Michigan Small Business Health Insurance Information

The purpose of this guide is to provide a general overview of Michigan small business health insurance. The guide reviews small business health insurance options for Michigan small businesses.

Building a successful business is hard work. Finding affordable small business health insurance doesn’t have to be. All small businesses face special challenges when it comes to finding and getting health insurance coverage. Luckily, recent health care reform legislation provides small businesses with special opportunities to secure affordable health insurance.

Michigan Core Small Business Health Insurance Options

When evaluating your small business health insurance options in Michigan, you should immediately compare the costs and benefits of the following three options:

1. Offering Traditional Small Business Health Insurance Coverage,

2. Offering a Defined Contribution Health Plan that Reimburses Employees for Individual Health Insurance Coverage, and

3. Offering Nothing

Michigan Small Business Health Insurance Overview

There are two primary categories of health insurance for small businesses to choose from:

1. Individual health insurance, 

2. Group health insurance. 

1) Individual Health Insurance

Individual health insurance plans are health insurance plans purchased by individuals to cover themselves or their families. Anyone can apply for individual health insurance. Small business owners who can’t offer group coverage due minimum contribution (or minimum participation) requirements typically purchase individual and family plans for themselves and their families. In 2014, insurance companies will no longer be able to decline individuals for individual health insurance based on a pre-existing medical condition. Also, starting in 2014, there are new special tax incentives available to businesses and employees when employees purchase individual health insurance. In some cases, self-employed persons who purchase their own health insurance may be able to deduct the cost of their monthly premiums. When small businesses decide on the individual health insurance route, they often create a "Pure" Defined Contribution Health Plan to reimburse employees tax-free for individual premiums.

2) Group Health Insurance

Group health insurance plans are a form of employer-sponsored health coverage. Costs are typically shared between the employer and the employee, and coverage may also be extended to dependents. In certain states, self-employed persons without other employees may qualify for group health insurance plans.

Four Types of Michigan Small Business Health Insurance Plans

Whether you’re looking at individual health insurance or group health insurance, there are several different types of health plans available. The four you should absolutely know are:

1. PPO Health Insurance Plans,

2. HMO Health Insurance Plans,

3. HSA-Qualified Health Insurance Plans, and

4. Indemnity Health Insurance Plans.

The plan type that is best for you and your employees depends on what you and your employees want, and how much you are willing to spend. Here’s a brief review of the four popular types of health insurance plans:

1) PPO Health Insurance Plans

PPO or “Preferred Provider Organization” plans are the most common. Employees covered under a PPO plan need to get their medical care from doctors or hospitals on the insurance company’s list of preferred providers in order for claims to be paid at the highest level.

2) HMO Health Insurance Plans

HMO stands for “Health Maintenance Organization.” HMO plans offer a wide range of health care services through a network of providers that contract exclusively with the HMO, or who agree to provide services to members. Employees participating in HMO plans will typically need to select a primary care physician (“PCP”) to provide most of their health care and refer them on to HMO specialists as needed.

3) HSA-Qualified Health Insurance Plans

HSA-qualified plans are typically PPO plans designed specifically for use with Health Savings Accounts (HSAs). An HSA is a special bank account that allows participants to save money – pre-tax – to be used specifically for medical expenses in the future. Section 105 Healthcare Reimbursement Plans (HRPs) are often used in place of HSAs due to their advantages for employers.

4) Indemnity Health Insurance Plans

Indemnity plans allow members to direct their own health care and generally visit any doctor or hospital. The insurance company then pays a set portion of the total charges. Employees may be required to pay for some services up front and then apply to the insurance company for reimbursement. 

Michigan Small Business Resources*

Michigan Health Insurance Coverage:

• Group Plans: There is a maximum 6-month look-back/12-month exclusionary period for pre-existing conditions on enrollees that do not have prior coverage. Benefits will vary depending on the chosen plan. Pre-existing health conditions covered. 

• Individual Plans: Assorted plans depending on medical needs. There is a maximum look-back period of 60 months and a maximum exclusion period of 24 months for pre-existing conditions on enrollees that do not have prior coverage. Elimination riders are permitted. Limits on pre-existing health conditions may apply. 

• COBRA: Coverage available for 18-36 months depending on qualifying events. Benefits are what you had with your previous employer. Pre-existing health conditions covered.

• HIPAA: Benefits are based on program selected. There is no expiration of coverage. Pre-existing health conditions covered.

• HIPAA: Premium assistance that pays employer-sponsored health insurance or Cobra premium available. Pre existing health conditions covered.

 Michigan Health Insurance Eligibility:

• Group Plans: Guaranteed coverage for companies with 2-50 employees. Eligible employees must work at least 30 hours a week. Owner can count as an employee. Owner name on business license must draw wages from the company. 

• Individual Plans: Eligibility is subject to medical underwriting. If you are denied coverage for a medical condition, you may be eligible for AHIP, or PCIP. 

