A Guide To Lining Up a New Health Plan For Your Workers
If you are a sponsor of a Humana group health insurance plan, it’s time to start shopping around for new coverage.
Earlier this year, health insurance giant Humana announced they were pulling out of the employer group health insurance market entirely over the next 18 to 24 months.
That means all employer plan sponsors currently relying on Humana to provide insurance benefits to workers and their families should immediately begin lining up new coverage.
This guide is for all employers who want or need to transition from one employee group health plan to another––especially for smaller employers with 49 or fewer full-time equivalents.
How to Switch Group Health Insurance Plans
Whether your carrier is canceling your policy and pulling out of your market outright, like Humana, or you just want to switch to a better health insurance plan, the process is pretty much the same – and this is the guide for you.
This may also be a great opportunity to go back to the drawing board, and explore some new, innovative strategies that may save you a substantial amount of money each month on your health plan…. while still providing valuable health benefits that employees want and need in today’s competitive talent market.
Considering Your Group Health Plan Options
When a health insurance carrier cancels an employer-sponsored group health plan, the employer typically has three options:
- Transition to a new group health insurance plan.
- Create a health reimbursement arrangement (HSA) to help employees buy their own health insurance on the open market.
- Transition employees to a health sharing plan.
- Cancel your health benefits altogether.
If you want to attract and retain quality employees, option 4 is almost always a non-starter. So let’s consider each of these options in turn.
Compare Pricing on the Best Insurance Plans Available
Option 1: Transition to a New Group Health Insurance Plan
Most employers with 50 or more full-time equivalents choose to transition their workforce to another insurance plan with the same or a different insurance carrier. These larger companies with 50 or more FTEs are required under the Affordable Care Act to provide health insurance for employees working 30 or more hours per week, or face “shared responsibility” penalties under the ACA..
Smaller employers – those with 49 full-time equivalents or fewer – are not required to provide health insurance to employees, and are not subject to ACA shared responsibility penalties.
Advantages of Traditional Group Health Insurance
Traditional health insurance policies cannot discriminate against people with pre-existing conditions. As long as the employee enrolls during an open enrollment period, during his or her initial enrollment period, or during a special enrollment period triggered by a qualifying life event, coverage is guaranteed right from the very first day.
This is a vital consideration for those who have pre-existing conditions.
Traditional health insurance plans also have no maximum lifetime coverage limitations under the Affordable Care Act.
Additionally, traditional group health insurance premiums are tax deductible for the employer and the covered employee.
Disadvantages of Staying With Traditional Health Insurance
The primary disadvantage of going to another traditional group health insurance plan is cost. According to the Kaiser Family Foundation’s 2021 Health Benefits Survey, the annual total cost of group health insurance premiums averaged $7,739 per employee for single coverage and $22,221 per employee for family plans.
Who Should Consider Transitioning to a New Traditional Health Insurance Plan?
Traditional group health insurance works best for larger employers with 50 or more full-time equivalents who have the cash flow to pay the high insurance premiums and still remain competitive.
At a practical level, employees need to be able to pay their share of health insurance premiums, as well, and afford any deductibles and co-insurance. This can be a big problem for lower-wage employees.
A traditional group health insurance plan can also be appropriate if you have an older work force, or one with a lot of pre-existing conditions. These people would be left out of any plans that did not provide for immediate coverage of pre-existing conditions.
Managing the Transition
Employer Group health insurance is regulated under ERISA, and plan sponsors are fiduciaries. This means group health sponsors need to carefully comply with the law and applicable regulations to avoid potential penalties, liability, and potential disruption to workers’ coverage.
This is especially true if you are transitioning workers to a new plan outside of open enrollment – sometimes called “mid-year” plan changes.
Here are the three most important considerations:
- ERISA Plan Documents – As an employer and plan fiduciary, you must pay close attention to maintaining and updating your plan documents. These include Summary Plan Descriptions (SPDs) and plan-specific documents. Your insurance carrier or Personal Benefits Manager can help connect you with compliance resources and expertise.
If and when you do make changes to your group health insurance plan, you must generate an ERISA Summary of Material Modification within 210 days after the plan year and distribute it to all employees.
- Affordable Care Act (ACA) Requirements – The Affordable Care Act requires plan sponsors to provide a 60-day advance notice to employees of any group health insurance plan changes before they go into effect.
- Enrollment Changes – If you make changes to your employees’ health care coverage during the plan year, you must allow your workers the right to change their enrollments. In effect, your employees are entitled to a miniature Open Enrollment Period.
