| Q: How much of the group premium must my business pay? |
| A: In order to be eligible for "guarantee to issue" by
Minnesota law, the employer must be at least 50% of the single employee rate.
All the HMO's in Minnesota require the 50%. How much the employer pays
above that is flexible. The key thing is not to discriminate among
employees. All employees get the same. There is no requirement to pay any
of the dependent costs. I recommend the employer contribute to the
dependents to encourage participation. Would you really want one of your
employees to waive coverage on his dependents because of the cost? Most of
my groups pay 75% to 100% of the employee premium and at least 25% of the
dependent costs. |
| |
| Q: What do you mean "guarantee to issue" a
small group? |
| A:
In Minnesota, an employer sponsored group medical plan
(small group with under 50 employees) must be issued regardless of the
medical history of the employees enrolling. At time of application, each
employee must complete an application detailing the medical history of
him/her and family. The medical insurance company or HMO uses that
information to evaluate the risk being considered. As the potential for
future claims increases based on that medical information, the insurance
company/HMO can increase the rates. So "guarantee to issue"
means the plan must be issued, the group must be accepted, but the rate
can be increased as high as the maximum premium. If the total risk
warrants it, the maximum table can be used. The rate tables, filed by each
company to the state, run from 75% of standard rate to 125%. (Blue
Cross takes a different approach and says they do not have to issue a
group if they feel they don't want the risk.) The good news about a
maximum rate table is the following year a group at the maximum rate can
only receive a rate increase equal to the inflationary trend. That group
is already at the maximum rate table and can not be increased to a higher
one.
One additional thought on this process. After the company evaluates
the group, they then make an offer back to the employer as to what his/her
plan will cost. The employer must accept that offer for the coverage to
actually be in effect either in writing or with a premium check. |
|
| Q: What is the longest or shortest period of time that a new employee
must wait to be eligible for coverage? |
| A:
The minimum waiting (eligibility) period is 0 days, the maximum
is 90 days. Normally the HMO's use the first of the month after 30 or 60
days. This simplifies accounting and billing. If you are installing a new
group and not moving group coverage, you have the option of covering all
current employees without a eligibility period or you can have them wait.
The employer selects this period. If you select 0 days, the employee comes
on the medical plan the first of the month following hire date.
The 90 day waiting period is the maximum by Minnesota law. If you
desire 90 days, due to for example high turnover of your employees, then
it is 90 days, NOT the first of the month after 90 days.
|
| |
| Q: Do I really have to take COBRA seriously? |
| A:
YES!! See the section on this site on COBRA. COBRA is the
employer's responsibility. If you don't offer COBRA, you could be liable
for the medical bills.
Note: The procedure for terminating an employee is to notify the
insurance company that an employee has terminated effective the first of
the next month. The insurance company removes that employee from the
billing. That employee has 63 days to notify the employer that he/she
chooses Cobra. The employee then has 45 days to remit the premiums to the
employer. The premiums must be paid back to the day of termination. Yes,
that means, the employer must notify the insurance company that the
terminated employee elected Cobra as soon as notified. The employee is put
back on the billing with a balance due back to the termination date, the
first of the month following termination. The employer may not have
received the money for the premiums yet. And may not receive them for more
than a month. The employee then must remit the monthly premium to the
employer on a timely basis each month. It is TOTALLY up to the employer to
handle this collection. And to do it in a fair and non-discriminatory
manor. It is also important NOT to set a precedent regarding how the
premiums are collected . Everyone should be treated the same. This is why
I always recommend an employer hire an outside firm that specializes in
Cobra service. It is real easy to make mistakes in notifying employees of
rights, or collecting the premiums or even giving advice to the
employee.
