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Choosing A Small Employer Health Plan
Overview
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Employers don't have to offer health insurance to employees or their dependents but most want to provide this benefit because:
  • Offering health insurance helps businesses reduce the cost of absenteeism, reduce staff turnover and recruit and retain high-quality workers.
     
  • It may limit disability and workers' compensation claims.
     
  • Health insurance is the number one fringe benefit employees look for with an employer.
     
  • Insured people are healthier and more productive.
     
  • Health insurance protects workers and their families from catastrophic financial losses that can accompany serious illness or injury.
     
  • Reducing the number of uninsured Oregonians helps your bottom line. People without insurance seek care in emergency rooms. The unpaid bills eventually are passed to businesses and individuals in the form of higher premiums.
     
  • The health insurance premiums your company pays are currently tax-deductible and are non-taxable income for employees. Starting in 2018, due to Federal Health Care Reform, an excise tax will be charged to employers for medical plans that exceed certain values.
     
  • Offering coverage to dependents, as well as employees, can make a "pool" larger and younger. This can help stabilize or even reduce rates.

Small Group Market (2-50 Employees)
If you are a business with at least two and no more than 50 eligible employees, you are considered a small employer group under Oregon insurance law. An eligible employee works at least 17.5 hours a week. This doesn't mean you have to offer health insurance to all employees working at least 17.5 hours a week. This count simply determines how you're regulated, including what factors may be used to set rates. If you have 75 employees but only 45 of them work at least 17.5 hours a week, you are in the small group market.
 
Insurers serving this market must accept all groups regardless of the health of any particular group's employees. Also, no employee of a business can be turned down for coverage because of a health condition. However, an employee may have to wait for six months before pre-existing conditions are covered.
 
Insurance rates must be approved by the Oregon Insurance Division to ensure the rates meet standards designed to protect groups with older or less healthy employees.

If I Offer Insurance, Do I Offer It To All Of My Employees?
As an employer, you don't have to offer health insurance. If you offer health insurance and:
  • You have 2-25 employees: You must make the coverage available to all eligible employees. You decide how many hours an employee must work to be eligible for your coverage. It must be between 17.5 and 40 hours per week, subject to insurance carrier rules. You may offer different plans to different classes of employees. For example, you might offer salaried workers one plan and hourly workers a different plan.
     
  • You have 26-50 employees: You may offer health insurance to some categories of employees and not others. For example, you might offer insurance to managers but not line staff.
Note: An employer must have at least two employees to be considered a "group."
Employer Contribution/Employee Participation Requirements
Insurance companies typically require employers to contribute at least half of the monthly health insurance premiums of their employees. They may also require that a certain percentage of eligible employees participate in your health plan. This is because insurance companies want to make sure not just the sick people sign up for health benefits. The more an employer contributes, the greater the number of employees who typically participate.

 
An insurance company may require one level of participation by employees and a different level of participation by dependents. For example, Insurer X could require 100 percent employee participation for groups of 2-3 employees and 75 percent participation of eligible dependents from that group. Employees who have other group insurance may opt out and this doesn't count against the participation requirement. Example: Employer A has three employees. A spouse's employer covers one. If both the other two employees participate, they meet the 100 percent participation requirement.
 
Higher employer contributions and higher employee participation rates may lower your rates, as well. (See "cost" below.)

Large Group Market (51 Or More Eligible Employees)
The large group market includes Oregon employers with 51 or more eligible employees. The large group market is also subject to consumer protection laws, such as mandated benefits and claims-handling rules. However, there is no rate regulation in this market. Employers may offer insurance to certain classes of employees but not others. For instance the employer could offer an insurance plan to managers only and nothing to the other employees. In the large-group health insurance market, the content of insurance contracts must be approved to ensure that mandated services are included and that consumer protection standards are met.

Self-Insured Employers
A large employer becomes "self-insured" or "self-funded" when it chooses to pay its employees' health costs itself instead of paying premiums to an insurance company for health coverage. Self-insured employers may assume all the financial risk of paying claims.
 
Many "self-insured" employers purchase reinsurance (also called stop-loss insurance) to cover costs over a set amount. This is better stated as "less than fully insured," since the employer is not assuming all of the financial risk. Example: An employer decides to pay up to $10,000 of an individual's medical bills. After that, stop-loss insurance pay the rest of the medical expenses up to the limit of the policy.
 
The phrase fully funded refers to a business that buys all its health insurance from an insurance carrier.
 