How To Shop for a New Health Insurance Carrier
Whether you are changing plans because your insurance company, like Humana, is pulling out of the group health insurance market in your area, or you just want to find a better plan, the process is straightforward:
- Conduct Market Research. Research and compare available health insurance carriers in the local market. Look for carriers with a good reputation, competitive rates, and suitable coverage options for your employees’ needs. Your Personal Benefits Manager can help guide you, and shave many hours off the cost of your search for a new vendor – all at zero cost to you as the employer. And nothing extra to your workers, either.
- Prepare a Census. Gather employee information, including names, ages, dependents, and any other relevant details, to create a comprehensive census. This will help your Personal Benefits Manager generate accurate quotes that are specific to your business.
- Request Quotes. Work with your Personal Benefits Manager to generate quotes from multiple competing carriers based on the specifics in your census. With HSA for America, you can also compare quotes from health sharing organizations (discussed below) as well as traditional insurance plans. Compare the quotes to find the best value for the coverage provided.
- Review Plan Options. Analyze the health plan options offered by different carriers, considering factors like coverage levels, deductibles, copayments, and prescription drug benefits. Choose a plan that meets the needs of your employees and your budget.
- Verify COBRA Eligibility. Review the new health insurance plan’s COBRA (Consolidated Omnibus Budget Reconciliation Act) compliance to ensure that the plan meets the federal requirements for continuation coverage.At HSA For America, your Personal Benefits Manager can assist with this process.
- Review Contracts and Agreements. Thoroughly review and understand the contracts and agreements with the new health insurance carrier. Pay attention to any termination provisions and the effective date of the new plan.It’s a good idea to arrange a few days of overlap between the old plan and the new one, to ensure a paperwork SNAFU doesn’t result in a lapse in coverage for your employees and their families.
- Notify Employees. Inform your employees about the upcoming change in health insurance carrier, explaining the reasons for the switch and any changes to their coverage.
- Engage in an employee communications campaign. Ensure that employees have access to the necessary enrollment materials and understand the deadlines for enrollment.
- Update ERISA Plan Documents. Update your Employee Retirement Income Security Act (ERISA) plan documents to reflect the new insurance carrier and coverage details.
- Distribute new plan documents to employees. Under ERISA, you must orovide the SPD to all plan participants within 90 days of the employee becoming a participant in the plan or within 120 days of the plan’s effective date, whichever is later.
- File Required ERISA Documents. Submit necessary ERISA filings, such as Form 5500, to the Department of Labor to remain compliant with federal regulations.
Option 2: Switch to a Health Sharing Plan
Health sharing plans are a tremendously popular and more affordable alternative to traditional insurance.
These plans are not insurance. They are non-profit, voluntary associations of like-minded, health conscious people who have agreed to live healthy lifestyles and help pay the medical expenses of their fellow plan members.
Advantages of Health Sharing Plans
- Cost Savings. Health sharing plans can often be more affordable than traditional group health insurance, making it a cost-effective option for both employers and employees.
- Flexibility. Health sharing plans typically offer more flexibility in choosing healthcare providers, giving employees the freedom to use a broader network.
- Few or No Network Restrictions. With health sharing plans, employees are not limited to a specific network of healthcare providers, allowing them to seek care from any provider they prefer.
- Disadvantages of Health Sharing Plans
- Pre-existing Conditions. Health sharing plans may impose restrictions on pre-existing conditions. Employees with pre-existing conditions may have limited coverage options or face waiting periods.
- Limited Coverage. Health sharing plans may not cover all types of medical expenses, such as preventive care or certain treatments.
For example, a health sharing plan may not share costs related to childbirth for unmarried women.
Health share plans also may not share costs arising from drug or alcohol addiction, including injuries as a result of drunk driving, or even as a passenger of a drunk driver.
It’s essential to carefully review the plan’s limitations, and make sure employees understand plan limitations as well.
Health Sharing and Workers with Pre-existing Conditions
For employees with pre-existing conditions, consider offering them a separate traditional group health insurance plan, if financially feasible, to ensure comprehensive coverage.
Option 3: Offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
Another option is to drop your group health plan altogether, and instead help workers buy their own coverage on the open market.
If you have fewer than 50 full-time equivalent employees and do not offer a group health insurance plan, or you plan to drop your group plan, you can do this on a tax-advantaged basis with a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).
