• What is a Health Maintenance Organization (HMO)?
  • What is a Point-of-Service Plan (POS)?
  • What is a Personal Provider Organization (PPO)?
  • What is an Indemnity Plan?
  • What is a Health Reimbursement Arrangement (HRA)?
  • What is a Health Savings Account (HSA)?
  • What is a medical savings group account or "MSA"?
  • What is considered a full-time employee?
  • What if my definition of a "part-time employee" is more or less than 25 hours?
  • Does the law require that I provide health benefits for my employees?
  • If I offer coverage, must I offer it to all employees?
  • If I offer my employees a health benefits plan, may I impose a waiting period before they can enroll?
  • May a small employer provide coverage to independent contractors?
  • May a self-employed husband and wife obtain group coverage under the small employer health benefits program?
  • Under what circumstances may a carrier impose pre-existing condition exclusion?
  • Does prior coverage protect a member of my group from pre-existing condition exclusion?
  • How would carriers determine the premium for my group?
  • Are rates guaranteed for a specific period?
  • May a carrier ask my employees for health information?
  • Once I have purchased a small employer health benefits plan, may a carrier continue to require me to complete forms?
  • Is it possible to offer employees more than one health insurance plan?
  • Is it normal for employers to ask employees to pay a portion of the health insurance premium?
  • Does it make sense for me to have a deductible on my plan?
  • Is it true that employees can pay for their own out-of-pocket medical expenses with pre-tax dollars?
  • As a small employer, does it make sense for me to self-insure?
  • If I wanted to, could I band together with other employees to obtain coverage in the large group?
  • What is "self-insurance" and "stop loss" or "excess risk" insurance?
  • What can I do if I am unhappy with the rates being charged by my current carrier?
  • What is the impact on a small employer group with fewer than 20 employees with a full-time employee turning age 65 and becoming eligible for Medicare?
  • What is COBRA?
  • What is the New Jersey continuation law?

  • What is a Health Maintenance Organization (HMO)?
    An HMO provides most healthcare services for a prepaid premium cost. Generally, the only out-of-pocket expense for the patient is a small co-payment made at the time the services is received. In most HMO's, the patient must choose a Primary Care Physician (known as a "PCP" or Gatekeeper) who provide most services and must authorize the use of other services, such as hospitalization, referrals to specialists, testing, etc. Providers in the network generally provide all covered services, although an HMO may refer you to a non-network provider for specialized treatment. Patients who obtain healthcare services outside the network will generally pay the entire cost of those services, except in cases of medical emergencies.

  • What is a Point-of-Service Plan (POS)?
    An indemnity carrier, a health service corporation, or an HMO may offer a POS plan, but benefits may differ depending on which kind of carrier is offering the POS plan. As in an HMO plan, the patient must select a PCP. However, the covered person may choose at the time he or she seeks medical services whether to use a network or non-network provider. Network providers accept pre-negotiated fees from carriers as payment for various services, with the patient responsible for a co-payment at the time the service is provided. If the patient uses a non-network provider, he or she must satisfy the deductible and coinsurance requirements. If the patient chooses a non-network provider, he or she will assume a larger portion of the cost.

  • What is a Personal Provider Organization (PPO)?
    A PPO also incorporates a network of participating healthcare providers. However, there is no PCP to coordinate care, and patients may seek care from any provider in the network without a referral. Network providers accept pre-negotiated fees from carriers as payment for various services, with the patient responsible for either a co-payment, or deductible and coinsurance, depending upon the plan design. If the patient chooses a non-network provider, he or she will assume a larger portion of the cost.

  • What is an Indemnity Plan?
    Indemnity insurance, also called fee-for-service, has been the traditional form of commercial health insurance. Under an indemnity plan, the covered person chooses his or her own physician, specialist, hospital or other provider. Indemnity plans require that the insured person pay a predetermined portion of annual medical expenses out-of-pocket, called the "deductible". These plans also require the covered person to pay a predetermined percentage of additional annual expenses up to a preset maximum; that share is called the "coinsurance" requirement. Once the deductible and coinsurance requirements are met, the carrier pays all additional covered expenses, up to the benefit limits, for the rest of the calendar year. Under an indemnity plan, the covered person usually pays bills for services directly and then is reimbursed by the carrier.

  • What is a Health Reimbursement Arrangement (HRA)?
    An HRA is an arrangement through which an individual healthcare reimbursement account is set up with a fixed annual amount for each covered employee. These accounts are similar to a health care flexible spending account (FSA) because employees can submit their out of pocket medical expenses and get reimbursed from the accounts. However, there's a significant difference. An FSA is funded with the employee's money that is set aside on a pre-tax basis, while HRAs must be funded solely by the employer. Contributions an employer makes to the employees' HRA accounts are tax deductible and if some relatively straightforward rules are satisfied, any reimbursements from the accounts are nontaxable to the employees. Any unspent money in an HRA at year-end can be carried forward from year to year until it is needed (even if the employee retires or leaves the company in the mean time). With an FSA, if an employee misjudges how much to put in the account and has some left over at year-end, the excess reverts back to the employer.

