WHY SHOULD A SMALL BUSINESS OWNER
CONSIDER BUYING GROUP HEALTH INSURANCE?
1. Would you like to be able to hire a higher caliber employee to help you build your business?
Candidates with better qualifications are going to work for the larger firms because they can get a better compensation package. Most larger firms offer a benefit package. With a Small Group Health Plan for your business, you will now be able to better compete for that higher caliber employee.
2. Would you like to write off your Small Group Health Plan premiums?
Some employers today are giving their employees an “allowance” for health insurance. The employee may go out and buy any plan they want and the employer may be giving them, for example, $ 250 per month to pay towards the cost. However, the employer may not know that doing this is a violation of California Law! When an employer is contributing towards the cost of an employee’s health insurance, the law requires the use of a Small Group Health Plan (AB1692). The $ 250 being paid to the employee would have to be included in each employee’s paycheck as taxable income. The employer would pay payroll taxes and workers compensation insurance on that additional money. With Small Group Health Insurance, all costs are eligible tax deductions as ordinary business expenses.
3. What special rules are there for Small Group Health Plans in California businesses?
- A “full time” employee is defined as a person working at least 30 hours per week (not 40 hours).
- The employee is considered eligible if he is not covered by another Group Health Plan, Medicare, Medi-Cal, or the VA. Individual Family Plans are NOT valid waivers.
- If an employer offers health insurance to one full time employee, it must be offered to all full-time employees – no discrimination is permitted.
- Insurance carriers require 50 - 75% of the “eligible employees” to enroll in the
- The employer does NOT have to pay all of the premium – only 50% of the least expensive plan offered. The employer MUST pay the same percentage for all employees.
- The employer does NOT have to pay any of the premium for the employee’s
- The remaining 50% of the employee’s (and dependent’s) premium is paid by the employee through payroll deduction, with after tax dollars (or see “I” below).
- Part time employees working 20 to 29 hours may be included but are not required. However, if the employer pays a portion of the premium for one part timer, he must pay a portion for all part timers.
- When the employer has employees that are contributing towards the cost of their health plan,the employer may establish a Section 125 Premium Only Plan. This allows the employees to pay their portion with pre-tax dollars. By doing this, the employer will reduce his payroll taxes and Workers Compensation Insurance Policy premiums. There is a one-time cost of $ 199 to set this up.
- If an employer offers health insurance for employees and dependents, the dependents are NOT eligible for the Federal Subsidy (Premium Assistance) under Covered California.
4. May there be a waiting or probationary period before a new employee becomes eligible for the plan?
When hiring a new employee, the employer does not know if he is going to work out. Most companies impose a 60-day waiting period. The new hire will receive coverage the first of the month following the 60th day after being hired. However, the employer may allow coverage to start as early as the beginning of the month following hire date, but no later than 90 days.