Cobra is an employer's total responsibility. Considering the
implications and you are now dealing with an employee that is no longer
working with your business, that maybe left because he/she was not
happy with your firm any longer, this is not an area that an employer
would want to make mistakes in.
|
| |
| Q: What if I don't get a new employee's enrollment forms into the
insurance company on time? |
| A: Bad news. You could cause all kinds of complications causing the
employee to be deemed a late enrollee, delaying or preventing payment of
claims. DON'T DO IT. ESTABLISH A SYSTEM TO MAKE SURE EMPLOYEE
ENROLLMENT FORMS ARE SUBMITTED TO THE INSURANCE COMPANIES ON TIME. |
| |
| Q: Why are the annual increases on my companies medical insurance so
much? |
| A:
The cost of medical care is increasing at a rate much higher than
inflation. Prescriptions alone have a double digit inflation. New
procedures cost more. Medical equipment is expensive to buy and use. And
people are using the medical plans. Insurance companies need to make a
profit, too. They have employees just like you do. The problem here in
Minnesota is the HMO's are not making an underwriting profit. Claims and
expenses are exceeding revenue.
How can you impact your rate increases?
- Employees can share in the cost of the premiums.
- Increase the co-pays and deductibles of your plan
- Change to a deductible plan
- Look at national insurance companies instead of local HMO's. The
nation as a whole is not experiencing these kind of double digit rate
increases. Move your group out of the state experience pool.
- Offer more than one medical
plan. Most insurance companies in Minnesota allow choice of two plans.
- Pray
What is the future of medical insurance? Obviously we can not
continue to receive large rate increases. You can't increase your prices
like that to keep up. It is not the cost of the premiums that is the
problem. It is the cost of medical care. Yes, we could have the government
take over medical insurance. Will that cause the cost of medical care to
decrease. No! That will pass the cost of the care to your tax pocket as
well as your premium pocket. And it will take competition out of the
formula. You think managed care is an issue, think about what it would be
like under socialized medicine. Ever had to deal with the Veteran's
Administration? They key thing we have to deal with is use of the medical
insurance not who pays the premiums. Few people actually take
responsibility for their own health. If you don't take care of yourself,
who is suppose to? Your doctor? Your mother? Your government? |
| |
| Q: Can the employee portion of the medical premiums
be pre-tax? |
| A:
Yes, the business needs to adopt a "cafeteria,
often called a 125 plan". By adopting this plan, also called
"POP for Premium Only Plan" any premium paid by the employee is
pretax.
There is a cost to establish a POP plan. Your attorney can assist
you or use a firm that specializes in cafeteria plans. This
firms have off the shelf template forms to set one up. The cost is minimal
to the employer. This is part of an ERISA plan that requires annual
attention by the employer or some business hired to file an annual 5500
form to the Department of Labor. The POP plan is one piece of a full
cafeteria plan that can be offered without the other pieces.
The other
pieces that can be offered are: Medical Reimbursement and Child Care. Both
of these pieces need administration and cost more to have. The Medical
Reimbursement part allows employees to set aside additional monies to
reimburse themselves on a pre-tax basis deductibles, co-pays, eyeglasses,
dental costs to name a few things that are not paid by the medical
insurance plan. The Child Care part allows employees to set aside the cost
of child care on a pre-tax basis. The main concern with these two parts is
the employees submit medical costs or child care receipts to someone who
has been accumulating the monies set aside from each paycheck. Most
employers hire some outside firm to do that rather than do it internally.
Many payroll firms offer the service.
|
|
| Q: What is the process for setting up a medical plan
where the employees pay part of the medical premiums? |
| A:
Simply put, your employees can share in the cost of
the medical plan. As indicated in the first question, the employer must
pay a minimum premium of 50% of the single employee rate, the employees
opting for the coverage must pay the balance. An employee can waive
coverage on himself and/ or his family. (Make sure you as the employer
retain a copy of this waiver for your files. ) If the employee takes
coverage then his/her part of the premium is payroll deducted by the
employer from each pay period. The employer is responsible for redeeming
the entire premium to the medical insurance company. That is why it is
important to start the deduction the pay period prior to the coverage
starting, otherwise the employer will be carrying much of the burden of
the premiums for most of the month. I try to start my new plans with half
the deduction taken out the pay period prior to the first of the month
beginning the plan. The next pay period reimburses the employer in full
for that month, then the last period of that month starts the next month.
By doing that, then last pay check of the employee need only cover half
the premium.
A note: coverage continues on an employee until the end of the month
of termination. When the bill is paid for the next month, the insurance
company is told of the termination and the employee is removed from the
billing. Keep records that you have terminated an employee from coverage.
Always do it in writing in case there is ever a question. |
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