Group Health Insurance is the most crucial part of a benefits package for obtaining and retaining the kind of employees you are relying on to help grow your business. It is no secret that in our current environment, it has become a challenge for small employers in Illinois to maintain affordable health coverage for their employees due to ever increasing costs.
In order to be considered for group health coverage, most carriers will require that there be a minimum of one or two W-2 wage earners (other than the owner and spouse). Some companies will require at least 2 people to enroll; however, not all carriers are alike and many have changed the rules to allow 1099 employees to be considered. The rules and regulations of small groups are like the weather in Chicago - wait a bit, and it will change! So if you have questions about whether or not your company qualifies, contact us for a quick phone call.
NOTE: A sole proprietor with no employees is not eligible for a group health plan.
At the time of applying for group coverage, insurance carriers require documentation to show that employees are on payroll, earning regular wages and working at least 30 hours a week. Typically, the insurance carriers asks for the quarterly wage and tax report that is filed with the state of IL. In the case of owners not on payroll, they may require a copy of your tax return showing profits, such as a K-1 or 1120. A health insurance carrier reviews these before approving the group and may audit each year at renewal time by requesting verification of full time eligible employees and a copy of the most recent Quarterly UI-3/40 form filed with the state of IL. If an audit occurs and the health insurance carrier sees that participation is not met, they will usually give a 30 day notice to the employer to add additional employees to meet the requirement or the group will be terminated.
The following items are also necessary for compliance:
COBRA or IL Continuation:
COBRA (Consolidate Omnibus Budget Reconciliation Act of 1985) requires businesses to extend their group health insurance coverage to an employee who leaves or is terminated for reasons other than cause. The employee must pay the premium to the employer, who in turn includes it with his monthly payment to the company. Terminated employees can keep the COBRA coverage for a maximum of 18 months. (Other rules apply for death and divorce, which offer 36 months of coverage.) The Employer is not allowed to charge more than 2% of the premium for administration costs; in many cases, companies do not charge any more than the health premium.
COBRA is the Federal Law that applies to companies with 20 or more employees.
In Illinois, companies with LESS THAN 20 employees, or two to nineteen employees, fall under the Illinois Continuation laws, also referred to as Mini-Cobra. Employer must offer the option to continue health insurance for terminated employees for up to twelve months after termination. The coverage must also be offered to the employee’s spouse and child. Similar to COBRA, the Employer must offer the coverage within in 10 days of termination, and they do not have to pay for the coverage. Employees choosing to continue must send a check for the premium to their Ex-Employer. The employee remains on the group bill until the end of the 12 months or until they stop paying.
While there is no requirement to provide group health insurance if you are an employer with UNDER 50 FTE (Full Time Equivalent employees), if you do offer a group plan, an employer must offer coverage to ALL eligible, Full Time employees and cannot CARVE OUT coverage for a select group of employees ie owners and officers. When the employer pays 100%, all employees must enroll unless they sign a waiver that they have other coverage. The majority of Employers do require employees to contribute some amount toward the health insurance premium; if employees choose not to enroll, they must complete an application and WAIVE coverage., indicating that their are either covered by other insurance (spouse ER plan, Medicare, Medicaid, Individual policy) or have no other coverage.
Premiums paid by Employees CAN BE tax deductible IF an Employer sets up a Premium Only Plan (POP) with the proper documentation, filing, and annual testing. These plans are not set up by the insurance companies or most brokers. Employers might be able to get assistance through their payroll service or talk to a T.P.A. (Third Party Administrator) to set one up for a fee.
Premiums paid by the Employer are Tax Deductible unless for the owner. Depending on how the business is set up (S Corp, LLC corp or LLC partnership), owners may not be able to deduct premiums. We recommend that you consult with your accountant to discuss your situation.
The health insurance law called ACA (and referred to by some as Obamacare) has 2 mandates:
1) individuals must purchase health insurance beginning Jan 1, 2014 and
2) Employers with 50 or more Full Time Equivalent (FTE) Employees must offer health insurance or pay a penalty of $2000 per employee. Early on, the government announced a delay of the Employer Mandate by one year, but beginning on January 1, 2015, the Employer mandate will be in force and business must comply or pay a penalty.
Today, more than ever before, employers need to understand the requirements in offering a group plan. Health insurance is becoming more complicated every day. At CB Health Insurance , we are committed to educating employers and helping you to streamline your plans during these difficult economic times.