Employee Benefits

Small vs. Large Group Health Plans

The number of full-time equivalent employees determines whether you fall into the small group market or large group market. Small group plans cover groups with 2-50 employees.

Small group plans cover groups with 2-50 lives

The Health Insurance Portability and Accessibility Act (HIPAA) requires insurers to write small group plans on a guaranteed issue basis. This means the insurer must cover the group, no matter what health conditions employees might have. Plans exclude coverage for a particular employee’s pre-existing health condition, but HIPAA limits that exclusion to no more than 12 months (18 months for late enrollees).

Large group health plans cover groups with 51 or more employees

Regardless of the size of your group, we can help you find a plan designed to provide the benefits your employees need to stay healthy, while controlling premium costs.

Group Health Plan Types

Preferred provider organization (PPO) plans

PPOs are the most common type of health plan today. A PPO contracts with a network of doctors; plans typically reimburse a higher percentage of fees for in-network doctors. Members can use non-network providers but will have higher copayments. Plans usually include features to avoid unnecessary health expenditures, such as requiring pre-authorization for elective procedures or a primary care physician’s referral for visits to specialists. Most plans also include wellness or disease management benefits designed to keep your employees healthy and control your claim costs.

Health maintenance organization (HMO) plans

An HMO requires members to use physicians within the HMO’s network; HMOs typically do not pay anything for out-of-network treatment, except in case of emergency. HMOs give your employees less flexibility in provider choice, but often cost less and involve lower out-of-pocket payments than other plans.

Point-of-service (POS) plans

POS plans combine features of HMOs and PPOs. Most POS plans require members to choose a primary care physician from within the POS network, but allow them to use out-of-network specialists with a referral from a primary care physician. Co-payments will be higher for out-of-network services.

Consumer-driven health plans

So-called consumer-driven plans aim to control healthcare costs by giving individuals more control over healthcare expenditures and by rewarding the ones who use their healthcare funds wisely. Most employer-provided consumer-driven health plans consist of a high-deductible health plan (HDHP) with a health savings account (HSA); however, health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs) can also be considered consumer-driven plans.  Special rules apply to these plans under the Affordable Care Act; we can help you ensure your HRAs and FSAs comply with the ACA.

High-deductible health plans (HDHPs) with a Health Savings Account (HSA)

Only individuals with an eligible high-deductible health plans and no other health insurance can have an HSA. Either an employer or employee can fund an HSA. Employees can use account balances to pay for qualified health expenses; funds can accumulate from year to year.

This healthcare funding choice offers advantages to employers and employees. Employer contributions to an HSA are not considered tax­able income; employee contributions are tax deductible. Withdrawals used for eligible medical expenses are not taxable to the employee; employees can also withdraw funds for other purposes (subject to a tax penalty). Funds accrue year to year and are owned solely by the employee.

Employees open and manage their own accounts, reliev­ing employers of administrative duties. Employers or employees may deposit funds into the account (subject to maximums), giving employers flexibility. An HDHP might cost less than the employer’s existing group health plan. Please contact us for more information.

Self-Insured Health Plans

Larger employers might want to consider self-insuring. Self-insured employers pay for each claim, out of pocket, as it is incurred. This differs from a fully insured plan, in which the employer pays a fixed premium to an insurance carrier, which pays covered claims on the employer’s behalf. Typically, a self-insured employer will set up a special trust fund to pay claims and purchase special “stop loss” insurance to cover catastrophic or unusual losses.

Self-insuring isn’t for every employer, but it does offer a number of benefits. Federal law (ERISA) governs self-insured plans, so they do not have to comply with varying state health insurance regula­tions and benefit mandates. You can customize benefits to meet the spe­cific needs of your workforce, as opposed to purchasing a “one-size-fits-all” insurance policy. You don’t have to pre-pay for coverage, improving cash flow. You maintain control over health plan reserves, enabling you to maximize interest income. And in most states, your plan won’t be subject to premium taxes.

Some self-insured employers also administer their own health plans, but many enlist the services of a third-party administrator (TPA), which can provide expertise not readily available in most HR departments. Our benefit specialists can help you determine if self-insuring makes sense for your firm.

Health Savings Options

In addition to health insurance, employers can choose from a variety of health savings options to either supplement or replace an insured or self-insured health plan. Any size employer can use these options.

Health reimbursement arrangements (HRAs)

An HRA is an arrangement funded solely by an employer that offers employees and eligible dependents tax-free reimbursement for qualified medical care expenses, up to a maximum dollar amount for a coverage period. Employees can generally roll over unused account balances to reimburse expenses incurred in later years.

