Paying for Individual Health Plans for Employees

Many employers in California do not realize that paying for employee's individual health insurance policies presents many problems There can be liability for the employer in doing so

Many employers in California do not realize that paying for employee's individual health insurance policies presents many problems. There can be liability for the employer in doing so. Let's look at the implications and understand why providing Small Group health insurance to your California employees is important.

First, we need to understand the differences between Small Group health or employer sponsored health insurance and individual/family or private insurance. Small Group is quite different in a few key ways. First, it is governed by California law AB 1672. Among many provisions set forth in AB 1672, Small Group coverage is guaranteed issue to qualified small companies with 2-50 employees. This means that a person with a legitimate employer-employee relationship (can be full or part-time depending on group preference) cannot be declined due to health.

Individual/Family health insurance is quite different in this respect. Individuals must qualify based on health in a process called medical underwriting. They can be declined coverage have rates increased based on their health history or status. This difference in medical qualification is a big issue for small groups that pay for individual health insurance plans for their employees if the group is eligible or capable of providing group health. If an employee is declined coverage and/or suffers a major medical bill, he/she can go after the employer saying that the employer should have sponsored a qualified (guaranteed issue) group health plan. This assumes that the employer met the requirements under AB 1672 to offer such a plan. As an employer, you also do not want to know too much about an employee's health status. If you need to let the employee go, there can be issues in knowing that they were declined individual health insurance. Keep a good separation from this knowledge to avoid issues in hiring/firing.

Employers usually offer individual plans based on cost but the difference hardly justifies this exposure to liability. In California, the employer can pay as little as 50% of the employees health insurance premium and with options such as Employee Elect through Anthem Blue Cross, an employer can now offer a full range of plans to each employee with a fixed contribution (dollar amount or a percentage of a given plan).

The other main issue deals with the tax treatment of employers paying for employee's individual health plans. Officially, only a qualified group plan premium for employees can be deducted as a business expense. Paying for individual health plans generally cannot be deducted. Make sure to run your company's situation by a tax professional but this is a major drawback for paying for individual health plans.

In summary, with all the options, both from a plan and cost perspective, on the market, small group health insurance makes the most sense. Run your instant quote and please let us know how we can help investigate your Small Group health insurance options. It is important to avoid the liability of employees not qualifying for individual health plans due to health history and to make sure you take advantage of the tax benefits associated with paying for qualify Group health plans. ?

Dennis Jarvis is a licensed California group health insurance broker with extensive knowledge of the Small Group health market in California.