Group Health Benefits

Small vs. Large Group Health Plans

The number of full-time equivalent employees determines whether you fall into the small group market or large group market. Small group plans cover groups with 2-50 employees.

Small group plans cover groups with 2-50 lives

The Health Insurance Portability and Accessibility Act (HIPAA) requires insurers to write small group plans on a guaranteed issue basis. This means the insurer must cover the group, no matter what health conditions employees might have. Plans exclude coverage for a particular employee’s pre-existing health condition, but HIPAA limits that exclusion to no more than 12 months (18 months for late enrollees).

Large group health plans cover groups with 51 or more employees

Regardless of the size of your group, we can help you find a plan designed to provide the benefits your employees need to stay healthy, while controlling premium costs.

Group Health Plan Types

Preferred provider organization (PPO) plans

PPOs are the most common type of health plan today. A PPO contracts with a network of doctors; plans typically reimburse a higher percentage of fees for in-network doctors. Members can use non-network providers but will have higher copayments. Plans usually include features to avoid unnecessary health expenditures, such as requiring pre-authorization for elective procedures or a primary care physician’s referral for visits to specialists. Most plans also include wellness or disease management benefits designed to keep your employees healthy and control your claim costs.

Health maintenance organization (HMO) plans

An HMO requires members to use physicians within the HMO’s network; HMOs typically do not pay anything for out-of-network treatment, except in case of emergency. HMOs give your employees less flexibility in provider choice, but often cost less and involve lower out-of-pocket payments than other plans.

Point-of-service (POS) plans

POS plans combine features of HMOs and PPOs. Most POS plans require members to choose a primary care physician from within the POS network, but allow them to use out-of-network specialists with a referral from a primary care physician. Co-payments will be higher for out-of-network services.

Consumer-driven health plans

So-called consumer-driven plans aim to control healthcare costs by giving individuals more control over healthcare expenditures and by rewarding the ones who use their healthcare funds wisely. Most employer-provided consumer-driven health plans consist of a high-deductible health plan (HDHP) with a health savings account (HSA); however, health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs) can also be considered consumer-driven plans.  Special rules apply to these plans under the Affordable Care Act; we can help you ensure your HRAs and FSAs comply with the ACA.

High-deductible health plans (HDHPs) with a Health Savings Account (HSA)

Only individuals with an eligible high-deductible health plans and no other health insurance can have an HSA. Either an employer or employee can fund an HSA. Employees can use account balances to pay for qualified health expenses; funds can accumulate from year to year.

This healthcare funding choice offers advantages to employers and employees. Employer contributions to an HSA are not considered tax­able income; employee contributions are tax deductible. Withdrawals used for eligible medical expenses are not taxable to the employee; employees can also withdraw funds for other purposes (subject to a tax penalty). Funds accrue year to year and are owned solely by the employee.

Employees open and manage their own accounts, reliev­ing employers of administrative duties. Employers or employees may deposit funds into the account (subject to maximums), giving employers flexibility. An HDHP might cost less than the employer’s existing group health plan. Please contact us for more information.

Self-Insured Health Plans

Larger employers might want to consider self-insuring. Self-insured employers pay for each claim, out of pocket, as it is incurred. This differs from a fully insured plan, in which the employer pays a fixed premium to an insurance carrier, which pays covered claims on the employer’s behalf. Typically, a self-insured employer will set up a special trust fund to pay claims and purchase special “stop loss” insurance to cover catastrophic or unusual losses.

Self-insuring isn’t for every employer, but it does offer a number of benefits. Federal law (ERISA) governs self-insured plans, so they do not have to comply with varying state health insurance regula­tions and benefit mandates. You can customize benefits to meet the spe­cific needs of your workforce, as opposed to purchasing a “one-size-fits-all” insurance policy. You don’t have to pre-pay for coverage, improving cash flow. You maintain control over health plan reserves, enabling you to maximize interest income. And in most states, your plan won’t be subject to premium taxes.

Some self-insured employers also administer their own health plans, but many enlist the services of a third-party administrator (TPA), which can provide expertise not readily available in most HR departments. Our benefit specialists can help you determine if self-insuring makes sense for your firm.

Health Savings Options

In addition to health insurance, employers can choose from a variety of health savings options to either supplement or replace an insured or self-insured health plan. Any size employer can use these options.

Health reimbursement arrangements (HRAs)

An HRA is an arrangement funded solely by an employer that offers employees and eligible dependents tax-free reimbursement for qualified medical care expenses, up to a maximum dollar amount for a coverage period. Employees can generally roll over unused account balances to reimburse expenses incurred in later years.

The Affordable Care Act considers an HRA a “group health plan,” so it must comply with the ACA’s provisions affecting group health plans. Effective January 1, 2014:

• Employers can no longer use HRAs as a standalone medical plan. Employers can still offer HRAs, but only when integrated with a group health plan that complies with the ACA’s rules on annual benefit limits.
• Employers can use standalone HRAs for two purposes: 1) to reimburse retirees who buy their own health plans, or 2) to pay for “excepted benefits,” which include, among other things, accident-only coverage, disability income, certain limited-scope dental and vision benefits and certain long-term care benefits.

Healthcare flexible spending accounts (FSAs)

Also known as Section 125 Plans, FSAs let employees use pre-tax dollars to pay for healthcare expenses, reducing their taxable income and reducing the employer’s payroll. Employees elect how much of their salary to contribute, although most employers cap contributions. Unlike HRAs, FSAs are “use it or lose it” plans. As with HSAs, FSAs must integrate with a qualified group health plan or the market reforms will apply. Because individual coverage bought on the health insurance exchanges will no longer meet the definition of a “benefit,” employees cannot use funds in FSAs to buy individual coverage on the health insurance exchanges. Premium-only plans (POPs) used to buy other individual coverage or employees’ share of premiums for an employer-sponsored group plan might still comply with the law; consult a benefits expert for guidance.

Contribution limits for FSAs went into effect for plan years beginning on or after January 1, 2013. In 2014, the contribution limit stands at $2,500 per year; limits for future years will be indexed for inflation. The contribution limits apply to employee salary reduction contributions for healthcare expenses alone; they do not apply to employer nonelective contributions or to contributions for dependent care expenses.

Health Savings Accounts (HSAs)

HSAs are tax-sheltered accounts from which consumers may pay HSA-specific qualified medical expenses. In order to enroll in an HSA, an individual must have a qualified high-deductible health plan, or HDHP, and no other health insurance. HSAs may be funded by contributions from employers, employees or both; however, the employee opens and administers his/her own account. An HSA must be held at a qualified financial institution. Employees retain control of their HSA accounts. Unspent balances roll over from year to year and follow the employee to subsequent employers.

Employers can elect to contribute to employees’ HSAs. he IRS considers employers’ contributions to an HSA qualified medical benefits, so they are excluded from employees’ gross income. The maximum contribution amount depends on whether the individual has single or family coverage under his/her HDHP. Individuals over the age of 55 are entitled to an additional $1,000 “catch-up” contribution.