Employers often ask if there is a right way to end a group health plan. This question is becoming more and more common as companies of all shapes and sizes end group health plans to adopt alternative health insurance solutions such as "Pure" Defined Contribution.
So, is there a right way to end a group health plan?
Yes. There are certain steps you will want to take to correctly end a group health plan. Here are four things to keep in mind when ending a group health plan.
Call the Insurance Company
Call a customer representative with the insurance company to confirm the exact steps required to end your group health plan. Your health insurance agent or broker will be able to assist you, however your business needs to call your insurance company directly.
You Can End the Plan at Any Time
Most group health insurance plans are "unilateral contracts". This means you can cancel a policy at any point during the year. Check with your health insurance company or broker about the terms of your policy. Some insurance companies "request" 30 days, but this is not usually required.
Employees will be Eligible for a “Special Enrollment Period”
When you end your group health plan, all those covered will be eligible for a special enrollment period for individual health insurance. This means they’re eligible to purchase individual health insurance for 60 days after you end your group health plan, and don't need to wait until the next annual open enrollment period (ex: November 15, 2014 to February 15, 2015).
Eligible Employees will have Access to the Health Insurance Discounts
When you end your group health plan, you are giving eligible employees, and their families, access to the premium tax credits (federal discounts on individual health insurance purchased through the Health Insurance Marketplaces).
Employees are eligible if they meet certain income thresholds and do not have access to employer-provided group health insurance. Households with income up to 400% above the federal poverty line (FPL) are eligible (up to $45,960 for an individual in 2013, or $94,200 for a family of four in 2013).
For more tips on ending group health insurance, check out our new eBook: How to Cancel Group Health Insurance (free PDF download).
Continuing Health Benefits with Defined Contribution
Many companies are ending a group health plan to adopt Defined Contribution Health Benefits. Once you set a date to end a group health plan, you can continue health benefits by following these steps:
Define the amount you would like to contribution to employees' health benefits (unlike a group health plan there are no minimum contribution requirements).
Use Defined Contribution Software to set up formal plan documents and to give each employee a fixed allowance amount to use for individual health insurance.
Work with your Insurance Agent or Broker to help employees shop for and purchase an individual health insurance policy (typically, this saves the employee 20-30%). You can also provide employees information about the new Health Insurance Marketplace in your state.
Use Defined Contribution Software to reimburse employees via payroll (takes 5 minutes per month).
What are your questions about ending a group health plan?