Is Group Health Insurance Right for You?
Have Realistic Expectations
Our experience has been that many small employers have unrealistic notions regarding group health insurance, and this can lead to wasted resources and employee hardship. To discourage this sort of thing, we offer some thoughts and advice:
Do No Harm
A weakly supported group health insurance plan that is ultimately abandoned is usually worse than no group insurance at all.
As a small employer, you want to provide quality benefits for your employees. However, if you don't currently offer a group health plan, you may not be doing your employees a favor by inducing them to drop existing individual health policies in favor of small group health insurance to which you're not fully committed.
If you implement a group health insurance policy, don't be surprised by annual rate increases of 20% or more. If you manage to get a great deal on small group health insurance rates, don't expect it to last. And don't expect your group health insurance rates to be less than what healthy employees would pay to buy coverage on their own.
It's truly unfortunate when a small employer abandons group health insurance (an increasing frequent occurrence during the past few years). Some employees are left in quite a bad circumstance -- uninsurable with no affordable coverage options. Better to not have offered group health insurance in the first place.
Restrictive Insurance Company Guidelines
- The employer must have at least two full-time employees.
- Proof of full-time employment is required. For documentation, most insurers accept the employer's last quarterly wage/tax report submitted to the state unemployment insurance department.
- Most group health insurers require at least 75% of full-time employees to either (1) enroll in the group health plan or (2) participate in their spouse's group health plan. In addition, most insurers require at least 50% of full-time employees to enroll in the group health insurance plan.
- Most health insurers require the employer to contribute at least 50% of the premium for employee health coverage, through they do not require the employer to contribute toward the cost of dependent coverage.
Clarify Your Purpose
Is your purpose to provide coverage for a very limited number of employees? If so, the employees may be better off with individual health insurance policies. MedPlan Access can provide individual and family health plan quotes for Illinois residents and for Indiana residents.
However, if you need to provide coverage for otherwise uninsurable persons or if you must offer employee benefits to retain and attract necessary qualified employees, group health insurance is what you need.
Less Costly Alternatives
For healthy people, individual health insurance almost always costs less than small group health insurance. Most people believe the opposite is true.
For a very small business with unhealthy employees, it's not unusual that coverage under the State high risk pool (Illinois Comprehensive Health Insurance Plan - CHIP, or Indiana Comprehensive Health Insurance Association - ICHIA) is a less costly alternative to group health insurance.
Barriers to Very Small Employers
Tiny group accounts (2-4 employees) are usually not profitable for health insurance companies, many of which impose barriers by charging maximum rates and/or imposing rigid administrative requirements.
In addition, many health insurers pay agents lower commission percentages on very small group accounts. This makes it more difficult to find a health insurance professional with sufficient financial motivation to help you.
Health Savings Accounts (HSAs)
- The employee gets security with permanent health insurance that isn't dependent on their employment situation.
- The employee owns a tax-advantaged Health Savings Account (HSA) which they can keep if the employment situation changes.
- The employer provides a meaningful employee benefit which is a tax-deductible health and welfare expense.
- This health and welfare expense is not subject to health insurance rate increases.
If you'd like to learn more about HSAs, check out the HSA section of this site.
