Small employers with 2-50 employees make up the small group market for health insurance coverage. Those who are self-employed or have no employees are typically ineligible to buy coverage in the small group market, but they can obtain coverage through the individual market.
Coverage Options for Small Businesses
The Small Business Health Options Program or “SHOP” offers small businesses the choice to either buy coverage in the private marketplace or through this small group health insurance exchange.
Market that is not open to the general public.
Businesses in the private market continue to acquire health insurance in the same manner they always have. Generally, they procure coverage through an agent, although it is also possible to obtain it directly from a small group health insurance issuer.
Small employers in South Carolina who purchase health insurance through the Small Business Health Options Program (SHOP) may meet the federal eligibility criteria for receiving federal tax credits.
Federal Tax Credits for Small Businesses
You might be eligible for a federal tax credit to cover your insurance expenses if you satisfy the following criteria: having less than 25 full-time equivalent employees, paying employees an average annual wage lower than $50,000, and contributing at least 50% towards employees’ health insurance premiums.
Small businesses have been able to access the Health Care Tax Credit since 2010. However, as of 2014, the federal tax credit has been raised from a maximum of 35% to a potential 50% of your contribution towards premium costs for employees (up to 35% for tax-exempt employers). It should be noted that this improved tax credit is exclusively accessible to small employers who acquire coverage through the SHOP.
Employer Shared Responsibility Provisions (also known as “Employer Mandate”)
The employer mandate, also known as the Employer Shared Responsibility Payment, is a penalty stated in the Affordable Care Act that employers must pay if they fail to offer health insurance coverage to their employees and their dependents.
“Beginning in 2015, those employers with 100 or more full-time or full-time equivalent employees who do not offer affordable health insurance that provides minimum value to their full-time employees (and dependents) may be required to pay an assessment if at least one of their full-time employees is certified to receive a Premium Tax Credit in the individual Health Insurance Marketplace.
Under these rules, a full-time employee is one who is employed an average of at least 30 hours per week. For employers with 50-99 full-time/full-time equivalent employees, these rules will not apply until 2016 provided employers of this size meet certain certification requirements.”
What does It Mean to be Fully Insured or Self-Insured?
A policy that is fully insured means that the benefits are acquired from an insurance company. The insurance company takes on the responsibility and financial risk of covering the costs for the provided services in exchange for the premium received. On the other hand, a self-insured plan, also known as “self-funded,” is when the employer, rather than an insurance company, offers the benefits. The employer creates a plan document that details the covered expenses, exclusions, and other important terms.
The employer pays for the claims using its own funds and potentially contributions from the enrollees, and may hire a third party to manage the benefits. In many cases, an employer will choose an insurance carrier to act as the third-party administrator. Both fully insured and self-insured plans are generally regulated by federal law, but self-insured plans are not subject to state insurance regulation.
What Types of Plans are Available For Small Businesses?
A small business owner has the option to purchase different types of health insurance plans. Some plans offer extensive major medical coverage, while others offer a more narrow or limited range of benefits. The available options comprise the following:
- Comprehensive Major Medical Plans – These are also known as “managed care plans”. These plans offer a network of preferred healthcare providers and are subject to the provisions required under the federal Affordable Care Act. There are 4 main types of managed care plans:
- HMO – Provides in-network benefits only. If you seek care from an out-of-network provider you will be responsible for 100% of the cost(s) associated with that care. You must also choose a primary care physician. Except for emergencies, you must seek a referral from your primary care physician prior to seeking care from any other health care professional.
- PPO – Provides in-network and out-of-network benefits. Although you can seek care, without a referral or prior approval, outside your network, your out-of-pocket costs will be significantly higher.
- EPO – A hybrid of an HMO and PPO. This type of plan includes in-network benefits only. However, the plan does allow for out-of-network benefits when prior approval is requested and received from the insurance carrier.