Self-insured employers generally are subject to federal, not state, regulation. They are governed by the Employee Retirement Income Security Act of 1974 (ERISA). ERISA requires that those employers that establish plans meet certain minimum requirements. But, they don't have to include certain benefits (mandates) that small employer plans must include. Oregon's mental health parity law requires more comprehensive mental health coverage than the federal mental health benefit law. The Oregon mandate does not apply to self-insured plans.
  • Pros: Employers can design coverage as they see fit. If they want to include chiropractic care or emphasize preventive benefits, they can. Even though most employers hire a third-party administrator to handle their health benefits, they can save on overhead.
     
  • Cons: If more than the expected number of employees get seriously ill, medical bills could wipe out an employer's medical fund or require more than an employer can pay (although you can buy stop-loss insurance to help with this). Premiums could vary widely from one month to the next, depending on claims.
Companies have to consider the health of their workforce before deciding whether to accept the risk of high claims in return for the potential to save money.

Trade Or Professional Association Plans
Association-sponsored plans allow small business owners to purchase coverage through membership in a business, trade, professional association, or union. Due to legislation passed in 2007, association health plans are exempt from small group rating laws, as long as they meet criteria that preventing "cherry picking." "Cherry picking" is described as proving less expensive coverage to healthy groups.
 
In some cases, state-regulated, association-sponsored plans have better rates and may give the employer and the employees a choice of plans. Also, participating in an association-sponsored plan may relieve the employer of some of the administration of health coverage.

Cost
How much will an employer pay for a group plan? Rates for a particular group nearly always depend on these factors: benefits selected, the average age of employees and dependents, family composition (numbers of spouses and children), and geography.
 
Rates may not be increased more than once in a 12-month period.
 
Nationally, the average annual group premium in 2009 was $4,824 for single coverage and $13,375 for family coverage.*
 
State law lists the factors that may be used to calculate rates. Each insurance company decides which factors it wants to use. However, the company must treat all small employer groups the same. In other words, it can't use some factors with one group and other factors with a different group.
 
In addition to the factors listed above, other factors that may be used include:
  • The amount the employer contributes to the premiums of employees and dependents
     
  • Tobacco use
     
  • Employee participation rate
     
  • Longevity with carrier (an employer may get a break for sticking with an insurance company)
     
  • Employee/dependent participation in wellness programs
     
  • Expected claims. (However, a company can't raise or decrease rates by more than 5 percent of the premium for this factor.)
While an employer can't change many rating factors, the employer can manage some aspects of cost. For example:
  • Cost sharing between the employer and employees. For example, what percent of the premium will the employer pay? The employees? Will the employer contribute to dependent coverage? What size deductible do you want? Generally, the higher the deductible, the lower the premiums. The employee pays the deductible.
     
  • The benefit package. Will you offer prescription drug benefits? Dental? What is the out-of-pocket maximum that an employee will incur in a year?
     
  • The type of insurance plan. Managed care plans such as HMOs, PPOs, and POS plans typically cost less than indemnity plans. Read more about this in our insurance types section.
*2009 Employer Health Benefits Survey - Kaiser Family Foundation and the Health Research and Educational Trust (HRET)
Can I Give My Employees Money For Individual Insurance?
Some employers ask whether they can simply give their employees money (additional compensation) to buy individual/family insurance plans for themselves and their families. The employer can provide additional compensation in hopes employees apply it to insurance costs. However, the employer may NOT require that employees use any portion of their compensation for insurance. If an employer pays any part of the insurance coverage, or claims a tax benefit, the employer must offer a group health benefit plan. For details, read the Oregon Insurance Division issued Bulletin 2002-5:

In Oregon, individual plans typically cost less than group plans because they are "underwritten," that is, the insurance companies may deny coverage to those with serious health conditions. Those Oregonians may then get coverage through the state's high-risk pool, although rates can be as much as 25 percent higher than those of commercial plans. Group plans also tend to have more benefits than individual plans (although that is not always the case). In addition, group insurance plans have open enrollment periods where anyone, including those that have delayed coverage until they are ill or injured, may enroll.

Where To Get Help
A health insurance agent (producer) can explain your health insurance choices and help you shop for a plan that fits your budget and your needs. See our agent help with health insurance section for information on agents. When choosing an agent, be sure to ask whether the agent routinely works with small businesses. You may want to ask for a reference or two.

Insurance Companies Selling Small Employer Group Plans In Oregon