Although in the past the American workforce has relied on employer-provided health insurance, some of the rationale behind that system has changed and many small organizations, defined as those having fewer than 50 full time employees, are re-considering whether health insurance must be a required benefit.
What has changed?
Employees in group plans were guaranteed access to insurance. Nonprofits have provided group insurance to retain and attract talent even though the cost may have stretched budgets because it was standard in the private sector. Prior to 2014, people shopping for individual health insurance were subject to underwriting requirements that allowed insurance carriers to reject applicants based on pre-existing conditions. The Affordable Care Act prohibits this practice so carriers may no longer reject applicants based on their health. This provision guaranteeing access to individual insurance is the reason small organizations are re-evaluating the need to provide a group plan.
Items to Remember If Discontinuing the Group Plan:
- You may drop your group plan whenever you want. You do not have to wait until the renewal date if that is not a convenient time to make a change. When the group plan ends, all covered staff are eligible for a Special Enrollment Period to purchase individual coverage.
- If the organization has been paying a portion of the premium for the employees, the organization can continue to provide funding to the staff to help offset the cost of the insurance. The payments would be added to payroll rather than being sent to the carrier. Organizations could plan and budget this expense each year instead of being at the mercy of large rate increases.
- Employees purchasing individual coverage get flexibility to select a plan that best meets their needs. And as currently implemented, low and middle wage earners can get financial assistance to help pay the cost. The cost is based on 3 variables: person?s age, where they live and whether they smoke. There are no health questions and people cannot get turned down.
Nonprofit organizations may want to consider this alternative because the Affordable Care Act has changed the rules and employees now have access to coverage whereas in the past employees in many cases had to rely on the employer for coverage.
Margaret Corwin of Corwin Company LLC is a Health Insurance Specialist who works to help answer your health insurance questions.