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Small Business Employee Benefits and HR Blog

How to Help Employees Switch to Individual Health Insurance

Lately, there has been a ton of media buzz surrounding the growing trend of small employers (with fewer than 50 employees) who are directing their employees to the individual health insurance market to obtain coverage. Since these employers are not subject to the employer mandate, they will not face any penalties for not providing group health insurance to their employees.Switching to Individual Health Insurance

With open enrollment for individual health insurance quickly approaching, now is the perfect time to help your employees enroll in individual health insurance policies. Since many employees have never purchased their own health insurance coverage before, this may seem a bit overwhelming for them. Here is an overview on how to help your employees with the switch to individual health insurance.

The Trend Is Growing

The media has been reporting on the growing trend of small businesses and startups switching their employees to individual health insurance. Part of the motivation driving the trend is the skyrocketing group health insurance premiums for small businesses.

The other reason behind small businesses dropping group health coverage is the many advantages that individual health insurance has due to the Affordable Care Act. Many of the articles written about this trend cite that employees who are eligible for premium tax credits end up paying similar contributions toward their premiums as they did with their group health insurance plans.

Some of the employers featured in the media are offerering a salary bump to employees who made too much money to qualify for premium tax credits to make up for the lost healthcare benefits. While this may seem like a beneficial arrangement for both parties, there are several problems with this solution.

  • There is no guarantee that the employees will actually spend the money on health insurance with a stipend.

  • Employers may lose top-tiered candidates to employers with formal health benefits in place. While a stipend may be somewhat appealing to candidates, most would prefer a formal, tax-advantaged health benefits program.

Educate Employees On the Advantages of Individual Health Insurance

When switching employees to the Marketplace to purchase health insurance, it is vital to educate them about the advantages of individual health insurance. While individual health insurance plans are not new, the Affordable Care Act (ACA) creates new advantages that make individual health insurance just as good – if not better – than traditional group health insurance. The new advantages are:

  • Coverage for a pre-existing condition (employees cannot be denied coverage or charged more because of a medical condition).

  • Coverage of essential health benefits (a core set of health benefits and services).

  • Employees may keep their policy when switching jobs.

  • Employees can choose the policy that best fits their family’s needs, including the network of providers and level of coverage.

  • Individual health insurance costs less, and employees may be eligible for a premium tax credit to assist them with the cost of monthly health insurance premiums.

For more on the advantages of individual health insurance, see this quick reference guide.

Let Employees Know Where and When to Purchase Individual Health Insurance

If you are cancelling your group health insurance policy, all those covered will be eligible for a special enrollment period for individual health insurance. This means they are eligible to purchase personal health insurance outside of the annual open enrollment period. Buying health insurance is now easier than ever. You should inform employees that individual health insurance policies can be purchased from:

  • The ACA Health Insurance Exchange (“Marketplace”)

  • A licensed health insurance agent or broker

  • Directly from an insurance company

Tip: To access the health insurance discounts (premium tax credits), employees need to purchase a plan offered on the Health Insurance Marketplace.

Clearly Announce Dates and Deadlines

If cancelling a group health insurance policy, you should notify the employees that they are eligible for a special enrollment period. The special enrollment period generally lasts 60 days after the qualifying event (see this article on special enrollment periods).

If your employees do not qualify for a special enrollment period, you should notify employees that the annual open enrollment period for coverage in 2015 begins November 15, 2014 and extends through February 15, 2015.

open_enrollment

Provide Additional Assistance and Allow Time for Questions

You should designate a healthcare benefits expert to be available for questions and additional assistance. The expert can have answers planned out for the most commonly asked questions about the transition to individual health insurance. Keeping additional resources ready to distribute to employees is also a good idea for anticipating employee needs.

 

What questions do you have about helping employees switch to individual health insurance? Leave a comment below.