Because
group insurance rates are two to three times as
expensive as individual plans, we believe
that the best option for most small businesses of
less than 20 employees is to let the employees sign
up for individual coverage, rather than group coverage.
These are the main advantages of this strategy:
- Individual
plans are 100% portable, meaning that they are
not tied to the employer's business. The
employee can take the coverage with them, wherever
they go.
- Because they are individually underwritten, they are much less expensive. Employees with pre-existing conditions can join a federal risk pool in 2010, and will be able to purchase individual coverage regardless of pre-existing conditions in 2014.
The new health care reform bill actually makes it more attractive for most businesses to eliminate their group coverage and let their employees enroll in individual plans. That is because starting in 2014, employees earning less than 400% of the federal poverty level (up to $88,200 for a family of four) will receive a large federal subsidy on their health insurance if their company doesn't offer a group plan. For businesses with over 50 employees there is a $3000 fee for each employee who receives a subsidy, but there is no cost to small businesses.
Employees with pre-existing health conditions can join a federal risk pool in 2010, and will be able to purchase individual coverage regardless of pre-existing conditions in 2014.
An
employer cannot pay for individual health insurance, but in most states you
can reimburse your employees tax-free through a Section 105 HRA Plan.
An HRA, or Health Reimbursement Arrangement, is simply an agreement that the
employer makes to reimburse certain medical expenses, including health insurance,
that the employee incurs. The reimbursement is considered a tax-free
fringe benefit to the employee, and a business expense for the employer.
The
end result is that you may be able cut your costs in half, while providing
your employees with better coverage. This works well for small businesses
with healthy employees. To learn about whether individual health insurance
coverage and an HRA plan is right for you and your employees, please visit
our 105 HRA Plans for Small
Business Owners page.
You can run rates for individual employees on our instant quote system. If
you are interested in true group coverage, please call us at 866-749-2039,
and ask for our group coverage specialist, Randy Rush.