This is a tax-advantaged benefit that allows you to reimburse your employees pre-tax for some or all of the cost of their individual or family health insurance. You can also cap the benefit at a fixed dollar amount.
By using a QSEHRA to help employees get their own health insurance, you avoid the hassle and administrative cost of signing up everyone for a single group plan. You also ensure that your workers and their covered dependents can easily continue their coverage of pre-existing conditions from their first day of enrollment.
Cost Control. QSEHRAs allow the employer to set a fixed amount to reimburse employees for their individual health insurance premiums or qualified medical expenses. This gives the employer more control over healthcare costs.
Tax Benefits. QSEHRAs offer tax advantages for both employers and employees:
- Reimbursements are tax-free to employees
- They are also tax-deductible compensation expenses for you, the employer.
Customization. Employers can tailor the QSEHRA to meet the specific needs of their workforce by choosing different reimbursement amounts for different employee categories.
Employees cannot use QSEHRA money to buy healthsharing plans. These plans are designed to encourage employees to own health insurance. To receive their benefit, they must provide proof of qualifying health insurance coverage.
As of 2023, employers can provide a maximum annual QSEHRA benefit of $5,850 per self-only employee and up to $11,800 per family.
QSEHRA might not be suitable for all employees, especially those who prefer a traditional group health insurance plan with comprehensive coverage.
Compare Pricing on the Best Healthshare Plans Available
If your health insurance carrier is pulling out, for whatever reason, or you just want to improve your health benefits for your employees, you have several choices as a small business owner:
- Explore other carriers
- Switch to a healthsharing approach
- Drop your health plan entirely and offer a QSEHRA.
Each option comes with its own advantages and disadvantages. One size doesn’t fit all, and every business is different.
It’s essential to carefully weigh the needs of both the business and its employees before making a decision.
Fortunately, you don’t need to do it alone. There’s help available. Our experienced Personal Benefits Managers are experts on health insurance, health sharing, HSAs, HRAs, QSEHRAs, and other money-saving approaches to providing your employees with quality health benefits at prices that will help keep you competitive.
For free consultation and assistance with all aspects of plan design and enrollment, click here, pick a time, and make an appointment.
Here are some additional articles on healthsharing programs: Healthsharing for Small Businesses: What Business Owners Need to Know | HSA For America Helps Small Businesses Save Thousands on Health Benefit Costs
Frequently Asked Questions About Changing Group Health Plans
What should I do if my small business group health insurance plan is cancelled?
If your group health insurance plan is cancelled, you have several options to explore based on your business’s needs and budget. Most businesses transition to a new traditional group health insurance plan. But you can also consider establishing a health reimbursement arrangement (HSA) benefit for your employees, or transitioning to lower-cost healthsharing plans.
Each approach has advantages and disadvantages, and every business is different.
For expert help designing a custom health plan that works best for your specific work force and budget, contact a Personal Benefits Manager.
Can I use an agent to shop for a new group health insurance plan?
Yes, working with an experienced insurance agent can be highly beneficial. They can help navigate the market, assess your requirements, and find suitable group health insurance options that fit your budget.
Unlike most health insurance agents, however, a Personal Benefits Manager from HSA For America can not only help you explore your other health insurance options, but can also help you with lower-cost alternatives like health sharing plans and direct primary care. Click here to get started designing a plan and getting both healthsharing and health insurance quotes for your small business.
Can I group health plan altogether and switch to a Health Reimbursement Arrangement (HRA)?
Yes, dropping your group health plan and adopting an HRA can be a viable alternative. An HRA is a tax-advantaged account that businesses provide to reimburse employees for their eligible medical expenses. It allows businesses to control costs while still supporting their employees’ healthcare needs.
Small businesses with fewer than 50 employees can use a Qualified Small Employer Health Reimbursement Arrangement, which is designed for small employers who do not offer a group health insurance plan at all.
It provides tax-free dollars to employees that they can use to buy health insurance for themselves and their families on the open market.
Why would a group health insurance plan be cancelled?
- Non-payment of premiums.
- The insurance company might stop offering the plan. This will soon be the case with Humana, which is pulling out of the group health insurance market. All businesses who rely on Humana to provide health coverage for their employees will soon need to find an alternative solution.
- Your business no longer meets the insurer’s criteria for offering a group plan. This can happen if the number or percentage of employees participating in your plan falls below a certain number.
How can an agent help in finding a new group insurance plan?
- Agents have access to multiple carriers and can provide quotes for different plans, saving you hours of research.
- They offer expertise in matching business needs with suitable plans.