• COBRA: Guaranteed coverage available for employees who work for businesses with 20 or more employees. Employees have 60 days from date of termination to sign-up. 

• HIPAA: Must have had 18 months of continuous coverage and completely exhausted Cobra or state continuation coverage. Must not have lost coverage due to fraud or non-payment of premiums. You have 63 days to enroll. 

• HIPAA: Must qualify for Medicaid and have access to Employer-Sponsored Insurance or Cobra.

Michigan Health Insurance Monthly Cost:

• Group Plans: Costs depend on employer contribution and the + 20% of the Insurance company’s Index rate. 

• Individual Plans: Costs for Individual coverage vary. There are no rate caps. 

• COBRA: Costs vary between 102% to 150% of group health rates. 

• HIPAA: Premiums will depend on plan chosen. 

• HIPAA: Reimburses the full employer-sponsored insurance premium amount by check monthly. Pays the insurance company directly for people on COBRA or eligible small businesses. 

*Source: www.coverageforall.org

Michigan: Average “Single” Premium per Enrolled Employee for Employer-Based Health Insurance, 2011*

Michigan: Average “Family” Premium per Enrolled Employee for Employer-Based Health Insurance, 2011*

Michigan: Average “Employee-Plus-One” Premium per Enrolled Employee for Employer-Based Health Insurance, 2011*

Michigan: Average Per Person Monthly Premiums in the Individual Market, 2010*

*Source: statehealthfacts.org

Small Business Health Insurance Reform

Are you ready for health care reform ("ACA") in 2014?

Today, employers are more stressed than ever. Here’s why:

1. The business environment is uncertain,

2. Employer-sponsored health insurance costs increase annually, and

3. New fees and penalties take effect next year, and most employers don’t fully understand how this will affect their financials.

It is time for employers to examine the specifics of healthcare reform, and start thinking strategically vs. emotionally. Change is hard. However, employers that educate themselves and plan ahead can avoid severe financial impacts.

The more change and disruption your business can embrace, the more cost savings (for both the company and your employees) you will be able to realize over the long term. In order to embrace this change, you must be familiar with the key aspects of ACA. For many small businesses, the solution to healthcare reform is simple: Offer a “Business Expense Account” for Healthcare. A new vehicle, called a Healthcare Reimbursement Plan (HRP), allows employers to get out of the health insurance business, and simply give select employees monthly allowances to spend on their own health insurance policy in a state health insurance exchange.

Listed below are key ACA components to consider when choosing small business health insurance. 

Individual Health Insurance Tax Subsidies

Beginning 2014, individuals will have access to tax subsidies to buy private health insurance through the public exchange. These subsidies will be for those who enroll in a silver plan through the exchange. The subsidy caps the cost of individual health insurance at 2% - 9.5% of their household income if their household income is less than 400% above the federal poverty line. This equates to roughly $90,000 per year for a family of four.

Click here for more information on the premium subsidies.

Individual Health Insurance Tax Penalties

The Individual Mandate requires most individuals to purchase health insurance, or else pay a penalty on their tax return each year. The intention of the individual penalty is to reduce the "Free Riding" effect in the health insurance market (a free rider is someone who is healthy and does not purchase health insurance until they need it.

Click here for more information on individual tax penalties.

Small Business Health Insurance Tax Credits    

Small businesses with up to 25 full-time equivalent employees may qualify for a tax credit for offering employee health benefits. The credit is broken in to two phases. Phase 1 (2010-2013) includes a tax credit worth up to 35% of a small business’s health insurance costs.  Phase 2 (2014 and beyond) includes a tax credit up to 50% of a small business’s health insurance costs.

Click here for more information the tax credits.

Small Business Health Insurance Tax Penalties

Starting January 1, 2015, Employers with 50 or more full-time equivalents who do not offer minimum essential coverage can face monthly penalties if at least one employee uses a premium tax credit to obtain health insurance through the state health exchange. If you do not have more than 50 employees, you are not subject to these penalties.

Click here for more information on the business tax penalty.

The Future of Small Business Health Insurance - Defined Contribution Plans

Defined Contribution Plans allow employers to offer health benefits without offering a traditional group health insurance plan. Instead of paying costs for a specific group health plan, employers allocate tax-deductible monthly allowances for their employees to spend on private health insurance and other medical expenses tax-free.

Features of defined contribution plans include the following:

• Employee Choice – employees choose a health insurance plan that best fits their needs.

• Fixed Cost – employers control health care costs by allocating fixed monthly allowances for their employees.

• Savings – employers using Defined Contribution Plans typically cost less than group health plans which results in saving for both the employer and employee.

Next Steps – Evaluate Your 3 Core Options

Immediately compare the costs and benefits of the following three options:

1. Offering Traditional Small Business Health Insurance Coverage,

2. Offering a Defined Contribution Health Plan that Reimburses Employees for Individual Health Insurance Coverage, and

3. Offering Nothing.