2014 really upset the apple cart.
There were 1000's of small, family businesses which had group health plans or were shopping for them.
The ACA law basically dismantled this approach for 10's of 1000's of so-called "mom and pop" companies.
Essentially, single owners and spouses found themselves forced onto the individual/family market.
Many small family businesses do not fall within the income range to qualify for a tax credit and the rates have roughly quadrupled since 2014 on the individual family market without one.
On top of this, the networks on the individual family market (Covered Ca or off-exchange) are about 1/3rd the size of the group market.
We'll look at the other advantages of group plans for family businesses below plus a way to still get access....and maybe even save money for better plans!
These are the topics we'll cover:
Let's get started
There are three main health insurance markets in California:
It's really the first two we want to contrast for small family businesses like a husband and wife.
They have pretty standardized plans now so a Bronze plan will walk and talk about the same in core benefits +/- 2%.
This is required by the ACA law.
There can be give and takes but the 2% range pretty much locks it in.
The real differences are as follows:
Let's look at each of these.
The networks are much bigger on the employer side....by about 1/3rd and this generally covers the best doctors and hospitals.
Essentially, the reimbursement is much lower on the individual family market to keep the pressure on the cost since they're now guaranteed issue.
Pricing is interesting.
Individual/family plans used to be about 50% cheaper than group plans before 2014.
That's no longer the case.
They have now risen to the point where we'll quote equivalent plans and the employer side is actually cheaper!
This was unheard of before 2014.
And we have much larger networks.
The next piece is usually not discovered till you go into a pharmacy.
The formulary, or list of allowed (translated.. paid for) drugs is very different between employer and individual plans.
Much bigger on the group side.
Finally, group plans on the PPO side still generally have out-of-state benefits.
Blue Cross and Blue Shield allow their Blue Card program which allows you to see BCBS providers in any state even in a non-emergency.
Individual/family plans had that before 2014 but it's slowly been whittled down.
We're happy to compare any of these for your company here.
Let's touch base on the cost.
We noticed the difference around 2019.
Individual family plans, even without a tax credit were always cheaper.
Now, they can even be more expensive for comparable (worse actually) levels of coverage.
We're happy to run quotes for both individual/family and employer plans for your small business company here.
There's no cost for our assistance as Certified Covered Ca agents and licensed employer health benefits experience of over 20 years!
A few notes on pricing for family businesses.
There's no difference in how we structure the employees. i.e. If a spouse is listed as a dependent or enrolled employee.
Each member is individually rated now by their age.
We'll look at how to structure it below for husband and wife plans below.
You can learn all about that calculation here.
Of course, we're happy to walk through your situation to see which offers the most advantage.
Let's look at the network effect.
This is usually why family businesses ask the question, to begin with.
Their doctors or hospital do not contract with individual family plans.
This is simply a question of reimbursement as the new individual/family plans pay doctors much less in their contracts.
There are big implications from this. For example, we can not get access to Cedars down in LA now with individual/family plans.
This is a big deal as Cedars is one of the premier hospital networks in the US!
There's a slow transition (that will continue) from PPO to EPO to HMO.
It's simply a question of trying to control costs.
We won't be surprised if HMOs dominate the market within a few years.
The key is that the networks for individual/family and group plans are very different.
Now that group plans are coming out cheaper in some cases (or the same price), it's hard to argue about the move.
This brings us back to the original issue...can we qualify as a family or husband and wife business.
Here's the rule that blew apart the family business group market.
The ACA specified that in order to qualify, at least one person must be on payroll (or owner) who is not the owner OR SPOUSE.
It's the spouse piece that crushed it as before, we just needed 2 people as owners/payroll.
What's the workaround?
If you have a legitimate employee (even part-time) then great. That does it.
Otherwise, if your older child is on payroll, that also takes care of it!
Obviously, you want to establish work requirements for the child to justify the payroll but this is all we need to form a family group health plan under the new rules.
We have helped many family businesses do this.
The general working age is 16 and the child can be part-time or even have a monthly salary.
We just need the child on payroll for half of the prior calendar quarter!
Let us help you structure this to get the best option and make sure you qualify.
Another variation of the question we commonly get...what about husband and wife companies?
Husband and wife (or married partners) are the primary group that was barred from the group health market in 2014.
Our best guess is the move was to force them into the new exchange market to help support it.
A married couple by themselves cannot qualify for a group health plan.
They must have one other person on payroll (or as co-owner) in order to qualify.
This is usually an older child (16 and over) or another employee.
That's the only way we can still get group health plans for husbands and wives (or any married partners).
Another interesting wrinkle to this whole calculation.
We have dealt with small family businesses that are structured as C corps.
Technically, the only way they can write off group health plans is through an employer-sponsored plan since the C corp is literally a separate entity.
Self-employed people (Sole Proprietors, LLC members, S-corps structured for pass-through taxation) may be able to write off 100% of their individual/family coverage subject to net income.
Make sure to work with your tax advisor on this piece.
The clear benefit of group health plans is that the premium is deductible to the company.
It's very clean and easy. Since the company is essentially the husband/wife, this is a clear win especially if you're structured in a way that individual/family plans are not deductible.
To be sure...we want to first confirm we won't qualify for a tax credit on the individual market as that's a huge consideration.
So...how do we compare the rates and options?
This is the easy part!
We just need dates of birth, zip code, and best estimate for this year's income (AGI on the 1040 tax form for most people).
With this, we can quote:
Based on this, we can quickly size up the best value.
Again, there's no cost for our assistance as licensed Covered Ca agents and licensed group health agents with decades of experience and 100's of group clients.
Check out our Google reviews here to see what we bring.