Employer Sponsored Plans
Frequently Asked Questions

Table of Contents

  1. Why do employers offer group health insurance plans?
  2. Which employers are required under the ACA to offer health insurance to employees?
  3. What’s the difference between an employer-sponsored plan and an individual plan?
  4. What is the cost of providing group health insurance?
  5. What is the most or least an employer has to pay?
  6. How many employees do I need to start a plan?
  7. What are the different plans that are offered?
  8. Do all employees have to be eligible?
  9. What other benefits can an employer provide?
  10. What are HSAs, FSAs, and HRAs?


Why do employers offer group health insurance plans?

  • 1- To attract and retain employees.
    Health insurance continues to be the #1 sought out benefit of employees. Providing an employer sponsored subsidized health insurance plan is important to new and existing employees alike.
  • 2- To have access to better coverage
    Group plans traditionally include lower deductible options and significantly increased provider access compared to the individual plan marketplace through MNsure.
  • 3- To take advantage of tax savings
    There are significant tax savings available to both employees and employers alike. Through a premium only plan, employees are able to utilize pre tax dollars to pay their portion of their health insurance premiums while employers are able to expense contributions they make to their employees premiums as well as reduce their FICA match liability on any employee premium contributions.

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Which employers are required under the ACA to offer health insurance to employees?

  • Employers with 50 or more full-time equivalent employees under the ACA must offer health insurance to those working 30 hours or more per week on average.
  • Employers with less than 50 full-time equivalent employees are not required to offer health insurance but many choose to do so.

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What’s the difference between an employer-sponsored plan and an individual plan?

  • Employer-sponsored group plans are run through the company, and the employee would enroll directly through the company. Individual plans are sold directly from insurance companies to the end-user or through the MNsure exchange to the end-user.
  • Employer-sponsored plans can also include wider networks, options for lower out-of-pocket maximums, and generally better prescription coverage than individual plans.

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What is the cost of providing group health insurance?

  • The cost of providing health insurance can vary greatly and depends on many factors. One of which is the type of plan you offer. For instance, a plan with a higher deductible is going to cost less than a plan with a lower deductible. The age of the person enrolling, the geographic region of the employer’s headquarters and the network selection also affects the cost of the plan.

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What is the most or least an employer has to pay?

  • In order to be compliant with state laws, an employer needs to cover at least 50% of the employee only cost for the lowest priced plan offered.
  • An employee can elect any percentage or amount above that 50% and may even elect to contribute toward dependent premiums.

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How many employees do I need to start a plan?

  • Most carriers require the enrollment of one W-2 employee who is not the owner or owner’s spouse to start the plan. There are a few exceptions to that rule, however.
  • Additionally, 75% of eligible employees who do not have a “valid waiver” must enroll to start the plan. The most used valid waiver is enrollment in a spouse’s group plan, but others include being enrolled in Medical Assistance, Medicare parts A and B, Tricare, and a parent’s group plan.

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What are the different plans that are offered?

  • There are many different plan options to choose from. Each carrier offers similar plans with traditional co-pay plans and HSA eligible plans available.
  • Employers can also offer individual plans on a pre-tax basis through an Individual Coverage Health Reimbursement Account (ICHRA).
  • Level-funded, self-insured plans are a very good option for healthy groups. The group must medically qualify, but these rates can be less expensive than fully-insured group plans while still limiting employer liability.

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Do all employees have to be eligible?

  • The employer can generally elect which employees are eligible based on job class and average hours worked per week. The minimum amount of hours an employee must work to be eligible is 20 hours per week.

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What other benefits can an employer provide?

  • There are many ancillary products employers can offer their employees. Dental, vision, short- term and long-term disability, and life insurance are the main ancillary products offered. Other benefits include pet insurance, critical illness insurance, accident insurance, and identity theft protection.
  • Employers can also offer flexible spending accounts (FSA) and health savings accounts (HSA).

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What are HSAs, FSAs, and HRAs?

  • HSA- Health Savings Accounts are available with eligible high deductible health plans as defined by the IRS. Each year an employee can decide how much they would like to contribute to their HSA account up to IRS defined limits, and they can pay for eligible medical expenses with that account. The money in the accounts stays with the employee from year to year, even if they move jobs or do not use all the funds contributed in a particular year.
  • FSA- Flexible Spending Accounts can pay for health, dependent care, and transportation expenses as determined by the IRS. FSAs allow your employees to make pre-tax contributions to their accounts up to IRS defined limits. With a few exceptions, an employee’s unused funds at the end of the year go back to the employer. These are sometimes known as “use it or lose it” accounts.
  • HRA- Health Reimbursement Arrangements are a promise by the employer to the employee to pay for certain health related expenses. These expenses mostly include those that are not directly covered by the health plan such as co-pays, deductibles, and other expenses incurred before the out-of-pocket maximums. HRAs can be paired with HSAs to offer a unique employee benefit.

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