Health Insurance Concerns for the Small Employer

Today's health insurance environment is tumultuous, to say the least, whether you are looking to purchase health insurance on an individual basis or whether you are looking to obtain health insurance for your employees. The least expensive way to obtain health insurance is through a group plan. But small employers are faced with many questions and concerns and, we find, very often hesitate to offer health insurance because they have so many unanswered questions. This column will make it easier for the small employer to understand what group health insurance is all about as it pertains to his/her business. By definition, in New Jersey, a small employer is anyone with 2-49 employees. (This does not include dependents.) You have many more options available when you purchase group health insurance compared to purchasing health insurance on an individual basis. In other words, you are more likely to get a plan with better benefits for less money on a group basis than if you purchase health insurance as an individual.

Q: If I am a small employer and put a group plan in place, do I have to offer health insurance to all of my employees?

A: Yes, you cannot discriminate by offering benefits to some employees and not to others. However, not all employees need to be enrolled in the plan. If, for example, someone has insurance through a spouse, they can waive their right to coverage. You also do not have to offer the same plan to all employees. You can categorize your workers by class and put different plans in place for the different classes. Employees who are covered under health insurance through a spouse may waive benefits. Likewise, an employee may refuse benefits but you must have 75% of the employees either insured under the group plan or waiving benefits because they are covered under a spousal plan.

Q: What happens if I add more employees at a later date? Must I offer them insurance?

A: Yes, you must inform them that a group plan is in place, and offer them the opportunity to join. Again, they reserve the right to waive benefits if they are covered through a spouse. When you purchase a small group health insurance plan, you are given the option of deciding how long new employees must be employed before they may be added to the plan. Your options are in 30 day increments with a maximum of 180 days.

Q: I am self-employed and only my wife works with me. Do I qualify as a small employer?

A: You can qualify as a small group as long as there are at least two people working 25 or more hours per week. If a husband and wife are self-employed, working together for the same business, they must sign a statement that they both work 25 hours a week or more for the business. If you meet this requirement, you may purchase group health insurance.

Q: I only have one employee and he is covered under his wife's plan. Can I still qualify to purchase group health insurance for my family and me?

A: Yes. Your employee will sign a waiver that he has coverage through his spouse. He will count towards your participation requirements and this will qualify you as a small employer, but only you and your family will be insured under the policy. If your employee's spouse should lose her job, they can be added to your plan immediately.

A: New Jersey law requires that the employer pay a minimum of 10% of the premium for the employee. You may payroll deduct the balance of the premium and the premium for the dependents.

Q: What happens if the premium increases to the point that I can no longer afford health insurance?

A: Most companies guarantee the premium for 12 months and both you and your agent will be notified of your new premium increase at least 6-8 weeks before it happens. This will allow your insurance agent time to "shop" for another more affordable plan. Your agent may recommend switching to another company, or may recommend a higher deductible or a higher copayment. There are always ways to structure a group plan to make it more affordable. If the premium is such that there is no way the company can handle the premium, even with employee participation, you always have the option to cancel the plan. This is not a wise thing to do and it may have dramatic repercussions on the bottom line of your business. Employees need health insurance and they, too, recognize that group insurance is the best way to obtain it. If you treat your employees fairly and explain the premium situation to them, you will probably find most employees willing to paying a higher percentage of the premium rather than risk losing the health insurance.

Q: What happens if employment is terminated for a particular employee? Can they stay on the plan?

A: If you have less than 20 employees, the employee can continue benefits under the New Jersey Continuation of Benefits option. This allows the employee to stay on the plan for an additional 12 months from their date of termination. The employee is responsible for paying the premium plus 2%. If you have 20 or more employees, the employee may continue his benefits under the COBRA law. COBRA is a federal law that allows employees to continue their benefits for 18 months, or for 36 months if there is a divorce, the employee dies (benefit continuation for dependents), or the children become of age when they are no longer eligible for group benefits. COBRA is a very lengthy, complex law and should be discussed with an attorney if you feel it may apply to your company.

A: Call your insurance agent (or you may call the author of this column) to discuss your needs and concerns. You will need to give your agent dates of birth and ages for each employee, together with how may dependents they have and the ages of any spouses. He/She will also need to know which of the employees will be waiving benefits because they are covered under a spousal plan. Armed with this information, your agent can get quotations from several insurance companies and help evaluate which plan will best meet your needs and budget.

Irene C. Card is the founder and president of Medical Insurance Claims, Inc. a health claims processing company serving individuals and physicians. If you have questions relative to this column or other related topics, we invite you to call (973) 492-2828