Offering Health Insurance to Employees: An Implementation Guide

Health insurance remains the most popular employee benefit, with over 70% of private companies offering it. So if you’re thinking about offering health insurance to help attract and retain workers, you probably have lots of questions about how to get started. That’s natural since there are so many factors to consider when designing your employee benefits.

Complete Payroll Solutions is a health insurance broker to thousands of small and mid-sized companies. We know health insurance can be an important benefit for your workers, but it can also be overwhelming to understand all the rules and requirements when it comes to starting a group plan. To help you understand what’s involved in implementing a health insurance benefit, here we’ll discuss:

• Do I have to offer health insurance to employees
• Do I have to make health insurance available to all employees
• Can I start a plan at any time during the year
• What’s involved in setting up a health insurance plan
• How long does it take to implement a health insurance plan

After reading this article, you’ll have the information you need to decide if offering health insurance to your workers is the right choice for your business.

Do I have to offer health insurance to employees?

Whether you have to offer health insurance to your workers depends on the size of your business.

• Small Employers: If you have less than 50 full-time equivalent employees, you’re not required to offer health insurance. 
• Large Employers: If you have 50 or more employees, you technically don’t have to provide health insurance; however, if you don’t, the Affordable Care Act (ACA) requires you to pay a tax penalty. In 2020, the penalty amount is $2,750 for each full-time employee (less the first 30 employees) if you fail to offer coverage to 95% of full-time workers and their dependents and any worker who receives coverage from an ACA marketplace.

There may be other situations that may require you to offer health insurance. For example, if an employee’s employment contract or union agreement guarantees it.

However, even if you’re not required to provide health coverage, you may want to offer it on a voluntary basis for a number of reasons:

1. A Competitive Benefits Package: In today’s tight labor market, prospective employees will be looking at other jobs and will want to see how your benefits stack up. Since the majority of companies offer health benefits to at least some of their workers, providing coverage will keep your program competitive.
2. Tax Savings: As an employer, your contributions for group health insurance are tax-deductible and you’ll pay less in payroll taxes. Employers with fewer than 25 employees who provide health coverage may also be eligible for a Small Business Health Care Tax Credit.
3. Greater Productivity: Health coverage encourages employees to stay on top of preventative care and, according to the CDC, there’s a direct link between health and productivity. As you might imagine, healthier employees are less likely to call in sick.

Do I have to offer health insurance to all employees?

If you offer an employer-sponsored group health plan, generally, all of your full-time employees must be given the opportunity to enroll. That’s because, under the ACA, if you offer health insurance to full-time employees, you must offer it to all similarly situated full-time workers.

However, you can exclude part-time – those who work on average less than 30 hours a week – and seasonal employees from participation. You can still offer health insurance to part-time and seasonal workers if you want to and, if you do, you can create your own requirements for participation. For example, you may decide that employees only qualify for coverage if they work at least 10 hours a week. At Starbucks, hourly employees are eligible for benefits, including health insurance, once they work 240 hours during a consecutive 3-month period.

Can I start a plan at any time during the year?

If you decide to begin offering health insurance to your employees, you can implement a plan at any time of year. Since health Insurance plans renew annually, many employers like to align their plans with the calendar or fiscal year, but it’s not required. In fact, it can be advantageous to have the plan start on an off-peak month to avoid the rush of renewals at peak times of the year and can make the process easier.

No matter when you start a plan, employees may have a waiting period between when they enroll in the plan and when coverage actually starts. For example, workers’ coverage may begin the first day of the next month.

What’s involved in setting up a health insurance plan?

The first thing you’ll need to worry about when offering health insurance to your employees is decide on the plan design. To determine what you want to make available to workers, you’ll want to take into account several considerations, including:

• Budget
• Employee population
• Industry
• Geographic region

You’ll also want to benchmark benefits against the market to make sure what you offer is competitive. It can also be helpful to survey your employees to see what they would consider good coverage and what is “affordable.”

After you decide on what will work for you and your employees, you’ll need to take several steps:

1. Get quotes. Start with an accurate census of your eligible employees. That means collecting the name, age, location, and other demographic information about each worker and their dependents. With this data, you’ll be able to solicit quotes for coverage.
2. Review your options. Whether you’re handling your benefits on your own or working with a health insurance broker, you’ll want to review the quotes to see what’s the best option for your needs and budget.
3. Hold open enrollment meetings. You’ll first want to educate employees about their options, either in-person at group meetings or virtually, so they can understand the plans and pricing and make an informed decision about their health insurance.
4. Submit applications to the carrier. Whether employees enroll with paper applications or online, you’ll want to make sure all required documents are submitted to the health insurance carrier at least 2 to 3 weeks prior to the effective date of the coverage – the sooner the better. This allows time for underwriting, plan setup with the insurance carrier(s), and the creation of ID cards. 
5. Distribute materials. After policy approval, your employees will begin receiving items like ID cards directly from the insurer. But you’ll also need to distribute some documents and notices to workers with plan information to be compliant with ERISA as well as details on how to set up payroll deductions.

If I offer health insurance, how long does it take to implement a plan?

While every implementation is different, on average it can take 60 to 90 days to get everything set up from census collection through ID cards so you’ll want to start well in advance of your plan’s desired start date. The exact timing will depend on a number of factors, such as the required deadlines from your insurance carrier so it’s important that you pay attention to the dates involved to get your plan established in a timely manner.

How to Best Implement Health Insurance at Your Company

There are a number of steps involved in starting a health plan for your company. And getting them right is essential to the success of your new benefit offering.

Since there is so much to think about when offering health insurance to employees, you may want to consider using a health insurance broker. A broker can help you get the best coverage at the most affordable price and also guide you on ever-changing compliance and administrative requirements.

If you decide to work with a broker, you may be wondering if Complete Payroll Solutions could be a good fit for you. We can be the ideal partner if you: 

• Already have your payroll with us and are looking for a one-stop-shop approach for all of your workforce needs
• Want hands-on access to a local team of licensed and experience insurance professionals
• Prefer an independent broker who works with all available carriers for the most options 
• Are interested in streamlined technology that can free you up for more strategic tasks

Still wondering if a broker is the right approach for you? Read our next article on how to choose a health insurance broker.