Group health insurance is health insurance sponsored by an employer. The employer usually pays a portion of the employees' premiums. It is typically offered to employees when they first join the company and can be changed when the policy renews, typically once per year. Members can also change when Qualifying Events (QEs) happen such as the birth of a baby, Marriage, Divorce, or death of a covered family member. Group policies are not required to cover all family members of a family. They can cover only the employee, or they can contribute to only the employee's costs which may make their dependents a good candidate for individual coverage which can now be addressed using the "Family Glitch" rules. Group renewals are typically once per year in January, but can be at any time of year.
Traditional Group policies can also have a major advantage in that some have the option to use a carrier's nationwide PPO Dr. network. Employees in different states (and different areas of a state) can be covered by a single group plan using this nationwide Dr. Network. Premiums for these plans are typically based on the employer's home base location.
Group policies can come in many forms. Traditional "Community Rated" Small Group plans are for employers with 100 employees or less in Colorado. Premiums are based on the collective losses of the entire Small Group market. ICHRA's (Individual Coverage HRA's) are relatively new and allow employers to pay for all or part of an employee's individual policy on a tax-free basis like a traditional Group plan. Large Group, which is over 100 employees in Colorado, can have the advantage of custom plan design and the possibly better premiums than Small Group. Self-funded, Partially Self-funded, and Level-funded plans are typically for larger employers but can go down to as few as 5 employees with some carriers. Their rates are more closely tied to the actual claims of the group. Self-funded (or Level-funded plans) may have lower premiums depending on the claims of the group and tend to be more volatile for smaller groups. Sometimes self-funded plans will "blow up" when surprise claims get high. ICHRA's can be a good alternative in these cases.
Small Group (under 100 employees in Colorado) are "community rated" and tend to be more expensive than individual plans, Large Group or Self / Level-funded plans in Colorado. Unless the company is very large, they will offer just one carrier to the employees, but that carrier may have several plan offerings from lower, less expensive coverage to more deluxe higher cost plans. This single carrier offering limits employees' choices (unless an ICHRA is offered), but HSA type and PPO Dr. Networks may still be offered at the employer's discretion.
Employers with over 50 Full-Time Equivalent employees are called Applicable Large Employers (ALE's) and are typically required to offer Group insurance to their employees. Employers with under 50 employees are not. ALE's are subject to penalties if they do not offer coverage or offer coverage that is deemed unaffordable. These employers are subject to the Employer Mandate or "Pay or Play" rules.
One ALE penalty, sometimes called the Part A penalty, is a fine of $2,880/yr per employee over 30 in 2023 that is not offered Group coverage.
Example: Employer with 100 employees does not offer group health insurance, they would be subject to a penalty of (100-30=70 X $2,880) $201,600 for the year.
A second penalty, sometimes called the Part B penalty, is $4,320/year for each employee that signs up through the state Exchange and gets a tax credit because the Group plan was determined to be unaffordable. Affordability for the employer penalties is similar, but not identical, to the calculations used to determine affordability for members to go to the Exchange and get a tax credit.
Employers with over 50 Full-time Equivalent employees, called ALE's, can determine if the Group coverage they are offering is affordable using special "Safe Harbor" rules to estimate an employee's household income. One Safe Harbor method is to use the employee's W-2 income.
An example of determining Group affordability is as follows:
Use the employer's lowest cost Group health plan for a specific employee (use lowest cost Silver Plan on the Exchange for ICHRA's), lets say in this case the "Employee Only" cost is $250/month.
The employee has a W-2 income of $25,000/yr
Using $25,000 multiplied by 9.12% (for 2023)/12 months = $190/month (This is the most that employee can pay for a plan to be considered affordable.)
In this case the employer's group plan would be considered unaffordable (The $250 cost is higher than the allowed $190/month) and the member could go to the exchange and possibly get a plan with a tax credit.
The employer may be subject to a penalty if the employee goes to the exchange and gets a tax credit.
The employee could also enroll their family if the coverage was unaffordable, not offered, or there were no employer contributions to the family's costs being made. This option for family members to participate in the Exchange was recently fixed by Family Glitch rules. (Family Glitch)
Call us with any questions as this can be a tricky area for both employer and employee with significant financial impact.
Individuals and families can acquire individual policies either by purchasing them through Connect for Health CO or directly from an insurance provider.
Those who meet certain household income requirements may be eligible for a tax credit to help cover their premiums. However, individuals who have access to an affordable group plan are not eligible for this tax credit. In the case of dependents whose coverage is considered unaffordable under their employed family member's plan, they can now apply for a tax credit plan through Connect for Health CO due to the introduction of the "Family Glitch" rules.
Typically, individuals with affordable employer-sponsored coverage would not need to obtain an individual policy.
ICHRA's are a new type of Group policy using ACA approved individual policies and Medicare in which the employer and employee have the same tax advantages as traditional group plans.
Medicaid is a government-sponsored health insurance program designed to assist lower-income individuals. In certain scenarios where Medicaid and a group plan are both applicable, the group plan takes precedence and serves as the primary insurance.