- POS – Also known as a “Point of Service” plan. This is another hybrid of the HMO and PPO plans. With POS plans you may be required to designate a primary care physician who will then make referrals to network specialists when needed. Like a PPO plan, you may receive care from out-of-network providers but the out-of-pocket costs will be much greater.
- Limited Benefit Plans – These plans do not provide major medical coverage. The benefits are typically a set dollar amount dependent on the type of care you receive and/or the injury/illness you sustain. These plans go by various names such as Hospital Indemnity, Accident Only, and Specified Disease. Pre-existing conditions are excluded under these plans and medical underwriting will be conducted prior to your acceptance. These plans are not subject to the provisions required under the federal Affordable Care Act.
How do I Purchase Group Health Insurance for My Small Business?
Some ways in which a small business employer can shop for group health coverage include:
- Agent/Broker: There are two types of agents/brokers – those that can only sell for one carrier (captive agent) and those that can sell for multiple carriers (independent agents). A captive agent can only provide quotes for plans sold by the carrier they represent. Independent agents can provide multiple quotes from multiple carriers. Various factors can determine which agent would be best for your group.
- SHOP: The Small Business Health Options Program (SHOP) was created in conjunction with the Affordable Care Act and provides an online medium for small business owners to search for and purchase group health insurance.
- Carrier: Insurance carriers maintain websites through which, typically, you can search for and purchase their health insurance products. Some carriers will allow you to conduct the quoting and enrollment process online; however, some may require you to call the carrier directly. An enrollment/eligibility specialist will then assist you through the process of purchasing a health insurance (or related) product.
It is advisable to conduct interviews with multiple licensed insurance agents who have expertise in catering to the health insurance requirements of small businesses prior to making a purchase.
When purchasing insurance, it is advised to explore different options by comparing prices from multiple insurers in order to ensure you are receiving the most beneficial offer. Additionally, it is important to have knowledge about the various factors that impact the cost of your premium. While some of these factors are beyond your control, others can be handled effectively.
- The type of health plan you select. For example, HMOs are typically less expensive than PPOs; both are less expensive than indemnity plans. Indemnity plans, also known as “Fee for Service” plans, allow you to visit almost any provider you choose and the health carrier pays a set portion of the total bill.
- The specific benefits you select. For example, choosing higher deductibles, co-payments, and maximum out-of-pocket limits can lower monthly premiums. On the other hand, choosing lower lifetime medical limits can lower premiums.
- The costs you transfer to your employees. Most small businesses ask their employees to bear a portion of the cost of their health insurance premiums. While this doesn’t affect the premium charged by the insurer, it does affect the amount the employer pays.
- Talk to other small business owners to find out about their experiences with different kinds of health plans and insurers.
In Addition to Health Insurance, What Other Types of Coverage/benefits Can I Offer My Employees?
Small business owners have the authority to decide the number and type of benefits that can be provided to small groups, which include a wide range of benefits such as dental insurance, long-term care insurance, short-term disability, long-term disability, life insurance, flexible spending arrangements (FSA – cafeteria plans), health savings accounts (HSA), health reimbursement accounts (HRA), vision insurance, and more.
Who Qualifies for Coverage?
Generally, employees who work 30 hours or more per week are eligible for health coverage within a group plan. Nevertheless, it is possible for an employer to extend coverage to employees working less than 30 hours weekly if it is made available to all employees facing similar circumstances. Discrimination based on past or present medical conditions is strictly prohibited when treating similarly situated employees.
Beware of “Alternative” Types of Health Insurance – Or Outright Fakes
Medical discount plans do not provide insurance coverage
Before purchasing, make sure to verify the claims made by these plans regarding discounts for members who utilize specific doctors, pharmacies, and hospitals with the providers themselves.
Although these plans are not classified as insurance, they are still subject to regulation by the department.
Fraudulent health schemes
Advertisements promoting “unbeatable” low prices on group health coverage can be found on late-night TV, in spam, or junk faxes. It is important to note that a significant number of such advertisements are being run by unlicensed and illegal operations. As is often the case with most products, if a deal appears too good to be true, it is likely not genuine.