Small business - group health insurance

The cost of health insurance for employees – by far the single most expensive benefit offered by employers – is one of the greatest challenges many small businesses face today. As business owners know, health insurance is a powerful tool for hiring and keeping the best workers.

Do I have to offer health insurance to my employees?

Businesses with 50 or fewer full-time employees are not required to offer group health coverage to their employees.

Who regulates group health plans?

Fully-insured group health plans issued in the State of Missouri are regulated by the Missouri Department of Insurance, Financial Institutions & Professional Registration. However, if the group health plan is self-insured, Missouri state laws would not be applicable. Most self-funded plans are regulated by the federal Employees Retirement Income Security Act (ERISA) of 1974.

What does it mean to be fully-insured or self-insured?

A fully-insured policy is one in which the benefits are purchased from an insurance company. In exchange for the premium it receives, the insurance company assumes the financial risk and responsibility of paying for covered services. Conversely, a self-insured (also referred to as “self-funded”) plan is one in which an employer, not an insurance company, provides benefits. The employer established a plan document outlining the covered expenses, exclusions, and other important terms; pays claims using its own funds along with any enrollee contributions; and may hire a third party to administer benefits on its behalf. Oftentimes, an employer will utilize an insurance carrier as their third-party administrator. Generally, federal law governs both fully-insured and self-insured plans; however, self-insured plans are not subject to state insurance regulation.

What types of plans are available for small businesses?

There are several types of health insurance plans a small business owner can purchase. Some plans provide comprehensive major medical coverage, while others provide a very specific, or significantly limited, amount of benefits. The various plans include:

  • Comprehensive Major Medical Plans – These are also known as “managed care plans”. These plans offer a network of preferred health care providers and are subject to the provisions required under the federal Affordable Care Act. There are 4 main types of managed care plans:
    • HMO – Provides in network benefits only. If you seek care from an out of network provider you will be responsible for 100% of the cost(s) associated with that care. You must also choose a primary care physician. Except for emergencies, you must seek a referral from your primary care physician prior to seeking care from any other health care professional.
    • PPO – Provides in network and out of network benefits. Although you can seek care, without a referral or prior approval, outside your network, your out of pocket costs will be significantly higher.
    • EPO – A hybrid of an HMO and PPO. This type of plan includes in network benefits only. However, the plan does allow for out of network benefits when prior approval is requested and received from the insurance carrier.
    • POS – Also known as a “Point of Service” plan. This is another hybrid of the HMO and PPO plans. With POS plans you may be required to designate a primary care physician who will then make referrals to network specialists when needed. Like a PPO plan, you may receive care from out of network providers but the out of pocket costs will be much greater.
  • Limited Benefit Plans – These plans do not provide major medical coverage. The benefits are typically a set dollar amount dependent on the type of care you receive and/or the injury/illness you sustain. These plans go by various names such as Hospital Indemnity, Accident Only, and Specified Disease. Pre-existing conditions are excluded under these plans and medical underwriting will be conducted prior to your acceptance. These plans are not subject to the provisions required under the federal Affordable Care Act.

How do I purchase group health insurance for my small business?

There are various means by which a small business employer can shop for group health coverage. Some of those include:

  • Agent/Broker: There are two types of agents/brokers - those that can only sell for one carrier (captive agent) and those that can sell for multiple carriers (independent agents). A captive agent can only provide quotes for plans sold by the carrier they represent. Independent agents can provide multiple quotes from multiple carriers. Various factors can determine which agent would be best for your group.
  • SHOP: The Small Business Health Options Program (SHOP) was created in conjunction with the Affordable Care Act and provides an online medium for small business owners to search for and purchase group health insurance. You can visit https://www.healthcare.gov for further information on the SHOP and/or to search for and purchase group health coverage.
  • Carrier: Insurance carriers maintain websites through which, typically, you can search for and purchase their health insurance products. Some carriers will allow you to conduct the quoting and enrollment process online; however, some may require you to call the carrier directly. An enrollment/eligibility specialist will then assist you through the process of purchasing a health insurance (or related) product.

Before purchasing, interview several licensed insurance agents who specialize in serving the health insurance needs of small businesses.