- They assist with the application process and answer questions throughout the policy period.
- Unlike most insurance agents, HSA For America Personal Benefits Managers aren’t restricted to offering overpriced traditional health insurance plans. Our PBMs can also helo you explore more affordably-priced healthsharing plans, as well, and help your employees select either health insurance or healthsharing plans for themselves and their families.
How long does it typically take to transition to a new group plan?
It can take anywhere from a few weeks to a couple of months, depending on the new insurer and the complexity of your business needs.
What is an HRA?
An HRA is a Health Reimbursement Arrangement where employers can reimburse employees tax-free for qualified medical expenses, including individual health insurance premiums.
There are multiple different types of HRAs. The one most used at small businesses is the Qualified Small Employer Health Reimbursement Arrangement, or QSEHRA.
Benefits are capped by the IRS. But the QSEHRA is very useful for small employers who choose not to offer their own group health plan.
How does transitioning to an HRA benefit my business?
- HRAs, offer more flexibility in controlling health benefit costs while still providing competitive benefits to employees and their dependents.
- It can be simpler to administer than traditional group insurance plans.
- Less potential liability compared to an ERISA-qualified group health care plan, which requires adherance to complex compliance rules and potentially exposes plan sponsors to fiduciary responsibilities and lawsuits.
- Employees aren’t restricted to a one-size-fits-all plan. The HRA benefit allows them to use tax-free money select an individual plan that best meets their unique, individual needs.
What are health sharing plans?
These are alternatives to traditional insurance where members share medical expenses. They aren’t insurance but operate on a similar principle of pooling risks. They typically do so at just a fraction of the cost of a traditional full-fledged group health plan per employee or covered member.
How do healthsharing plans compare to traditional group insurance?
- They often have lower monthly contributions but can have restrictions on pre-existing conditions.
- They may not cover certain treatments or services that traditional insurance would.
- They operate on voluntary participation and shared values, often religious or ethical.
Can my employees buy a health sharing plan with their HSA benefit?
No. Unlike health insurance premiums, health sharing costs are not considered a qualified medical expense and do not qualify for HSA funding, per IRS Publication 502 – Medical and Dental Expenses.
Can employees contribute funds to an HSA with healthsharing plans?
Usually not. But there is at least one health sharing plan, the HSA SECURE Plan, that preserves members’ eligibility to contribute to a health savings account.
This is because the HSA SECURE Plan includes the ten minimum essential coverages required under the Affordable Care Act to qualify it as a high deductible health plan eligible for HSA contributions.
However, the HSA SECURE plan is only available to individuals who own businesses or who have self-employed/independent contractor income.
HSA SECURE is among our most popular health sharing plans because of the unique combination of affordable pricing thanks to the health sharing concept, and tremendous tax savings thanks to the HSA.
Currently, HSA SECURE is the ONLY major health sharing plan that preserves members’ eligibility for new HSA contributions.
What should I consider when selecting a new group plan or alternative?
- The needs and preferences of your employees and their families
- Any preexisting conditions or pending surgeries among your covered members that may not be covered right away if you use a health sharing plan
- Any religious requirements in the health sharing plan. In most cases, it’s best to use a secular or non-denominational health share plan as an employee benefit, or let your workers choose their own health share plan.
- Your budget.
- The stability and reputation of the insurance or healthsharing provider.
- Whether enrollments in a health share plan may jeapoardize your group health insurance plan by driving participation rates too low.
How do I communicate these changes to my employees?
- Hold informational employee meetings or webinars.
- Provide literature explaining the new plan or system.
- Offer one-on-one sessions for personalized questions.
Your Personal Benefits Manager can help provide enrollment information for your employees and their families, or provide personalized coaching and assistance if they need to use their HRA benefits to buy health insurance on the individual/family market.
Feel free to provide them with this link, and they can make their own appointments to sign up.
Is there a grace period when switching plans?
This varies by insurer. Some might offer a short grace period, but it’s essential to ensure continuous coverage to avoid any lapse.
Can I offer both a traditional group plan and a healthsharing plan?
Yes, businesses can offer both, but coordination is essential to avoid overlap or gaps in coverage.
Employers who offer both health sharing and traditional health insurance plans should take care that they don’t lose their eligibility for group status. This can happen if so many people choose healthsharing over health insurance that participation rates fall below the minimum required to maintain a group plan.
Do all agents have access to the same plans and rates?
No. For example, few health insurance agents working today are appointed to sell health sharing plans as well as tradtional health insurance policies.
