Traditionally, group health plans have been considered an important perk of a job. You offered group plans because there was no other way for your employees to be guaranteed affordable health insurance without you offering it. It was the right thing to do.
But the market and laws have changed. Some people now qualify for government tax credits and no one can be denied coverage for a pre-existing condition. Are group plans still the best option?
A LOOK AT TAX CREDIT ELIGIBILITY
The basis for determining tax credit eligibility is based on a person’s income, family size, zip code and whether or not their employer offers a group plan. Simply put, if you offer your employees a group plan, they aren’t eligible for government tax credits.
Even if you contribute to your employees’ group plans, some employees may now be eligible for a greater amount of money in government tax credits than you provide them towards their group plan. In this case, you might actually be hurting your most needy employees by preventing them from accessing money from the government.
As an example, we’ll consider a mock employer, Indianapolis-based Smith Vision Clinic.
SMITH VISION CLINIC’S CURRENT SITUATION
Smith Vision Clinic has 10 employees. Two employees have had health problems over the past few years, driving the group rates up and hurting all employees’ premiums.
Smith Vision Clinic currently offers its employees and their families a group plan with a $6,000 deductible and a $550 monthly premium. The vision clinic pays for half of the employees’ premiums, so the employees are responsible for $225/month.
Brenda Jones is an employee at Smith Vision Clinic. She is a 32-year-old single mother of one making $30,000 a year. She is on the clinic’s health plan.
If the vision clinic stopped offering its group plan, Brenda would qualify for about $320.90/month in government tax credits. With this money, Brenda could purchase a Silver plan with better coverage than her current plan for $172.70/month, saving her over $50/month — a significant amount of money for an individual with a salary of $30,000. By providing a group plan, Smith Vision Clinic is preventing Brenda from accessing this money savings and better coverage.
We’re seeing an increasing number of employers in situations like Smith Vision Clinic. When we show these employers the numbers, dropping the group plan is the obvious solution to help tax credit eligible employees. But what about employees who aren’t tax credit eligible?
PROVIDING MONEY FOR EMPLOYEES TO PAY FOR INDIVIDUAL HEALTH COVERAGE
When you drop your group health plan, you don’t have to abandon your employees who aren’t eligible for tax credits. By sending your employees to a health insurance marketplace like Gravie, these employees can shop for a plan in the private market that meets their needs.
You give these employees money on top of salary to purchase individual coverage and then allow them to choose the level of coverage appropriate for their family. You also give your employees access to a team of expert advisors who are available year-round to answer any health insurance related questions.
However well-intentioned, you might actually be hurting your employees by offering group health insurance. By dropping your group plan, you could provide a less expensive, better and easier option.