for tax years 2011, 2012 and 2013. As part of the Patient Protection and Affordable Care Act, Congress authorized this tax credit to help small businesses offset the costs of managing a health care plan for their employees.

How it works

The IRS will refund up to 35% of premiums you pay toward your employer group Health insurance plan, in the form of a credit against your business income taxes. If your organization is tax-exempt, you may qualify for a credit of up to 25%.

To qualify for the credit, you must meet the following criteria:

• You must have fewer than 25 full-time equivalents.
• Your average worker must earn less than $50,000 per year from his or her employment with you.
• You must pay at least half the premium to cover your employees, although not your employees' dependents.

If your business has fewer than 10 employees, and you pay them annual wages of $25,000 or less, you may be able to qualify for the full credit. The credit phases out as you add more employees, and pay them more, until it phases out completely at the 25 worker and $50,000 mark.

The IRS does not count leased employees, nor owners of sole proprietorships, partners, or shareholders with more than a 2% ownership interest in an S-corporation or a 5% interest in a C-corporation. The IRS also typically does not count family members against you for the purpose of determining your credit.

Limitations on Annual Premiums

The IRS has placed limits on the amount of annual premium you can apply towards the credit. However, the precise limits vary depending upon your state. For information specific to your state, or for businesses with operations in multiple states, please don't hesitate to give us a call for a free consultation.

How to Claim the Credit

To claim the credit, fill out IRS Form 8941 - Credit for Small Employer Health Insurance Premiums, and submit it with your tax return for the year. Incidentally, the credit has been in effect since tax year 2010. If you would have qualified and simply weren't aware of it then, or missed it, you may be able to claim the credit by filing an amended tax return for years 2010 and 2011. Be sure to speak to your a qualified tax advisor.