That’s what sets HSA For America apart: Our Personal Benefits Managers are often experienced business owners in their own rights.
On top of their access to traditional health insurance carriers, they are also experts on health sharing solutions, and are appointed to sell the very best, most competitive health sharing plans in the country.
Whomever you select, it’s essential to work with a reputable, licensed insurance agent with access to various options suitable for your business.
Are there penalties for not providing health benefits to employees?
Yes, under the ACA, certain employers with 50 or more employees may face penalties for not offering adequate coverage. It’s essential to consult with an expert on your specific situation.
How does an HRA impact my employees’ taxes?
Reimbursements through an HRA are generally tax-free for employees when used for qualified medical expenses.
This is what makes HRAs preferable to simply providing employees with a stipend to buy their own health insurance. A stipend is fully taxable to the employee. HRA benefits are entirely pre-tax, when used to pay for qualified medical expenses.
What happens to employees with pre-existing conditions?
Under the ACA, group plans cannot deny coverage or charge higher premiums due to pre-existing conditions. Healthsharing plans might have restrictions or waiting periods.
Generally, those with significant pre-existing conditions are better off with traditional health insurance rather than healthsharing.
However, employees with pre-existing conditions still get full coverage right away if they enroll in an individual plan. They therefore can still get insurance protection for their preexisting conditions if they use an HRA benefit.
Can I switch back to a group plan after transitioning to an HRA or healthsharing plan?
Yes, but it’s crucial to coordinate timing to avoid gaps in coverage and communicate changes to employees.
How does transitioning to an HRA work in practical terms?
Transitioning to an HRA involves setting up the arrangement, establishing eligibility criteria, and determining the amount of reimbursement. Employees then submit their eligible expenses for reimbursement, and the business reviews and processes the claims accordingly.
What are the advantages of switching to an HRA?
Some benefits of transitioning to an HRA include greater flexibility in selecting insurance plans, potential cost savings for both businesses and employees, and the ability to customize reimbursement amounts to suit different employee needs.
Can small businesses adopt Health Sharing Plans as an alternative to traditional health insurance?
Yes, Health Sharing Plans, also known as Health Care Sharing Ministries, are an alternative to traditional health insurance. These arrangements involve a group of individuals sharing medical expenses and can be a cost-effective option for some small businesses.
How do Health Sharing Plans work?
Health Sharing Plans operate on the principle of shared responsibility, where members contribute a predetermined monthly amount. These funds are then used to cover the medical expenses of members who qualify based on the organization’s guidelines. Members typically submit their medical bills for review and reimbursement.
What are the key differences between Health Sharing Plans and traditional health insurance?
Unlike insurance, Health Sharing Plans are not governed by the same regulations and may have different coverage limitations, pre-existing condition rules, and eligibility requirements. It’s important to carefully review the terms and conditions of any Health Sharing Plan before making a switch.
Can Health Sharing Plans be an affordable option for small businesses?
Health Sharing Plans can be cost-effective for some small businesses that are seeking alternatives to traditional health insurance. However, it’s important to evaluate the specific needs of your employees and compare the costs and benefits with other options.
What are some considerations when evaluating Health Sharing Plans?
When considering Health Sharing Plans, it’s important to review the organization’s guidelines, the coverage limitations, the network of healthcare providers, the reimbursement process, and any religious or moral requirements they have.
Are Health Sharing Plans suitable for all employees?
Health Sharing Plans may not be suitable for all employees, particularly those with specific healthcare needs or pre-existing conditions. It’s essential to evaluate individual employee needs and consider their ability to access necessary medical services through the plan.
Should I seek professional advice when exploring alternative healthcare options for my small business?
Yes, it is highly recommended to seek the guidance of healthcare benefits professionals, insurance agents, or legal advisors who specialize in small business insurance. They can provide tailored advice based on your specific circumstances and help you make informed decisions.
Can I offer educational resources or workshops to help employees understand their healthcare options?
Absolutely. Providing educational resources, such as workshops or seminars, can help employees understand the alternative healthcare options available to them. This can empower employees to make informed decisions about their healthcare and utilize the benefits effectively.
Your HSA for America Personal Benefits Manager can help connect you with educational resources for your employees, provide enrollment coaching and assistance, and otherwise support your employees as they seek to maximize their employee health benefits from your company.
Wiley is President of HSA for America. He believes that consumers should have choice and price transparency, so they can make the best healthcare decisions for their needs. Read more about Wiley on his Bio page.