The Affordable Care Act (ACA) changed the group health insurance marketplace by creating two separate product options for small group health insurance plans - community rated health plans and self-funded health plans.
Community rated health plans are not subject to any medical underwriting, the rates for the policy are based on the age of the employee, where they live and the ages of any covered dependents. Since the rates are published and not subject to change these plans are a good choice for any small business with a workforce that has members with health conditions that are likely to result an a high amount of claims paid.
Self-funded plans are subject to medical underwriting and can offer more affordable premiums than community rated health plans. These plans are a good choice for small businesses with a healthy workforce. The extent of medical underwriting is based on the group size, typically employers with ten or more employees need to only submit a census of their employees including full name, gender, dates of birth and home zip code for all family members. Groups with less than ten employees may need to submit health questionnaires to determine their approved rates for a self-funded health plan.
In addition to premium savings employers can also receive a premium credit when their actual claims paid are less than the amount set aside to pay claims. Self funded plans include a claims fund that is funded with a portion of the monthly health insurance premium, when the claims fund has a positive balance at the end of the plan year a percentage of balance is credited to the employer account. Employers must renew their policy in order to receive the claims fund credit.
It's important to know that a self-funded plan includes stop loss coverage, so if claims are high the employer will not be responsible for any additional costs other than the health insurance premiums.
Subject to state mandates
No money back
Financial protection
Community rated
Generally not subject to mandates
Opportunity to get money back
Financial protection
Monthly costs reflect expected claims
Learn more about the details of self-funded health insurance plans. .
What differentiates one policy from another is the cost sharing between the insured and the insurance company.
The Affordable Care Act (ACA) introduced metal level tiers for health insurance plans. The four metal tiers of health insurance plans are bronze, silver, gold and platinum. The insured member will pay a greater percentage of their medical expenses with Bronze plans and an incrementally less percentage amount with the Silver, Gold and Platinum plans.
There is a correlation between metal tiers and maximum out of pocket limits. Bronze and Silver metal tier plans typically have the higher maximum out of pocket limits, while Gold and Platinum plans typically have lower maximum out of pocket limits. Remember, maximum out of pocket limit refers to the amount the insured member must pay in out of pocket medical costs per plan year before the insurance company pays 100% of the remaining medical expenses. For 2020 the maximum out of pocket limit for an ACA complaint plan is $8,150.
This table shows the metal tiers and the correlation between insured cost sharing, maximum out of pocket limits and policy costs.
| Metal Tier | Insured Cost Share | Common Maximum out of Pocket Limit | Policy Cost |
|---|---|---|---|
| Bronze | 40% | $8,150 | $ |
| Silver | 30% | $6,500 | $$ |
| Gold | 20% | $5,000 | $$$ |
| Platinum | 10% | $3,000 | $$$$ |
Employers need to budget their financial obligations with a group health plan. By offering two or more health plans the employer can base their contributions off of a one of the plans, typically a lower cost plan. Employees can then have the option of paying more for policy with lower cost sharing, or pay less for a health plan with greater cost sharing.
The Small Business Health Options Program (SHOP) helps small businesses provide group health insurance to their employees. Employer's can earn a tax credit worth up to 50% of their employer premium contribution.
To be eligible for SHOP coverage in Georgia the employer must meet the following guidelines.
In Georgia employers may enroll in a SHOP health plan with Kaiser Permanente to be eligible for the small business tax credit. Learn more about the Kaiser Permanente HMO health plans in Georgia. To get quotes and enroll in a SHOP qualified health plan please contact us.
Learn more about the details of SHOP health plans. .
An HSA offers the option to fund a bank account with tax free account to pay for qualified healthcare expenses.
In order open and fund an HSA you first must be insured on an HSA qualified high deductible health plan (HDHP). HDHP's have all non-preventive medical expenses subject to a specific minimum deductible first before any claims can be paid by the insurance company. Only preventive care services such as an annual routine physical exam is covered at no charge without having to meet the deductible. HDHP's have both a minimum deductible and maximum out of pocket limit depending on the type of coverage, self-only or family coverage.
Once an employee is insured on a HDHP they can open and fund their HSA. HSA's are not part of the HDHP, but rather an account established and administered by a bank - similar to checking account. The employee contributions from their paycheck are deducted pre-tax, thus lowering their taxable income.
Employer contributions are a tax deductible business expense - just like employer paid health insurance premiums. HSA's are subject to maximum contribution limits depending on the type of HDHP coverage, either self-only or family.
This table displays the minimum deductible and maximum out of pocket limit on a HDHP along with the maximum HSA contribution limit for 2020. These limits are updated annually by the IRS.
| Coverage Type | HDHP Minimum Deductible | HDHP Maximum out of Pocket | HSA Contribution Limit |
|---|---|---|---|
| Self-only | $1,400 | $6,900 | $3,550 |
| Family | $2,800 | $13,800 | $7,100 |
The cost of healthcare can be calculated by adding the cost of your health insurance premiums plus your out of pocket costs when you need to seek healthcare. With an HSA you can then subtract the tax savings on the contributions into your HSA to pay for your medical expenses.
HSA qualified HDHP's have lower premiums than comparable copay plans with similar deductibles. The IRS limits the maximum out of pocket for HDHP's, in 2020 the maximum limit is $6,900, while the maximum out of pocket for ACA plans in 2020 is $8,150 - that's a difference of $1,250!
Employers can establish a benefit agreement to match a specific amount of HSA contributions made by the employee. This encourages employees to contribute to their HSA in order to obtain the employer HSA match. Employees experience greater appreciation and satisfaction with their employee benefits when they have HSA funds available to pay for out of pocket medical expenses.
The employees HSA balance rolls over from year to year so they will never lose their HSA contributions. Unlike health insurance premiums, HSA contributions remain available for the employee to use on future healthcare expenses.
HSA funds can be used to pay for any qualified healthcare expense as detailed in IRS publication 502. Non medical HSA expenses include dental, vison, lasik eye surgery and orthodontia expenses.
Learn more about the details of Health Savings Accounts and high deductible health plans. .
An HRA is an employer funded health reimbursement account (HRA) that can be used to pay for eligible medical expenses.
Employer establishes the HRA reimbursement rules by deciding which expenses are to be reimbursed. The HRA is typically administered by an insurance company or third party administrator to pay the designated claims. Employer makes an initial deposit then replenishes the HRA as needed.
A Health Reimbursement Arrangement is a smart way to offset the rising costs of health insurance while still maintaining a benefit package that will be attractive to your employees. Premium savings are provided with the higher deductible health plan, so both the employer and employee will pay lower monthly premiums. If a member has a deductible expense that the HRA plan reimburses then the employee's out of pocket costs are lower than what the actual health plan benefits would have been without the HRA.
Employers will save on their share of the monthly premiums, these savings can be used to fund the HRA. The break even point for the employer is calculated by the premium savings divided by the amount of the deductible reimbursement. For instance, if the employer premium savings with the higher deductible health plan is $20,000 and the maximum reimbursement amount per employee is $2,500 then the employer would break even after reimbursing up to eight employees. ($20,000/$2,500 = 8). Any reimbursement amounts less than $20,000 would be a savings and over eight would require additional employer funding.
Learn more about the details of Health Reimbursement Accounts. .
