You Want To Convert From Individual To Group Insurance. But How?
Higher costs and shrinking networks, including the complete disappearance of Preferred Provider Organizations, or PPO’s, may have you as an individual longing for a way to find some relief from these health insurance burdens. There is some hope! If you’re a business owner, you may be eligible to switch to a group plan which offers more benefits at a lower or at least comparable cost. In this post, we’ll discuss reasons you might switch and key factors to consider when making the jump from an individual pan to a group plan.
We’ve already mentioned two of the most common reasons for making a switch from individual insurance to group insurance – cost and disappearing networks but there’s one other to consider, more options. There are more insurance companies still operating in the small group space, where the individual market in most areas have only one major insurance company left, and then typically one or two low income type providers that area geared more towards Medicaid / Medicare type programs.
As we all know, costs are rising in part because insurers are forced to insure those who may not be that healthy, especially those with pre-existing conditions, which equals more risk for the insurance company. While the mandate requiring everyone to be covered includes many healthy people, which typically lowers costs (less risk for the insurance companies), it is not enough to offset premium increases due to the less healthy cohort being insured under the Affordable Care Act (ACA). Unfortunately, most of the young, healthy people who were uninsured prior to the ACA remain that way or they are covered under their parent’s plans, so there’s not any “healthy” premium being injected into the system. If someone wasn’t going to buy insurance when they could get a good PPO plan for $150 a month, why in the world would they buy a plan on an HMO network that will now cost them $400 a month and has less benefit?
As a result of the increased risk and costs, insurers are pulling out of many markets, leading not only to shrinking networks of coverage for the individual consumer, but also simply fewer insurance companies to choose from. Like most people still in the individual market, you may be feeling ‘the squeeze’ due to all of these factors and looking for an alternative.
Do I Qualify to Switch To A Group Plan?
You could potentially switch to a group plan as long as you have at least 1 person (this could be you) enrolling in the program AND you have documented proof of payroll for W-2 employees (payroll reports if you are just starting, a quarterly tax and wage report filed with the state in which you do business in, or a combination thereof). This doesn’t mean you have to have a bunch of full-time employees running around. We have a number of clients that are enrolled on a plan and have no other full-time employees other than themselves. They qualify because they have a documented staff of W-2 part-time employees. If you are a business owner, but you are not running payroll, then you are not considered eligible for group coverage by most insurance companies. (There are a few exceptions for partnership or businesses with multiple owners that I am happy to discuss, offline. Give me a call and we’ll discuss.)
If you do have full-time employees besides yourself, all full-time employees must be offered the group coverage but they can opt out and if they have other coverage – the fact that they do not enroll does not hurt your company. As long as they have other coverage you could still get on a group plan with just yourself enrolling. Again this can be a great option for you, the Business Owner, to get out of the HMO-heavy Affordable Care Act (ACA) market and into a space where you have more options and better networks. It’s also a potentially great way to deliver value to full-time eligible employees.
Things To Consider When Switching
There are few keys to making a smooth transition from the individual market to a group plan.
1. Establish A New Hire Waiting Period
This is something you actually determine for yourself or your employees. The New Hire Waiting Periods determines how long you want a new employee to wait before receiving full benefits. Common New Hire Waiting Periods are 1st of the month after date of hire, 1st of the month after 30 days, or first of the month after 60 days. You cannot have a waiting period longer than 90 days in today’s marketplace.
2. Setting Up Legal and Premium Conversion Documents
There are some legal plan setup documents you would need to get put in place and also you would want to get the Section125 setup documents put in place so your employee’s contributions can be handled on a pre-tax basis through payroll. These can be sourced from a number of different places, including benefit attorneys, some benefit providers and some good brokers can also help.
3. Set Up The Financial Structure of Your Plan
There are typically two types of financial structures when it comes to group employee benefits, Contributory and Voluntary. If you choose a Contributory plan, the insurance and benefit providers are going to want you, the business Owner, to pay for at least 50% of the employees cost to participate in that program. This percentage can be higher with some providers including up to 100%.
A Voluntary plan would see your employees paying 100% of the cost of the program. This typically occurs through a pre-tax payroll deduction so as to lower the employees overall taxable income for the year.
There are special enrollment rules for health insurance if you are not going to be making a contribution from your company towards your employee’s health insurance costs. The deadline to submit applications, paperwork etc. is December 15th for the following January 1st start date, in most cases. Most other benefit programs (dental, vision, life, etc) can be setup on a voluntary basis at any time of the year.
A Final Word
Making the jump from individual insurance in the ACA market to a group plan can help lower costs and significantly increase value through access to broader networks and more plan providers. If offered to your employees, it can also be a real boost to employee retention and new talent acquisition. While it’s not without it’s own hurdles, mainly when initially setting up the program, it can pay huge dividends in the future! Offering benefits for the first time is often far less expensive than increasing salaries and employee’s will value this more than a raise in most cases. If you feel you need guidance in exploring your options more thoroughly contact us for a FREE consultation!
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About Holloway Benefit Concepts
HBC was founded in early 2011 by Ryan Holloway. After serving over 8 years on active duty in the US Marine Corps, Ryan transitioned from being a full-time marine into an HR professional in early 2003. This began a journey and awoke a passion for helping companies who value their employees. After spending time working with a COBRA and FSA Administrator, an insurance company, and a large brokerage, Ryan realized that there were more unique and creative solutions for businesses than other companies were willing or able to realize. Seizing on his own entrepreneurial spirit, Ryan set out to found an independent agency designed to provide unique and original insurance solutions. to learn more about HBC, visit https://hollowaybenefitconcepts.com/