Do we stick with our business group plan or let everyone go out and get their own individual insurance, a common question being asked among employers this year. Individual plans are attractive right now, especially in the pricing, but where will it be in a year or two, is a pertinent factor. We agents don't have a definite answer to that (and probably won't until after mid-term elections), but the general speculation is that individual rates will continue to go up, especially in 2016 when federal funding for the Exchanges diminish. Meanwhile, some employers are deciding to take advantage of these cheaper individual premiums, bank some savings, and if need be go back to a group plan in a year or two. That seems logical, especially if that group plan had been underwritten at the lower pricing end because now they will be community rated and definitely see an increase in price. There are differences however between group and individual plans, and one should be aware of these before making any big changes. These are some facts to consider:
1. There is no out-of-network out-of-pocket maximum, with individual plans. If you are out of network, there is an additional deductible, the coinsurance is less, and there is no maximum cap in cost sharing. Group plans have a cap on out-of network cost sharing.
2. Routine eye exams are not covered with individual plans, except for Blue Cross Blue Shield of MN. Group plans cover this procedure under the preventitve care benefit.
3. Individual plans' family deductibles must be met before benefits are paid whereas group plans offer embedded family deductibles, meaning if one member meets their deductible, benefits are paid for that member in the family.
4. An employer should consider whether their employees really want to shop for their health insurance, or would they prefer the employer make those tricky decisions.
5. For groups that would like the opportunity to pick their own plan design, network, and insurer, individual plans can be an advantage. Group plans may also offer multiple choices in plan designs, but with one insurer.
6. Tax Reporting. Employer sponsored group health insurance paid by an employer for coverage on an employee and their dependents, is deductible as a normal business expense under IRC Section 162. Health insurance benefits are not wages and therefore are normally not subject to wage taxes. Individual health plan premiums and/or medical expenses paid by the employer on behalf of his/her employee and dependents has historically not been deductible for various reasons including adverse selection against group programs and double dipping tax benefits by an employee. However, since 2014 and all the ACA changes to the market, we have been told that tax free contributions from employers and employees are acceptable through a Section 125 plan. There must be a plan (Section 125 or Cafeteria) in place to administer tax- free premium payments or medical expense reimbursement. We would be happy to facilitate or recommend an administrator to you if you would like further information.
There are pros and cons for each type of health coverage, and the demographics of your employee group and their interest in choices are very important. Whichever way you go, offering employer sponsored health insurance is still a priority in attracting quality employees. As many of you are facing end of the year renewals, having kept your "old" plans for a 12-1 renewal, start the dialogue with your employees about retaining group versus individual health plans, and get back to us to develop an action plan. Also remember we have individual health specialists on staff if you have COBRA employees that would like other plan options, and for retiring employees, we can assist them with setting up an individual plan, including Medicare.