Small Business Health Insurance for Employees

If you own a small business and are considering purchasing a group health insurance policy for your employees, you must become familiar with the most basic and common rules and regulations regarding the implementation of such plans. Insurance is regulated at the state level, resulting in minor differences from one location to the next. However, the vast majority of states have adopted similar laws affecting insurance as an employee benefit.

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Employee Eligibility

Group health insurance must be offered to every eligible employee in your company. It is against the law to selectively exclude specific individuals from participating or enrolling in the plan. An eligible employee, as defined by each state’s insurance department, is typically anyone who works for the company an average of at least 20 to 30 hours per week.

Participation Requirements

If a large enough percentage of all eligible employees decline participation in your health insurance plan, the entire group may be deemed ineligible. Most states require a minimum of between 50 and 75 percent participation. However, those employees who decline enrollment because they have coverage elsewhere do not count against minimum participation requirement calculations.

Mandatory Contributions

In most states, employers are required to contribute toward the cost of health insurance for their employees. The minimum mandatory contribution varies, and is typically between 10 and 50 percent. Many states only require employers to base contributions on the cost of coverage for the single employee, regardless of whether or not an employee chooses to cover dependents, as well.

COBRA

Small businesses that provide group health insurance to more than 20 employees are subject to federal COBRA regulations, in addition to insurance laws mandated by the state. COBRA regulations require employers to follow strict guidelines regarding the communication of information and the continuation of coverage for terminated employees. Failure to comply with COBRA regulations may result in significant penalties and fines.

References

"Bloomberg Businessweek"; The Big Small Business Health Insurance Problem; Scott Shane; September 2010
United States Department of Labor: FAQs for Employees About COBRA Continuation Health Coverage
National Association of Health Underwriters: Consumer Guide to Group Health Insurance

Resources (Further Reading)

Health Insurance In-Depth: 10 Essential Ingredients of a Good Health Insurance Plan

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This article is a Twisted Nonsense Exclusive! (04/04/2011)