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cost-effective alternatives for my health benefits.
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Q. What are the basics of group coverage in Louisiana?
A. It takes at least 2 people to form a group eligible for health insurance in Louisiana. If an employer pays 100% of the premium, then 100% of the eligible employees must be covered. Employees are normally considered to be eligible for coverage if they are a full-time employee, are actively working, and have served any required probationary period.
If an employer pays only a portion of the monthly premium, then 75% of the eligible employees must participate in the plan. This is done to avoid adverse-selection, a situation where only the sick employees would be part of the plan.
Insurance carriers must place on file with commissioner of insurance every year their detailed plan for rating different classes of business groups. Louisiana law allows insurers to base their rates on the following factors: Age, gender, industry, geographic area, family composition, group size, tobacco usage, and the plan of benefits.
Insurance companies are not allowed to base their group premium rates on health status, claims experience, or duration of coverage.
There are also limits on how often and how much an insurer may raise your rates. You are guaranteed a stable rate for the first 12 months of your policy. Of course, an insurance company is allowed to increase your premium if you add people to the group.
Advantages of Group Coverage
- Guaranteed issue. There are no "waivers" or rate-ups. Coverage for any pre-existing condition may be withheld until after 12 months, but there are strict state guidelines to insure fair treatment.
- Stable premiums. The state has guidelines that govern how much an insurance company can raise your rates.
- Cancellation protections. An insurance company cannot drop your group whenever they want to. The only way they could possibly cancel your coverage is if they cancel every group in the same business class in the whole state.
- Employee benefits. Providing good benefits to your employees helps attract and retain the best.
- Tax write-off. An employer’s portion of the premiums is a bona-fide business expense.
Disadvantages of Group Coverage
- Participation requirements. Many small businesses have trouble getting 75% of their employees interested in contributing to a health insurance plan. Many times this is because they have a spouse that already has coverage.
- High cost. Many people believe that group insurance coverage is less expensive than individually-owned plans, but this is generally not true. The state places so many requirements and mandates on group coverage that it has gotten fairly expensive.
- Entrapment. Because group insurance is guaranteed issue, many people with health problems are stuck in jobs they don’t like just to be able to keep the insurance. This is especially true of workers approaching retirement. At age 62 you can get your monthly Social Security benefit and retire early, but you can’t get Medicare until age 65. Health insurance for those three years can be very expensive.
Q. I can’t get 75% of my employees interested in a plan. What are my options?
A. What you choose to do may depend on why you want to provide these benefits to your employees in the first place. If you are trying to provide a benefit package that would help you retain your good employees, here are a few options.
- Encourage your employees to take out their own HSA (Health Savings Account plan). They would own the health insurance policy, but you could contribute to their savings account, which would help them pay their annual deductible. As long as you contribute comparably to the accounts of every employee that has an HSA, you meet the government’s requirements and your contributions are a tax-deductible business expense for you. Contact us for more information on this option. Also see our HSA page.
- You might provide a smaller limited pay-out plan to all of your employees. These types of plans are less expensive and may make it possible to cover 100% of your group very cost-effectively.
- Offer to be a clearinghouse for their premiums. Have a licensed insurance professional come and help design health insurance plans for your employees who want them and offer to deduct their premiums from their paychecks and you pay the insurance company for them. Many insurance companies allow this and a lot of employees like it. You still have an appearance of helping your employees get their needed benefits.
- You may have to consider going to a 100% group plan where all of your employees are covered and you pay 100% of the premiums. You could pay for your employees only and ask them to pay for any additional family members to be insured. At least you would have a business-expense tax write-off.
- If you are mainly trying to get guaranteed coverage for yourself or any employees with otherwise uninsurable health conditions, offer some supplemental insurance. Most supplemental plans don’t meet the definitions for group so they aren’t subject to the participation rules. They are usually voluntary and the employee pays for them.
Q. Should I make supplemental insurance available to my employees?
A. Supplemental plans usually make sense in the right situation. Here are some types of coverage that might be considered supplemental:
- Term life insurance
- Disability (short-term and long-term)
- Accident medical expense (pays first-dollar benefits for accident claims)
- Indemnity plans (pay a set dollar amount for specific events, e.g., overnight stay in the hospital, fracture, ER visit, etc.)
- Critical illness plans (pay specific dollar amounts when diagnosed with life-threatening critical illnesses.)
Offering these plans to your employees shows that you are trying to provide the very best choices for them and their care.
Q. What are the latest trends for employers providing health benefits?
A. The trend getting the most attention right now is asking employees to contribute more to their own health care expenses. This is normally done by increasing deductibles and copay options. Doing this has a substantial effect on monthly premiums.
The next hottest trend goes hand-in-hand with the first. This trend is to make Health Savings Account qualified, high-deductible health plans available. If you are already moving towards a high-deductible plan, why not give your employees the benefits of a tax-free savings account to go with it. Over one million new
HSA plans are expected to be issued in 2006. Please keep in mind that not all high-deductible plans qualify for the Health Savings Account. See our
HSA page for more information or
contact us for personal assistance.
