If you have a business, offering benefits is imperative if you want to keep your employees and attract other quality employees. In this blog entry, I will address the most common questions that I get regarding group benefits, explain some plan strategies and options and I will also tell you what to expect during the quoting process.
MY BUSINESS IS SMALL. HOW MANY EMPLOYEES DO I NEED FOR A GROUP PLAN?
Let’s start with this….in Texas, you only need two Full Time Eligible (FTE’s) to establish a group. This cannot be a husband and wife. It can be one W2 employee and the owner of the company. It can be one 1099 contract employee and a W2 employee and there may be some exceptions to these rules depending on the carrier. As a general rule of thumb, just know that you can have a group plan with as little as two FTE’s.
CAN I OFFER BENEFITS TO 1099 CONTRACT EMPLOYEES?
A relatively recent development is that 1099 contract employees can participate in group benefit plans but there are some restrictions associated with this. First, you must offer benefits to all 1099 contract employees if you are going to offer benefits at all. Second, you should have at least one W2 employee on the plan but each carrier is different so it is possible that a carrier would take a group of all 1099 contract employees IF benefits were extended to all of them.
I DON’T EVEN KNOW MY BROKER AND DON’T EVEN KNOW IF THEY ARE STILL IN BUSINESS
So what if you have a plan in place and you have a broker/agent but you don’t hear from them or even know if they are still in business? Well, if you have a plan in place that has been on auto-renewal each year, it is very possible that your plan needs have changed if your business has changed. It is also very possible that the insurance market changes that have taken place over the last few years have created a better option for you and your company but since you are on auto-renewal, you have not explored those options.
If you have a broker/agent that is M.I.A., you can complete a “Broker of Record Letter” and send it to your carrier to change brokers. This will give your new broker access to much needed information which will help them in determining the best plan for your company and quoting and installing a new plan.
WE WERE QUOTED ON A PLAN A WHILE BACK BUT WE JUST COULD NOT AFFORD IT
If you were quoted on a plan, we would like to review that information because things are changing all of the time. Did you look at getting just one plan for everyone in your company? Did you look at dual option or multiple option plans to give your employees some choices? Did you look at partially self-funded plans? Did you consider offering some voluntary benefits to help your employees manage risk? There are strategies that can help employers control costs while still offering a rich benefit package to their employees. This is why it is important to have an experienced and informed broker working for you.
WHAT IS A PARTIALLY SELF FUNDED PLAN? SOUNDS EXPENSIVE
Partially self-funded plans are actually quite a bit less expensive than traditional group benefit plans because the employer is assuming more of the risk. Basically, they work like this….
The employer pays their monthly premiums just as they would with a traditional benefit plan but a portion of that premium is put into a separate account to satisfy claims. As claims come in, that money is withdrawn to cover those claims. A portion of that premium is also used for plan administration by the carrier and for an umbrella style policy to cover excessive claims. At the end of the plan year, if there is any money left in the claims account, some of it is rebated to the business owner.
IF CLAIMS EXCEED THE CLAIMS ACCOUNT BALANCE, WILL WE HAVE TO PAY MORE?
As part of a partially self-funded plan, excessive claims are covered by the plan. So, if you have a million dollar claim, this other umbrella policy will kick in and cover those claims.
CAN ANYONE GET A PARTIALLY SELF-FUNDED PLAN?
Partially self-funded plans do have stricter underwriting guidelines. Each employee would have to fill out an application and each application will be evaluated to determine if the group has a disproportionate amount of risk for the carrier. Not all groups are accepted and you won’t know that until you apply. This can be problematic because gathering all of that information and then being declined can create some challenges for businesses. This is why we will also quote some traditional options along with these partially self-funded plans. This way, if a partially self-funded plan is not an option, we can install a traditional plan without delay.
SO HOW DO I GET A QUOTE?
It used to be the case that a simple census could be completed where employers just designated that they would cover a certain percentage of the premium and they had a certain number of employees to cover. They would also designate that they would cover the employee and their dependents and little or no underwriting was done. Times have changed and much more information is required to quote group plans. This is why some employers just stick with their current plan because it can be a bit of a hassle to change. However, if you could save money and have better options which are more suited to your company, it would be wise to consider changing benefit offerings. Here is a chart that explains what is needed for a quote and a brief explanation for each item.
Please give us a call at 281 907-3989 if you are considering making a change to your group benefits or if you are considering offering group benefits for the first time.
We would love to help.
Jon P. Bouche – President
Lifeline International LLC