The Affordable Care Act considers an HRA a “group health plan,” so it must comply with the ACA’s provisions affecting group health plans. Effective January 1, 2014:

• Employers can no longer use HRAs as a standalone medical plan. Employers can still offer HRAs, but only when integrated with a group health plan that complies with the ACA’s rules on annual benefit limits.
• Employers can use standalone HRAs for two purposes: 1) to reimburse retirees who buy their own health plans, or 2) to pay for “excepted benefits,” which include, among other things, accident-only coverage, disability income, certain limited-scope dental and vision benefits and certain long-term care benefits.

Healthcare flexible spending accounts (FSAs)

Also known as Section 125 Plans, FSAs let employees use pre-tax dollars to pay for healthcare expenses, reducing their taxable income and reducing the employer’s payroll. Employees elect how much of their salary to contribute, although most employers cap contributions. Unlike HRAs, FSAs are “use it or lose it” plans. As with HSAs, FSAs must integrate with a qualified group health plan or the market reforms will apply. Because individual coverage bought on the health insurance exchanges will no longer meet the definition of a “benefit,” employees cannot use funds in FSAs to buy individual coverage on the health insurance exchanges. Premium-only plans (POPs) used to buy other individual coverage or employees’ share of premiums for an employer-sponsored group plan might still comply with the law; consult a benefits expert for guidance.

Contribution limits for FSAs went into effect for plan years beginning on or after January 1, 2013. In 2014, the contribution limit stands at $2,500 per year; limits for future years will be indexed for inflation. The contribution limits apply to employee salary reduction contributions for healthcare expenses alone; they do not apply to employer nonelective contributions or to contributions for dependent care expenses.

Health Savings Accounts (HSAs)

HSAs are tax-sheltered accounts from which consumers may pay HSA-specific qualified medical expenses. In order to enroll in an HSA, an individual must have a qualified high-deductible health plan, or HDHP, and no other health insurance. HSAs may be funded by contributions from employers, employees or both; however, the employee opens and administers his/her own account. An HSA must be held at a qualified financial institution. Employees retain control of their HSA accounts. Unspent balances roll over from year to year and follow the employee to subsequent employers.

Employers can elect to contribute to employees’ HSAs. he IRS considers employers’ contributions to an HSA qualified medical benefits, so they are excluded from employees’ gross income. The maximum contribution amount depends on whether the individual has single or family coverage under his/her HDHP. Individuals over the age of 55 are entitled to an additional $1,000 “catch-up” contribution.

Term and Permanent Life Insurance

Many insurance experts advise purchasing life insurance equal to five to eight times the individual’s income. Offering group life insurance to your employees allows even employees with medical conditions to buy some life insurance protection.

There are two categories of life insurance: term and permanent.

• Term life insurance provides pure death benefit coverage at group rates. Most employers offer term insurance in their basic benefits package. It provides financial protection for a specific time (one to 30 years), and gives a death benefit but no cash savings.
• Permanent life insurance, or cash value, programs provide some additional benefits, including the tax-deferred accumulation of cash.

Term Life Insurance

Term life insurance comes in several varieties:

• Renewable. Policy owners can renew coverage at the end of their policy term without having to submit new medical information, though the premium rate will generally rise with each renewal.
• Convertible. A convertible policy allows the insured to convert term coverage into a permanent policy without providing evidence of insurability (usually a medical exam), in exchange for a higher premium, which remains fixed after conversion.
• Level. Level-premium policies have a fixed premium for a certain number of years (usually 10 or 20), while the death benefit remains unchanged. Although the rate locks in for the policy period, it can jump considerably upon renewal.

Permanent Life Insurance

Permanent life insurance provides lifelong protection and includes a savings element that grows on a tax-deferred basis and may become substantial over time. Premiums are generally higher than for term insurance, but they remain fixed.

All permanent insurance has a face value and a cash value. The face value is the money that will be paid at death, while cash value is the amount of money currently available to the policyholder. Permanent life offers other benefits—once their policy builds sufficient cash value, owners can withdraw some of their cash value, obtain a loan using the cash value as collateral or use the cash value to pay premiums.

