Frequently Asked Questions About
Group Health Insurance

What is group health insurance?

Group health insurance is employer-sponsored health coverage for business owners, employees and often for dependents.

A majority of Americans have group health coverage through their own or a family member's employer-sponsored group plan. Employers and employees can share costs and there are special tax incentives available to businesses that provide group health insurance.

How does group health insurance work?

As an employer, you select a group health insurance plan and then invite your employees to enroll.

Typically, employers cover a percentage of each employee's monthly premium, and can also contribute to dependent premiums. The remainder is paid for by the employee.

Is group health insurance right for my business?

If you want to provide health insurance benefits and you're able to contribute toward employee premiums, group health insurance is the way to go.

Offering group health insurance can help you hire and retain the best workers, and the amount you pay toward employee premiums may be tax-deductible. Since no one can be turned down based on medical history, group coverage also protects workers or family members who might otherwise go uninsured.

What are the benefits of providing group health insurance to my employees?

It's no secret that employees value health insurance benefits. Surveys have shown that workers value health insurance coverage second only to monetary compensation. By offering group health insurance benefits to your employees, you may find it easier to hire and retain the best workers for your company.

As a business owner, you may not have health insurance coverage yourself. Perhaps you've considered shopping for an individual health insurance plan for yourself and your family, but did you know that by obtaining insurance through a company, you may get better rates than through the individual market?

Additionally, there are various tax incentives available to you and your employees when you participate in a group health insurance plan. For example, businesses can generally deduct 100% of the premiums they pay on qualifying group health plans and, by offering group health insurance as part of a total compensation package, you may be able to reduce payroll taxes. Plus, your employees can pay their portion of the monthly insurance premium with pre-tax dollars. Make sure that you take these incentives into consideration when determining the affordability of a health insurance plan for you and your employees.

How do I know if my company qualifies for group health insurance?

  • Your company will probably be eligible for a small business plan if it meets the following criteria:
  • Your company consists of at least two full-time owners, officers, partners and/or employees, as verified by officially-filed state quarterly wage and tax statements (e.g., NYS-45 in New York and DE-6 in California) or annual federal tax return documents;
  • Your company is a legitimate business entity (i.e., your company was formed for a purpose other than to obtain insurance), as verified by one of the following documents:
    • A business license or fictitious name filing (proprietorships and partnerships);
    • Articles of incorporation (corporations); or
    • Articles of organization (limited liability company).
  • Your company meets the minimum employer contribution percentage set by the insurance company.

Are employers required by the Affordable Care Act to purchase group insurance for their employees?

Yes, the Affordable Care Act requires large employers to provide coverage to full-time employees or pay a penalty. This provision, called the "play or pay" rule, goes into effect January 1, 2014.┬áSmall employers – those with fewer than 50 employees – are exempt from the coverage requirement and penalty.

As a side note, be aware that the ACA uses different definitions of "large employer" for different provisions of the overall law. While any company with 50 or more employees is considered large for the play-or-pay rule, the more frequently used definition is a business that maintains an average of 100 employees over the course of a year.

What is the main reason for group health insurance plans?

Controlling group plan medical insurance costs has become one of the most difficult tasks in running a business. It is imperative that your medical coverage maximizes your premium dollars while protecting assets and/or future earnings against major illness or injury.

How much should you pay for group health insurance plans?

Paying the highest premium does not equate to the best coverage and nor does choosing the lowest premium equate to getting the most for your dollar. Unfortunately, choosing the wrong coverage becomes painfully obvious when you need it most. Looking at hundreds of plans and benefit options can be quite daunting and if you are among the majority of businesses without an in-house risk manager, we can help save you money and give you a choice of plans to meet your needs.