New Approach to Small Group

[ABC]

This is an approach I have come up with for 2009 for small groups. This pitch is really for groups under 10.

Take a standard group plan with co pays with 9 people on the plan. I am going to pitch individual HSA plans. I know that is not anything new but here is where I go with it.

The employee know is responsible for the premium (tough sale to the employee) but the the employer now funds the HSA account. So the employee now should not have any out of pocket when it comes to claims. Obviously we hope there is roll over every year.

So now the employer knows what they will spend each year on HSA contributions and there will not be any large rate increases. This approach should cut the cost of insurance in half for the employer.

Deal breakers for this pitch

If the employee is uninsurable...In my state we have a high risk pool plan where an HSA is an option. The dilemma this creates with a family is we now might have a higher out of pocket with 2 HSA plan in place for the family.

Maternity coverage. This is a real deal breaker. The individual plan that has no waiting period for this coverage is Assurant but there is a separate $5,000 or $10,000 deductible. Still going to cost the client at least $7,000 for a child birth.
This would really upset an employee.

I think this might work for small groups that are getting double digit rate increases that are thinking of dropping coverage.

Please do not post this in the individual forum as some newbie might set themselves up for failure trying to put this approach in place.

Feedback?

 

[moonlightandmargaritas]

Check the statutes. Some states (my state of FL is an example) prohibit replacing small group health of 2-50 lives with ifp within twelve months of the group being in force.

 

[Crabcake Johnny]

Wouldn't recommend that. Could violate ethical conduct rules. DOI's are very protective of the group market.

If you go in to "blow up" the group the DOI will spin that into recommending that course of action simply to pocket a commission.

Also, you have reality. Reality is at least one of the employee's is uninsurable, will get rated or ridered. Never listen to the employer who will likely state "everyone's healthy here."

 

[ABC]

Wouldn't recommend that. Could violate ethical conduct rules. DOI's are very protective of the group market.

If you go in to "blow up" the group the DOI will spin that into recommending that course of action simply to pocket a commission.

Also, you have reality. Reality is at least one of the employee's is uninsurable, will get rated or ridered. Never listen to the employer who will likely state "everyone's healthy here."

Interesting view
I really dont see how this would have an impact with the DOI as long as the employer is not paying for the individual premium (my state). The IRS states that anyone can contribute the the HSA account. If its an LLC or S corp the owner will have to take the contributions as ordinary income but can right them off on their personal taxes.

As it comes to the uninsurable in my state we have a high risk pool insurance that has to take anyone denied by a private carrier. In the plan designs they have an HSA as one of the options. So that is going to cover that issue. Now that might not save the employee as much money but its an option to reducing the cost.

But give me more feedback as I want to address every possible scenario I might run into with this pitch

Thanks

 

[Guest]

But give me more feedback as I want to address every possible scenario I might run into with this pitch

I agree with Moon and John. You really don't want to do this. But if after your nine years of experience you think you can bring this off and not have your ticket pulled, well... good luck.

Instead of asking here, why not just call Jim Atterholt at the DOI office (317-232-3520) and bounce the idea off of him (or his assistant) and see what they say?

 

[ABC]

I agree with Moon and John. You really don't want to do this. But if after your nine years of experience you think you can bring this off and not have your ticket pulled, well... good luck.

Instead of asking here, why not just call Jim Atterholt at the DOI office (317-232-3520) and bounce the idea off of him (or his assistant) and see what they say?

Good Idea,

In the past I have put indiviudal plan in place with groups but under Indiana state law an employer cannot contribute to the indiviudal premium. Now under HSA rules (IRS) an employer can fund an HSA account. So my pitch then is the employer is just funding the HSA accounts and not paying for any of the individual premium.

I have already consulted with a accountant on this approach and he said I am good to go.

A couple of issues I still have to check into.
One is without a true qualified group plan can a section 125 be set up or a POP? This way the employees could have payroll deductions for their premiums. I have had Aflac go out and set up a section 125 before on indiviudal plans. So I am think I shift the risk onto them. Colonial already told me they will not do it.

The carriers are on board with this approach to the point they are willing to EFT the premium for individual policies through the employer. I am not reall hip on this as it could be serious problems if an employee leaves the company getting the EFT canceled.

Right now I expect for 2009 a lot of small employers to really cut all the cost they can. One of the costs is going to be health insurance. So instead of a employer sdropping benefits completely they can still offer some type of benefits to the employee through HSA contributions.

This approach will not be for every group but I am 90% sure it can be an option on the spread sheet.

More feed back please

Thanks

 

[Delta76]

I already have a few small "groups" doing what you are suggesting. A section 125 plan is set up that allows for individual premiums to be pre-taxed as well as the HSA contributions. The employee gets to pay their way with the individual plans and the employer can select an HSA contribution level to fund the account for anyone employee under an HSA plan.

For example, one employer gives employees with a family plan $4000 per year/individuals $2000 per year into their HSA. The costs are lower for everyone and the employees really like seeing bigger numbers building in their accounts. You mentioned a few of the hiccups above, but for the right group it can be a great fit.

A few things:

One is without a true qualified group plan can a section 125 be set up or a POP?

Yes. POP only if list billed. Make sure the document specifically allows for individual premiums to fit into the plan. I personally use TASC for non list billed companies(tasconline.com).

I have had Aflac go out and set up a section 125 before on indiviudal plans. So I am think I shift the risk onto them. Colonial already told me they will not do it.

Look out here! The local distric manager assurred me their 125 plans covered individual premium reimburesments. After a few phone calls and speaking with at least six people in the AFLAC home office, I found out they actually do not do this. It's not even an option with them.

Check the statutes. Some states (my state of FL is an example) prohibit replacing small group health of 2-50 lives with ifp within twelve months of the group being in force.

As M&M said, check the statutes first.

 

[ABC]

Delta,
Thanks for the response. I appreciate getting feedback from someone that is already using this strategy.

On your list bills are you having the employer pay by EFT?
If yes is there any issue with that approach? If an employee leaves any major problems getting the employer out of the EFT for that premium?

I have already decided to go forward with this approach as an option. I have just a couple more things to check on.
I think I am going to sell a lot of it.

 

[Delta76]

On your list bills are you having the employer pay by EFT?
If yes is there any issue with that approach? If an employee leaves any major problems getting the employer out of the EFT for that premium?

First, list bill for IFP is illegal in my state, so I haven't had any dealings with it. Second, how likely is it that all the employees will be in the best spot with the same carrier? It doesn't seem practical to me.

 

[ABC]

First, list bill for IFP is illegal in my state, so I haven't had any dealings with it. Second, how likely is it that all the employees will be in the best spot with the same carrier? It doesn't seem practical to me.

Good point

I decided not to have the employer set up an EFT through their account. One of my carrier reps was wanting me to set up the accounts that way.
In my state List bills are legal its just illegal for the employer to pay any portion of the premium on an individual plan.

You do make a very good point about multiple carriers being in place. I was considering putting it all with the same carrier for the list bill but at this point I don't think I will recommend doing a list bill unless its all family working for the company.