Group health insurance requirements

Saturday, January 7, 2023 12:44 Posted by Admin
Group health insurance requirements

What Is Group Health Insurance And How Does It Work?

Group health insurance is a type of health insurance plan that covers employees of a company. The purpose of group health insurance coverage is to provide discounts for members of an organization so they can receive health benefits without needing to break the bank.

Depending on the size of a company, some laws make it compulsory for an employer to purchase group coverage for their employees. Whether or not these laws exist, every employer should try to offer group health insurance coverage since it improves the quality of life of their employees and boosts their satisfaction.

For group health coverage options, the monthly premiums are split between the employees and their employer, unlike an individual health insurance plan where the recipient handles the health insurance premiums alone.

While a group health plan is mainly for full-time employees, group coverage plans often allow employees to extend health benefits to their family members or dependents. Adding a family member to group coverage will likely cost more.

Who is Eligible for Group Health Insurance

What Are The Participation Requirements For A Group Health Insurance Plan?

Before an employer can purchase a group health insurance plan for employees, the insurance company might have some requirements to be met. These requirements from health insurance companies usually depend on participation levels, as a minimum percentage of employees is needed for group health plans to be valid.

Health insurance providers commonly require that at least 70% of a company’s full-time employees are covered by group health insurance for the plan to be valid.

Employer Mandate

The Affordable Care Act (Obamacare) ensures the availability of affordable health insurance to an increased number of people. One way that the Affordable Care Act enforces access to health insurance is the Employer Mandate.

The Employer Mandate makes it compulsory for an employer to provide health coverage for at least 95% of their full-time employees and their children under the age of 26.

When employers offer health insurance, the plan is required to pay a minimum value of 60% of the cost of all covered services. Failure to offer affordable health insurance coverage to employees results in a penalty per employee which started at $2000 and $3000 in 2014.

These penalties depend on whether any coverage is offered at all and whether the offered coverage is either affordable or meets up with the minimum value requirement. The values of these penalties change every year due to inflation, and the adjusted values for 2023 are $2880 and $4320.

Large Employers

The requirement to offer health insurance according to the employer mandate does not apply to small businesses, but only to companies classified as Applicable Large Employers (ALE). A company is a large employer if it has at least 50 full-time and full-time equivalent employees.

Full-time employees are employees that work for a minimum of 30 hours per week during a month or 130 hours during a month.

Full-time equivalent employees are a group of part-time employees that do not work individually as much as a full-time employee, but when combined, their hours are equivalent to that of a full-time employee.

A large company does not need to provide health insurance for its full-time equivalent employees. The evaluation of the number of full-time equivalent employees is only necessary to determine whether a company’s employees are up to 50 (whether the employer is an Applicable Large Employer).

What Are The Participation Requirements For A Group Health Insurance Plan?

Small Business Health Insurance

If you are an employer with less than 50 full-time and full-time equivalent employees, the Affordable Care Act considers you a small business owner, and you don’t need to offer health insurance.

However, if it won’t put an unbearable strain on your establishment, you can attempt to buy a small business health plan, so your employees can have a better life. Whether you are a large or small employer, employee satisfaction should be a priority.

When small employers purchase health plans that are tailor-made for small businesses, there are accompanying advantages such as an increased chance of enticing new employees and keeping them. Small employers will also enjoy working with healthy members of staff.

In addition, small businesses can save money through the small business health care tax credit. This credit applies to small businesses that adhere to the following conditions:

  • Having less than 25 full-time equivalent employees.
  • Paying an average yearly wage of less than $50,000 (in 2014). The average yearly wage is adjusted every year for inflation and was $56,000 in 2020.
  • Providing a health plan to all full-time workers via the Small Business Health Options Program (SHOP).
  • Paying at least 50% of the insurance premiums for all full-time employees. This does not need to include their dependents or part-time workers (less than 30 hours weekly).

If a small employer qualifies for the small business tax credit, they can gain up to 50% of the premiums for their small business. Also, a small business can qualify for this credit for up to two years in a row.

What Are The Benefits of Group Health Insurance Coverage?

A group health insurance plan is beneficial to both the employer buying the health plan and the employees receiving health coverage.

As an employer, if your employees have access to affordable health care, they are likely to be happier and more productive, since medical issues can be handled easily, and medical costs won’t be too much of a pressure.

Group Health Insurance Vs Individual Health Insurance

One major advantage that group coverage has over individual coverage is the cost of health insurance premiums. Since a group health plan splits the insurer’s risk across all the covered employees, it is easy to lower the cost of the monthly premiums.

For an individual health plan, the insurer’s risk weighs on just one person, making individual plans more expensive on average.

What Are The Benefits of Group Health Insurance Coverage

Affordable Care Act Benefits

Health insurance companies have varying advantages for the recipients of group coverage, but some benefits are compulsory, according to the Affordable Care Act (ACA).

The benefits required by the Affordable Care Act are:

  • Ambulatory care (outpatient services)
  • Emergency care
  • Hospitalization (including surgery and overnight stays)
  • Pregnancy, maternity, and newborn care
  • Mental health and substance abuse care
  • Prescription drugs
  • Rehabilitative services and devices
  • Lab tests
  • Chronic disease management and preventive care
  • Pediatric services

Apart from the 10 basic forms of health coverage listed above, some employers also provide additional benefits for their employees such as vision and dental coverage.

Written by Todd Taylor

Todd Taylor

Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.

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