  • Shop around: compare the costs of equivalent coverage from several insurers to be sure you’re getting the best deal. Understand the factors that affect your premium costs. Some cost factors are clearly outside of your control. Other cost factors can be managed, such as:
    • The type of health plan you select. For example, HMOs are typically less expensive than PPOs; both are less expensive than indemnity plans. Indemnity plans, also known as “Fee for Service” plans, allow you to visit almost any provider you choose and the health carrier pays a set portion of the total bill.
    • The specific benefits you select. For example, choosing higher deductibles, co-payments and maximum out-of-pocket limits can lower monthly premiums. On the other hand, choosing lower lifetime medical limits can lower premiums.
    • The costs you transfer to your employees. Most small businesses ask their employees to bear a portion of the cost of their health insurance premiums. While this doesn’t affect the premium charged by the insurer, it does affect the amount the employer pays.
  • Talk to other small business owners to find out about their experiences with different kinds of health plans and insurers.
  • Check to verify that both your agent and the insurance company are licensed in Missouri. You can do this online or by calling the Missouri Insurance Consumer Hotline at 1-800-726-7390.

    Agent licensing
    Company licensing

  • Look into the complaint history of the insurer you’re considering. You can find that out using our complaint index page or calling the Missouri Insurance Consumer Hotline at 1-800-726-7390.

In addition to health insurance, what other types of coverage/benefits can I offer my employees?

There is a plethora of additional benefits available for small groups such as: dental insurance, long-term care insurance, short-term disability, long-term disability, life insurance, flexible spending arrangements (FSA – cafeteria plans), health savings accounts (HSA), health reimbursement accounts (HRA), vision insurance, etc. The number and type of benefits offered is up to the small business owner.

Who qualifies for coverage?

Typically, employees working 30 or more hours per week will qualify for coverage under a group’s health plan. However, an employer may offer coverage to an employee working less than 30 hours per week so long as the coverage is being offered to all similarly situated employees. An employer may not discriminate amongst similarly situated employees for any reason, especially for past or current medical issues.

How does COBRA and Missouri State Continuation work?

The Consolidated Omnibus Budget Reconciliation Act (COBRA) applies to groups with 20 or more full-time employees. COBRA allows a terminated employee the right to continue enrollment under the group health plan for a period of 18 months. The termination can be voluntary or involuntary; however, involuntary termination due to misconduct may negate the employee’s right to COBRA coverage. The employer is responsible for notifying the terminated employee of their COBRA rights within a specified timeframe. Certain qualifying events, such as disability, may allow a terminated employee to extend their COBRA benefits past the 18 month time limit. There are also special provisions for dependents/spouses of terminated employees based on the reason(s) for loss of coverage (i.e. death, divorce, etc.).  More information on COBRA is available by visiting the US Department of Labor website.

Missouri State Continuation applies to groups with less than 20 full-time employees. State Continuation mirrors, for the most part, federal COBRA. The specific provisions for State Continuation are outlined under Section 376.428 RSMo.

Beware of “alternative” types of health insurance – or outright fakes

Medical discount plans are not insurance

These plans claim to offer discounts for members who use certain doctors, pharmacies and hospitals. Verify these claims with those providers before buying.

While these plans are not insurance, they are regulated by the department. Call our Insurance Consumer Hotline to verify the plan is registered as required by Missouri law.

Bogus health plans

You may see ads on late-night TV, in spam or in junk faxes offering “unbeatable” low prices on group health coverage. Many of these are unlicensed, illegal operations. You can find out if these companies are legitimate with a quick phone call to our department. As with most products, if a deal sounds too good to be true, it probably is.

What can I do if I am experiencing issues with an insurance carrier?

Our department is tasked with overseeing the insurance industry in our state. Our goal is to evaluate a carrier or agent’s compliance with policy provisions and Missouri insurance laws. One of the ways we accomplish this goal is through our consumer complaint process. If a consumer is experiencing an issue with an insurance carrier or an insurance agent, and the issue is related to a product or agent subject to state regulation, the consumer may file a complaint with our department. You may file a complaint by downloading our Consumer Complaint Form and returning it to our office, or by filing a complaint online through our website. To file a written or online complaint, or to obtain additional information regarding our complaint process (such as a list of plans we do and do not regulate), click HERE. If your question is of a general nature, or you are seeking some other type of insurance-related assistance, you may contact our Consumer Hotline at 800-726-7390.

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