By Trish Pearson
Insure Your Future
Trish Pearson
The backbone of Connecticut’s business economy is the small employer. Benefits are important in attracting quality employees. Those with 30 or fewer employees have limited options when it comes to providing health insurance to their employees. Many insurance carriers have opted not to offer products in the small group market, and those who do have limited and expensive plans with high deductibles.
The minimum cost share between the employer and employee is 50 percent, which only includes the employee and not dependents. Although the choices are limited, there is an option that some companies find attractive: “level funded plans.”
Level funded plans are no Affordable Care Act compliant, which means they can consider medical history and conditions as well as age in determining insurability and premium. They also do not cover all services, such as infertility. The difference between these plans and traditional group plans is that the premium includes an amount that is “set aside” to cover claims up to a specific amount. The other portion goes to covering losses that may occur above the expected estimated costs.
The benefit to this type of plan is that the premiums are often lower, as everyone pays the same premium regardless of age and not all care is subject to the deductible. This plan works well in companies where the employees are generally healthy but may skew to the older side. When the total cost is shared among the enrolling employees, the cost per person is less.
These plans were initially met with skepticism in the insurance industry. However, it has worked out well in some cases. The risk is that if the group has some unexpected health events resulting in higher than estimated costs, the renewal premium will increase dramatically. If, on the other hand, the usage is less than expected, the employer will receive a rebate against the renewal premium.
There are a limited number of companies in Connecticut that offer this type of plan, but it is worth investigating to see if it might be a good fit. Consult with a broker to find out more.
An alternative option is to have individual employees purchase plans through the Access Health CT, the health exchange. The employer can reimburse them for a certain amount of the premium. There are a few plans available on the exchange, and the employer can choose one plan or offer a few choices. Depending on household income, the employee can sometimes qualify for an advanced premium tax credit which will reduce their individual premium. The tax credit is based on the household income, which includes all household members, not just the employee.
This approach is best if there are fewer than five employees who will enroll. There are also group plans offered on the exchange, but depending on the income of all employees the employer might be eligible for a tax credit which is applied at the end of the tax year. If cash flow is an issue, this might not be the best option as the total premium has to be paid over the course of the year before any credit.
Trish Pearson is a licensed independent insurance agent and certified long term care specialist. Contact her at 203-640-5969 or trishpearson281@gmail.com.