Group health insurance is generally provided in an employee benefits package by the employer to the employees, as an additional benefit. Group health insurance plans are meant to cover the cost of necessary health care required by the employees, their spouses, and dependents. Rising cost of health care has resulted in most employers scrapping group health insurance from the list of fringe benefits. This is especially true in the case of small business units. The employer may consider, group health insurance a waste of good money, that may be utilized elsewhere. However, considering the exorbitant cost of health care, group health insurance plans will go a long way in reducing employee turnover.
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Group Health Insurance for Small Business Enterprises
Eligibility Criteria: In order to be eligible for group health insurance plans, the firm needs to be engaged in a legitimate business. A small business firm can be structured as a sole proprietorship, a partnership, or a corporation. In the case of sole proprietorship and partnerships, the business should have filed for a license or a fictitious name. Corporations and limited liability companies should have written and filed articles of incorporation and articles of organization respectively. The company should have at least two full-time employees, owners, officers, or partners. The maximum number of employees for a small business is generally 50 and the minimum is 2.
Advantages of Providing Group Health Insurance: Group health insurance is advantageous to both employers and employees. An employer may require health insurance for himself and his family members. The employer can opt for an individual health insurance policy. In order to qualify for an individual insurance policy, the employer would have to go through a medical check-up. If the employer is in good health, he will be able to qualify easily for any individual health insurance plan. In case his medical history is not satisfactory, he may not qualify for health insurance. In other words, he may be denied coverage when he needs it the most. In this situation, a group health insurance plan can be a life saver. This is because according to Federal Law, an individual seeking health care coverage under a group health insurance plan cannot be denied coverage on account of past claims history. Moreover, pre-existing condition exclusion period cannot exceed 12 months. Collective bargaining power results in lowering per head premium because of the distribution of risk. In other words, the employer manages to get insured at a lower premium because of participating in a group health insurance plan. In case of group health insurance plans, the employer is the policy owner and is expected to contribute a fixed amount of money as premium. The premium paid is tax deductible and reduces the employer’s tax burden.
Alternative to Group Health Insurance
Employers who cannot afford to provide group health insurance can opt for an employee-owned Health Savings Account (HSA). HSAs allow the employer to decide the amount of contribution, that he would like to make, towards providing health care facilities to the employees. In the case of HSAs, the policyholder is the employee while in the case of group health insurance, the employer is the policyholder. The employer’s contribution to the HSAs is exempt from payroll taxes. Interest in the Health Savings Account accumulates tax-free. Using HSA allows employees to choose their individual insurance plan provider. HSA is a viable alternative to group health insurance for small businesses since it subsidizes the cost of health care for employees, without burdening the employer with premium payments.
Group health insurance is a wonderful plan for employers and employees. Both group health insurance and HSAs can significantly reduce employee turnover. This in turn would help small business units save on the cost of hiring new employees on a regular basis.