Employee Benefits vs. Employee Insurance

Employee benefits are not the same as employee insurance or workers’ compensation insurance. Let’s look at the differences between the two.

While employee benefits differ from employee insurance, or workers compensation, many times your commercial insurance agent provides both insurance and employee benefits to your business.

Employee benefits generally start with health insurance and group term life insurance. With the ongoing changes of the Affordable Care Act — frequently called “Obamacare” — make sure you work with your agent to understand your responsibility.

As part of the health insurance package, an employer may opt to provide vision and dental insurance.  In addition to life insurance, an employer may also offer group disability insurance.

A retirement plan is generally offered as an employee benefit as well.  Unlike workers compensation insurance which is required by most states, employee benefit packages are provided at the discretion of the employer and may be funded with a variety of options.

Generally, employers can provide these additional benefits to just the employee or also opt to cover family of the employees as well.  Cost is almost always the determining factor in putting together an employee benefits package.  With the cost of health insurance, it is reasonable to ask the employee to pay a percentage of the coverage, and perhaps even all of the family coverage.

Workers compensation insurance is business insurance which will provide wage replacement and medical coverage for an employee injured on the job.  Once you hire an employee a prudent business owner will consider worker’s compensation insurance.  Varying by state, this coverage is mandatory depending on different variables.  Ask your commercial agent the requirements in your state.

As your business grows, an employee benefits package may be necessary to attract and retain good employees.  Work with your commercial broker to develop and implement an employee benefits package that makes sense for your business.

Group Health Insurance

One of the benefits of working for a company is group health insurance. Such insurance is purchased by an employer and offered to the employees. Frequently, this group health coverage is also offered to immediate family members of the employee.

The employer usually pays a significant portion of the premium for its employees coverage in the group health plan, and the employee then pays the difference, generally as an automatic deduction from the employee’s paycheck.

Group health insurance policies and coverage vary from state to state because the insurance industry is regulated by the individual state.

Laws about how coverage can be issued to large groups are different than laws regarding the same coverage for small groups, and the way that premium rates are determined is also different. The requirements for sole proprietors purchasing health insurance coverage also vary on a state-by-state basis.

As of right now, businesses are not required to offer group health insurance. Individual insurance companies apply their own set of underwriting rules based on the number of employees and other factors. State and federal laws apply to varying degrees. These are based on factors including the number of employees, the type of business and whether an insurance company is providing the coverage.

One benefit of the group health insurance is the requirement known as guaranteed issue.  The federal HIPAA law mandates that no matter what pre-existing health conditions small employer group members may have, no small employer or an individual employee can be turned down by an insurance company for group coverage.  Some states and policies may have an exclusionary period for coverage of a pre-existing condition of generally six to twelve months.

In the majority of states, the law allows small group health insurance companies the leeway to determine their initial premium rates for each company using a process known as medical underwriting.

The remaining states make small group health insurance companies use processes known as community rating or modified community rating to come up with initial rates.  Additionally, coverage options and variables will also be a factor in determining the cost for the group health insurance policy.

You would do well to check with your state department of insurance for specifics in your area.