The different types of permanent life policies include:

• Whole or ordinary life. The face amount of the policy is fixed, while premiums remain level and must be paid on a regular basis. It offers a death benefit and a cash value, which is like a savings account that grows based on insurance company-paid dividends.
• Universal or adjustable life.  More flexible, owners can pay premiums at any time, in virtually any amount, and may change the amount of the death benefit, although an increase usually requires a medical examination. After accumulating sufficient funds in the cash value account, policy owners may alter premium payments, a useful feature if your economic situation suddenly changes.
• Variable life. This policy combines death protection with a savings plan. Cash value will vary with the performance of the underlying investments, although some policies do guarantee a minimum death benefit.
• Variable-universal life. Policy owners have the investment risks and rewards of variable life insurance, coupled with the ability to adjust the premiums and death benefit available under universal life.

Group Voluntary Life Insurance

Life insurance is one of the most popular voluntary benefits. Employers can use voluntary life insurance as the company’s primary life insurance benefit, or to supplement basic employer-provided term insurance coverage.

With voluntary life insurance programs, the insurance carrier has responsibility for program implementation, communication, enrollment and administration.

Life Insurance in Business Continuity Planning

Life insurance guards the financial health of your business as well as of your employees. Key employee life insurance protects the company from financial loss due to the untimely death of a key employee.

Life insurance-funded buy-sell arrangements can guarantee that designated successors have the money available to buy your share of the business and your heirs receive a fair value.

Dental Plans

Most insurers offer managed care plans designed to encourage wise use of dental benefits, with lower out-of-pocket costs for preventive services such as exams, x-rays and cleanings. Many plans also offer benefits for orthodontics, but pay a lower percentage for orthodontics than for restorative services such as fillings, root canals, etc.

Plan types include:

Indemnity Plans

Under this “traditional” insurance plan, the plan pays dentists ac­cording to a formula—usually a percentage of the dentist’s fee, up to a “usual and customary” maximum. The dentist can bill insureds for the difference, or copayment. Most plans also have patients pay a deductible per visit or per series of treatments as well. Preferred provider organizations (PPOs): A dental PPO consists of a network of providers who agree to accept a certain discounted payment for their services. PPO plans give insureds financial incentives to use these “preferred providers” by paying higher percentages of claims they submit than for those submitted by non-preferred providers. Insureds pay the uncovered portion out of pocket.

Dental health maintenance organizations (HMOs): In an HMO, dentists agree to provide specified dental services to members in re­turn for a periodic per-capita payment—usually monthly. Payments do not depend on the number or type of services rendered, and the HMO accepts the financial risk for providing covered dental services to members.

Most plans require participants to use an HMO dentist, but some plans provide reduced benefits for members who use out-of network dentists. A participant may have to pay a deductible, co-payment, or any amount exceeding plan coverage levels.

Group Dental Insurance

We can set up a group dental insurance plan on an employer-paid or volun­tary basis for your group. Under a voluntary plan, employees pay 100 percent of premiums through payroll deduction. They get the cost advantages of a group plan, plus the convenience of payroll deduction. If the plan is set up under a premium conversion cafeteria plan, the employees’ contributions are made with tax-free dollars. We can tailor plans to meet your employees’ needs, with options rang­ing from including or omitting orthodontic coverage to using either larger or smaller PPO (preferred provider organization) networks.

Employer-Funded Dental Plans

Some employers opt to self-fund their employees’ dental benefits. A self-funded plan can give you more control over your benefit program.

A direct reimbursement plan, or dental health reimbursement arrangement (HRA), the employer re­imburses employees directly for their dental care expenses, eliminating the role of the insurance company. Under a reimbursement plan, 90-95 cents of each dental benefit dollar pays for benefits. This compares to about 70-85 cents under a traditional insured program, which also must cover insurer overhead and profit.

Dental reimbursement plans give employers greater control over their benefit program and cash flow. As with an insured plan, your costs for qualified dental expenses (which excludes cosmetic procedures) and administration are tax-deductible, and employees receive reimbursements tax-free. Under a direct reimbursement plan, the employer reviews claims, makes payments and handles compliance with benefit laws. Alternatively, you can hire a third-party administrator to handle administration. If you’re interested in exploring dental reimbursement plans, we can evaluate your company’s needs and design a plan for you.

Dental Discount Plans

Not insurance, discount plans typically give participants discounted rates for dental care in exchange for an annual fee. Depending on the plan, members can save 15 to 20 percent off average costs for a variety of dental services, such as fillings, braces, exams and routine cleanings. Plans often discount the cost of cosmetic procedures, which most dental insurance plans exclude. Members must go to a participating dentist who has agreed to offer services at a discounted price.