Small Group Health VS. Raises for Employees for Individual Policies
As a small business owner, are you considering canceling your small group policy for the employees? Before you do, contact your tax professional and read this.
Why individual insurance is not recommended in most cases: One of the greatest benefits of offering group insurance is the tax break for the employer and the employees for the respective premiums paid. Some employers mention that they would like to eliminate the group benefits and give their employees a raise so they can apply those additional dollars to the health insurance. Employers seldom take into account the employer taxes at a tune of approximately 11% or more plus workers compensation costs. In addition, the employees also have to pay their own income taxes.
The other reason group insurance is better than individual insurance is access to doctors. Group policies have different contracts than individual plans. A small group Anthem Blue Cross PPO client can go to more doctors and hospitals than an individual health client with Anthem Blue Cross PPO individual plan. The individual plans simply have a smaller network.
That said,there have been a handful of scenarios where it made sense for the employer to eliminate the group insurance particularly where the entire workforce qualified for Medi-Cal or a large subsidy from Covered California. The subsidy was significantly more favorable than the portion the employer was paying towards the employees’ premiums.