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Buying Tips: Small Business Health Insurance and Section 125 POP Plans
The following article offers important information for employers shopping for small business health insurance and Section 125 POP plans.
As a small business owner, you naturally want to provide health insurance to your employees, but the cost of doing so is quite high. In fact, Bankrate.com reports that less than half of small business owners offer health insurance benefits, compared with almost all of the large businesses. If you’re going to offer insurance, you want to shop around and compare plans to make sure that you’re getting the best deal. Consult with your employees to learn their needs and try to find insurance that meets those needs.
Step 1
Get rate quotes from all insurance companies in your area. You can do this by contacting the insurance companies directly or you can talk to an insurance broker. Your rate quote should include a list of the plan details, which you can then use to further compare insurance plans. A lower rate, for example, may have fewer benefits.
Step 2
Compare the benefits offered by the insurance company. Look to see the details of the plan coverage. For example, some plans may not cover hospital stays, prescription medication or infertility treatment. If the plans that you are comparing offer similar benefits, then you know that you are really comparing apples to apples.
Step 3
Look at the deductibles, which are the out-of-pocket expenses that your employees will have to pay for medical insurance. For example, if the deductible is $2,500, then your employee will have to pay $2,500 before her insurance will start paying for treatment. In general, the higher the deductible, the lower the monthly premium.
Step 4
Ask about co-pays, which are the amount of money that your employees have to pay to visit the doctor or get prescription drugs in addition to the deductible.
Step 5
Include dental and vision benefits. Most small business insurance plans do not offer dental and vision benefits, but you can purchase them as add-on benefits.
Tip
- You can ask employees to pay for a portion of their insurance, which allows you greater flexibility in choice. For example, you could offer to cover the cost of a basic health insurance plan, but offer the opportunity for employees to choose a better plan by paying a bit extra.
Warning
- You may have to cut out some benefits to make health insurance more affordable. Talk to your employees to find out their must-haves so that you know which types of benefits you can cut. For example, if your employees are young, they may not need prescription drug coverage because they can usually get occasional prescriptions, such as antibiotics, for less than $10 from the pharmacy. This could be a great way to save on costs.
About the Author
Maggie McCormick is a freelance writer. She lived in Japan for three years teaching preschool to young children and currently lives in Honolulu with her family. She received a B.A. in women’s studies from Wellesley College.
Group Health Insurance Plan Documents for Section 125 pretax and Wrap SPD Plans:
The Section 125 Premium Only Plan, or POP Plan, is an essential part of any employer group health insurance and ancillary benefit program.
Section 125 is the part of the Internal Revenue Code that allows employees to purchase health insurance and other ancillary benefits tax free. A Section 125 Plan legally allows your employees to pay their portion of medical insurance premium and other ancillary benefits premiums using pretax or tax-free dollars.
Core Documents provides employers with everything they need to establish an IRS- and DOL-compliant Section 125 POP Plan for only $99.00 in PDF version emailed to you as soon as your document is completed. For $149, you can receive the Deluxe Binder option that includes the PDF email version ASAP plus and a printed plan document in a 3-ring binder shipped via Priority Mail.
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Our secure online ordering system accepts:
If you prefer to order by fax, click here.
The Wrap SPD is the main ERISA, DOL and now ACA mandated vehicle for communicating plan rights and obligations to employee participants and beneficiaries. As the name suggests, it is a summary of the material provisions of the plan documents, and it should be understandable to the average participant of the employer.
Here are the Wrap SPD document requirements by ERISA and the Affordable Care Act as succinctly as possible:
- If you offer group health insurance you’re now required by ERISA law, enforced by the Department of Labor and now the Affordable Care Act, to distribute a Wrap SPD within 120 days of the Plan’s effective date.
- Failure to provide the ERISA Wrap SPD within 30 days of request triggers a $110 a day fine per participant. Not having a Wrap SPD can also trigger an audit by the Department of Labor.
- The insurance company’s Master Contract, Certificate of Coverage, or Summary of Benefits is not a Wrap SPD.
- This requirement applies to all employer sponsored group health insurance offerings, including a one-person plan.
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For more information on Small Business Health Insurance and Section 125 POP accounts and documents, read these blog posts:
Pre-Tax Individual Health Insurance with Section 125 Premium Only Plan Document
Can An Employer Reimburse Individual Health Insurance through a Section 125 or HRA Plan?
Core Documents Announces Section 125 & HRA Flex Affiliate Program for Accountants, Payroll Companies and Insurance Agents