When to avoid small business group health insurance

Employer-based group health plans are usually the preferred method of delivery of health care financing because of current laws and market efficiencies. But there are cases where individual insurance is a better option.

Employer-based employee benefit plans are usually preferred way to provide health insurance and supplemental health benefits to employees. In an ideal setting, group health insurance allows for the highest quality coverage to be made available at a competitive price through a combination of employer contributions and voluntary employee salary reductions. The use of common employee benefit plans makes the health plan a pre-tax benefit which significantly reduces the net cost.

However, there are exceptions. Certain work environments do not provide a suitable setting for employer-based insurance. The following list provides examples of situations where group health plans will not work. In those cases individual insurance exchange is a better option.

1. There is a high level of tension or distrust between the employer and employees. Certain industries are notorious for unsuccessful employee benefit plans and, unfortunately, that problematic climate is likely beyond our immediate control.

2. The employer does not offer or contribute to at least a basic health insurance plan. Most group health insurance companies require that the employer pay a portion of the cost in order to financially stabilize the insurance policy and deter adverse selection.

3. Payroll deduction accounting is not available. While we are able to help with the set up qualified benefits under any payroll system, the fact is that some employers do not use a payroll accounting system and other that do use a payroll system do not maintain a good working relationship with the service provider.

4. The employer is unwilling to pay the cost of setting up a pre-tax qualified plan to reduce benefit costs for the employees. The initial start-up cost is typically $300 at Freedom Benefits and similar additional expenses recur each year.

5. Management does not understand the benefit plans and does not take the time to learn how they work. An effective benefit plan relies on endorsement and a mentorship type environment within the workplace.

6. The workplace does not allow time and place for employees to learn about benefits. This is the underlying reason that group health plans do not succeed in some industries.

When one or more of these conditions are present, a group health plan will not likely be successful. In those cases the employer should focus on steering employees to a health insurance exchange and may want to consider paying for health benefits through the regular paycheck.

An employer may wish to consider any of the voluntary benefit programs offered by Freedom Benefits that combine individually selected health insurance with the tax advantages of group health plans.

 

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