Getting Started with Small Group Insurance

Small Group Qualifications

1. You need a minimum of 2 people on the plan to form a group and there needs to be an employer-employee relationship.  In addition, insurance must be offered to all full-time employees (FT is considered working 30 hours or more). An employee can then choose to enroll in coverage or "waive" coverage. If an employee waives coverage then their only opportunity to join the coverage would be at open enrollment (which is the annual renewal date of when the plan started) or if they have a "qualified event" (loss of coverage).

2. The 2 people to make up the group cannot typically be a husband and wife.

3. The employer must contribute at least 50% of a single employee’s premium. You can contribute more, but 50% is the minimum.  There is no requirement to contribute towards any dependent premium, however, you cannot prohibit dependents from being on an employee’s coverage.  If you choose to not contribute towards dependent coverage that premium can be deducted from the employee's paycheck.  Additionally, that can be done on a pre-tax basis through a Section 125 "POP" (Premium Only Plan which is part of a full-blown Section 125 plan) plan.  If you do choose to contribute towards dependent coverage that contribution percentage can be different than what you contribute towards the employee-only premium.

4. Most insurers will allow the option of offering two or more plans if you so desire.  Typically you will see the offer of a high deductible, no-frills option, and then a more moderate deductible option that features co-pays for doctor office visits and a co-pay prescription drug card where you would only get into your deductible for hospital services.

5. Other lines of coverage (dental, life, vision, and disability) can be offered as well.  These lines of coverage can be offered with an employer contribution towards the premium (contributory) or without a contribution towards the premium (voluntary).  If you choose to offer these coverages the insurer will typically discount them in some sort of bundled offering.

6.  Coverage always begins on the first of the month.  Necessary applications and other documents can be submitted to the carrier all the way up to the first of the month to secure the first of the month effective date.  While not recommended, some carriers will allow submission up to the 5th of the month after the requested effective date and will back-date the coverage. Keep in mind, the closer to the first of the month submission takes place the further into the month ID cards will be received.

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HSA Questions and Answers for 2023

What is an HSA?

An HSA (Health Savings Account) is a tax-exempt account established exclusively for paying qualified medical expenses for a person insured by a qualified high deductible plan and his or her eligible dependents.

Who is eligible for an HSA?

You are eligible to establish an HSA fund if you are covered by a qualified high-deductible insurance plan and are not entitled to Medicare benefits. You are not eligible if you will also be covered by a nonqualified insurance plan (such as an employer-sponsored plan).

What qualifies as a high-deductible insurance plan in 2023?

For single coverage, your plan must have at least a $1,500 deductible and no more than $7,500 in annual out-of-pocket expenses. For family coverage, your plan must have at least a $3,000 family deductible and no more than $15,000 of annual out-of-pocket expenses. Except for preventive care and supplemental accident coverage, a qualified high-deductible plan may not provide any benefits until the deductible has been met. Deductibles may increase each January based on the CPI. Please be aware: Not all high deductible plans are HSA-qualified high deductible plans. Look for HDHP or HSA in the plan name. Most HSA plans now have an Embedded Deductible. How does this insurance coverage work? Typically, all eligible medical expenses (except preventive care) go toward your deductible first. After you satisfy your deductible, the insurance company pays at your coinsurance level (For example 80% coinsurance means that the insurance carrier pays 80% and you pay 20%) until you reach your annual out-of-pocket maximum (the most you will pay each year for covered services). Then the insurance pays 100% for the remainder of the calendar year. If you have family coverage, you will have an "embedded" single deductible. This means that one person can satisfy the single deductible and the insurance will begin to pay at your coinsurance level for that person. The rest of the family can collectively satisfy the remaining deductible and would then be paid at the coinsurance level.

How do I open an HSA fund?

Most local banks and some carriers manage Health Savings Accounts. Be sure to ask about the fee schedules and interest rates to get the best deal!

How does the HSA work with insurance coverage?

By using your HSA debit card or HSA checking account, you will be able to use tax-deductible funds from your HSA fund to pay for expenses that are credited to your deductible. You are also able to use these funds to pay for dental, vision, and other uncovered medical expenses. This is not a "use it or lose it" benefit like an employer-sponsored Flexible Spending Account (FSA). Your HSA funds accumulate year to year and can earn interest (which is not taxable income).

What happens if I use HSA funds for nonmedical expenses?

The withdrawn amount is subject to income tax and a 20% penalty. If you are over age 65, the amount is considered retirement income and is only subject to normal income tax.

How much can I contribute to my HSA fund in 2023?

Within certain limits and based on your particular needs, you control how much you contribute to your HSA including lump sum deposits. If you are under the age of 55, you are allowed to set aside $3,850 if you are insured with single coverage or $7,750 if you are insured with family coverage. If you are over age 55, you can set aside an additional $1,000. Remember: Your HSA contribution is in addition to (not in place of) your health insurance premium.

What is the advantage for me?

High-deductible health insurance plans offer lower premiums than low-deductible copay plans because the risk to the insurance company is lower. By using tax-deductible dollars to pay for your medical expenses, you reduce the actual cost of those services. The HSA plan lets you pre-plan for a predictable risk.