There’s a lot of confusion and misconception surrounding the individual health insurance market. And understandably so — health insurance is confusing and the changes happening in the market are hard to keep up with. This week we’re debunking the top five myths about the individual market.
Myth 1: My employees can be denied coverage for a pre-existing condition.
Before the Affordable Care Act (ACA), people could be denied individual coverage for a number of different health reasons. Maybe they had diabetes, cancer or were pregnant. One of the most important changes brought about by the ACA is that no one can be denied coverage or charged more for insurance due to a pre-existing condition. Employers can rest assured that if they send their employees to the individual market, their employees will have guaranteed access to quality health insurance that’s often superior to the group coverage they had before.
Myth 2: I can’t help my employees pay for their individual plan.
You can, but there are number of rules that need to be taken into consideration to ensure compliance.
In November 2014, the Department of Labor released FAQs about “premium reimbursement arrangements” for individual health plans. These FAQs answered questions about whether an employer can reimburse an employee for their individual health insurance premiums.
The FAQs led to a lot of confusion about what qualifies as a reimbursement arrangement. In February 2015, a letter written by Harry Becker, Associate Chief Counsel at the IRS, was released. The letter emphasized that if an employer wants to drop their group plan they can do so and then provide additional, taxable compensation to employees to help pay for health insurance.
By working with a vendor who invests time and money in making processes compliant, you can offer employees money to use for individual health insurance.
Myth 3: I can contribute to my employees’ health insurance with tax-free contributions.
As outlined in the same FAQ mentioned above, tax-free contributions are illegal because they form a premium reimbursement arrangement. By forming a premium reimbursement arrangement, you are subject to the same rules group plans are under the Affordable Care Act and would ultimately not have a compliant benefits program.
Myth 4: Group plans are better than individual plans.
With the passing of the Affordable Care Act, individual plans must now include certain essential benefits like free preventative care, mental health services, pregnancy, maternity and newborn care, among others. As a result, plans are better and the individual market is much more attractive than it used to be.
The pricing of individual health plans is also similar to or better than comparable group plans. In fact, in some markets, our members have found plans that are up to 40% less expensive than comparable group plans!
Myth 5: I won’t be able to attract and retain talent if I don’t offer a group plan.
For many people the switch from a traditional group-based plan to an individual plan is a new concept. With this newness comes discomfort. But by moving employees to the individual market, you’ll provide them more choice, more assistance and more often than not, a better plan at a cheaper price.
By working with a vendor who provides free year-round assistance to your employees, you can provide a better and easier alternative to group health insurance, resulting in happier employees. Even better, the money you save on making the switch can be used to invest in your employees in other ways.