What is Small Group Insurance?
In the past few years, with the enactment of the Affordable Care Act, we have watched the individual/family health insurance market slowly become eclipsed in popularity by the much more stable small employer group insurance market. The premiums for these policies have remained far steadier and generally provide much more value in comparison.
Owners of small businesses in Texas have the option to offer health insurance coverage to both their employees and their immediate families. We, at Selected Benefits, offer a comprehensive selection of Group Medical Plans from most all of the major carriers in the area.
The insurance law in Texas defines a small employer as follows: any business with at least 2 employees, but no greater than 50 employees. This definition holds no matter how many hours per week they work, so if you do choose to offer health, dental and vision insurance, you must make it available to all eligible employees and their dependents which include those working at least 30 hours per week.
As a general rule, the insurance carrier will require a minimum of 75% participation of all eligible employees in order to write the policy. A health insurance company that chooses to offer small group health insurance in Texas must make it available for purchase at any time during the year. An exception would be if the employer cannot meet the requirement of 75 percent participation, the insurance carrier, at its discretion, can require that the employer has to wait until the next season of open enrollment to purchase the health insurance coverage. This “open enrollment” period will last from November 1 until January 31 of the following year (subject to change from the federal government).
Affordable Care Act Requirements
The Federal law currently requires all policies, including Texas small group insurance plans, to contain the 10 essential health benefits as defined by the Patient Protection and Affordable Care Act. Included in these are:
• Emergency services
• Maternity including care of newborns
• Prescription drug coverage
• Laboratory services
• Mental health and substance abuse to include counseling/psychotherapy
• Surgery and hospitalization
• Pediatric services to include dental and vision care.
• Preventive care, wellness services to include chronic disease management
• Outpatient care without first being admitted to a hospital
• Services/devices to help those with disabilities, chronic conditions or injuries gain and/or recover both mental and physical skills
Please note that Grandfathered plans, which are defined as those that were purchased before March 23, 2010, are exempt from the requirement of including the 10 essential health benefits.
Also, please be aware that certain types of insurance coverage in Texas such as short term medical policies, indemnity policies, so called limited benefit plans and specific disease policies such as critical illness or accident policies, are also not required to meet those same federal standards. These policies will not satisfy the federal requirement that you must have health insurance and could result in an IRS penalty.
Now some history of the Federal Tax Credit as it pertains to Health Insurance in Texas for Small Businesses….
When President Obama enacted the Affordable Care Act, commonly known as “Obamacare”, this offered federal tax credits to small businesses who offer to their employees, health insurance including dental and vision insurance. Unfortunately, that credit was only around for fiscal tax years of 2010 through 2013. The general idea was to make it less expensive for small business owners to offer their employees benefits before health insurance reform was fully implemented in tax year 2014.
This tax credit reimbursed small businesses that qualified, up to 35% of the annual premiums paid toward health, dental and vision insurance for its employees. For certain tax exempt entities, the tax credit was a maximum of 25%. Companies had to meet the following criteria in order to receive the full tax credit:
1) Less than 25 full time employees
2) The average wage, per employee, must be below $50,000 per year
3) Employers must contribute a minimum of 50% of the annual premium for employee coverage (dependents are excluded)
Those businesses that have less than 10 full time employees and that pay an annual wage of less than $25,000 can still qualify for the full tax credit. The federal tax credit will be reduced for those entities that employ more full time workers and higher wage earners until such a time when it is eliminated for those companies with greater than 25 full time wage earners at an annual salary that exceeds $50,000. These rules of eligibility are primarily based on the amount of full time employees a company has on the books rather than the total number of employees. This means that those businesses that employ part time workers can possibly still qualify for the federal tax credit even if they employed more than 25 individuals.