Employers should be aware of the following group health insurance contract elements:
- Employer Contribution—employers are required to contribute a percentage amount towards employee premiums. Typically the minimum amount an employer has to contribute is between 50%-75% of the employee premium only. Employers do not have to contribute anything towards dependent premiums.
- Participation Requirements—a certain percentage of employees are required to enroll in a group policy. Normally the requirement is at least 75% of employees, not including valid waivers. A valid waiver is someone who is enrolled in another group policy through a family member, Medicare, or Medicaid. Employees enrolled in individual policies are not considered valid waivers.
- Probation Periods—employers are required to setup a probation period that new hires must meet before enrolling in the benefits. Employee must meet this probation period, but not exceed it, to enroll in benefits. Normally a probation period cannot be longer than the first of the month following 60 days, due to the Affordable Care Act.
- Unilateral contracts-- employers can terminate a health insurance policy to switch to another health insurance policy at any time. There are certain rules to this:
- Cancellations are always effective the last day of the month.
- If an employer has already made payment for the forthcoming month, the carrier may not allow them to cancel until the end of the month they are paid up to.
I have a group health insurance policy setup, now what?
After setting up a group policy employers should be sure they are in compliance with the Employee Retirement Income Security Act (ERISA) and the Affordable Care Act (ACA). Please visit our Compliance and Frequently Asked Questions sections.
Can I offer my employees individual plans, rather than a group plan?
Employers are not able to reimburse employees with pre-tax funds to buy an individual health insurance policy. Doing so can result in a fine of $100 a day, per employee, according to section 4980D of the Internal Revenue Code. However, there is no rule against employers paying their employees extra taxable income, which their employees can use to purchase an individual health insurance policy. Please see Frequently Asked Questions for more information.
Is there a resourceful option that allows me to offer employees a health insurance plan while also saving on premiums?
Yes, there is! A great option would be setting up a Health Reimbursement Account (HRA) for employees. An HRA can be used in conjunction with a higher deductible health plan
HRAs are accounts funded solely by an employer that allow employees to be reimbursed tax free for qualified medical expenses. When offered in conjunction with a higher deductible health plan, it is a win/win for both the employer and employees.
Employers can elect higher deductible health plans, saving on premiums, and the HRA benefits the employees by absorbing some of the upfront medical costs that may be associated with a high deductible. Where employees may pay co-pays on a Gold plan, on a Silver or Bronze level, there may be benefits that are subject to the deductible, in some cases, the employee would have to pay 100% toward certain services before their deductible is met. With an HRA in place, the employee can be reimbursed for qualified expenses as a result of the higher deductible plan. Please see Frequently Asked Questions for more information.
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Affordable Care Act (ACA) Compliance for Large Groups
Under the Shared Responsibility Provision of the Affordable Care Act (ACA) large employers are required provide affordable health insurance coverage that meets the minimum value to their full-time employees and dependent children. They are also required to file with the IRS starting in 2016, for the 2015 calendar year. Failure to comply with the Affordable Care Act (ACA) requirements may result in the penalties.
In order to be in compliance with the ACA, employers must meet the following requirements:
For more information on any of these items, or to learn about transition relief available to large groups, please visit our Frequently Asked Questions section.
Employee Retirement Income Security Act (ERISA) Compliance
ERISA is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. ERISA requires that plan participants are provided with plan information including; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty.
In order to be in compliance with ERISA employers must meet the following requirements:
- Comply with ERISA rules and regulations
Provide and/or file required documents and forms, including annual notices to employees.
- Annual notices on Reporting and Disclosure; Fiduciary Responsibilities; Administration and Enforcement; COBRA and additional standards for group health plans; HIPPA, Newborn & Mothers Health Protection, Mental Health Parity Act, Woman’s Health and cancer Rights Act; etc.
- Plan documents
- Summary Plan Description (SPD) including any changes in plan benefits and entitlement benefits
- Form 5500, including schedules and auditors report (if applicable)
- Summary Annual Reports (SARs)
- A full copy of the Fidelity Bond and/or Fiduciary liability insurance (if applicable)
We recommend a third party administrator for helping groups comply with the above ERISA requirements. Click here to link to ERISA Solutions website.
For more information on the Employee Retirement Income Security Act (ERISA) compliance, please visit our Frequently Asked Questions section.
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