  • What is a Health Savings Account (HSA)?
    HSAs are permanent, portable, tax-favored savings accounts available to anyone with a high-deductible health insurance plan. In their simplest form, they can be considered "super-sized" Medical Savings Accounts, but without the restrictions and complexities. HSAs provide hope for the clients - both individually and groups - who are seeking ways to control the seemingly endless upward spiral in health care and resultant premium costs.

  • What is a medical savings group account or "MSA"?
    An MSA is an account held in trust for the account holder. The employer or the employee makes annual tax-free contributions to the account which must be maintained in conjunction with a high deductible health insurance policy. The employee can draw on the account to pay for qualified medical expenses not covered by their health insurance policy or leave the funds to accumulate on a tax-free basis. Not all carriers in the small employer market offer high deductible plans that are intended to be used with an MSA.

  • What is considered a full-time employee?
    An employee that is actually working 25 hours or more per week.

  • What if my definition of a "part-time employee" is more or less than 25 hours?
    The law requires that you use the 25-hour standard for determining eligibility for health benefits plans. You may use another definition for other purposes, but not for health benefits eligibility.

  • Does the law require that I provide health benefits for my employees?
    No. However, if you provide group coverage, you must comply with the requirements of the law.

  • If I offer coverage, must I offer it to all employees?
    No. However, if you do not offer coverage to all employees, any distinctions in deciding which employees will be offered coverage must be based on classes of employees, and the classes of employees must be based on conditions pertaining to employment (e.g., job title, length of service, salary, etc.). Other kinds of distinctions may not be legal.

    In addition, you still must meet the 75 percent participation requirements based on the total number of eligible employees (i.e., employees working more than 25 hours per week). For example, in a group of ten employees, you would need eight or more employees covered either under your health benefits plan or plans or their spouses' plans (so long as their spouses' plans are not individual plans).

  • If I offer my employees a health benefits plan, may I impose a waiting period before they can enroll?
    You have the option of requiring a service-waiting period of up to six months.

  • May a small employer provide coverage to independent contractors?
    A small employer may elect either to cover all independent contractors or not to cover independent contractors. A person is an independent contractor if he/she: (1) is performing a service for the employer pursuant to a written contract for monetary or other legal consideration; (2) is working exclusively for the employer; (3) works 25 or more hours per week for the employer; (4) works on other than a temporary or substitute basis; and (5) the independent contractor relationship has been established to serve a substantial business need of the employer and is not intended primarily to obtain insurance coverage.

  • May a self-employed husband and wife obtain group coverage under the small employer health benefits program?
    Only if both are eligible employees of the business. A carrier may ask for tax records for you and your spouse as proof that you are both bona fide employees. If only one spouse is working full-time and there are no other eligible employees, the couple may obtain only individual health coverage.

  • Under what circumstances may a carrier impose pre-existing condition exclusion?
    If your group contains six or more employees, the carrier is prohibited from imposing pre-existing condition exclusion, except, in the case of late enrollees.

    If your group consists of two to five eligible employees, the carrier may decline to pay, for six months following the covered person's eligibility date for coverage, or the beginning of an employee's waiting period imposed by an employer, for treatment of a medical condition which was diagnosed and/or treated in the preceding six months. The "eligibility date" for an employee serving an employer's waiting period is the first day of the employer's waiting period.

  • Does prior coverage protect a member of my group from pre-existing condition exclusion?
    Yes, under most circumstances. An employee will be credited for any "creditable coverage". Creditable coverage includes individual or group insurance, and self-funded, or government funded (e.g., Medicare, Medicaid) health coverage so long as the coverage has not lapsed for more than 90 days. There are some exceptions in the law, so consult your agent, broker, carrier or lawyer.

  • How would carriers determine the premium for my group?
    Carriers may consider the age, gender, and family status of employees in the group, and the location of the business in New Jersey in determining the premium. Carriers may not consider the health status, nature of business, or past claims experience of a group in determining premium.

  • Are rates guaranteed for a specific period?
    That is up to the carrier. Ask the carrier or your broker or agent if rates are guaranteed and for how long.

  • May a carrier ask my employees for health information?
    Yes. However, health information cannot affect the premium and may not be used as a basis for denying coverage. It may only be used for the purpose of determining pre-existing conditions.

  • Once I have purchased a small employer health benefits plan, may a carrier continue to require me to complete forms?
    Yes. The carrier must require you to fill out an annual employer certification form in order to determine the number of employees and your participation rate. Failure to provide this information will result in non-renewal of coverage.

  • Is it possible to offer employees more than one health insurance plan?
    Yes. Employers can offer multiple plans, letting the employee choose the type of coverage they want (HMO, POS, PPO, Prescription coverage, deductible, etc.). Employers can make a pre-determined contribution (basic plan), then let employees decide if they want to pay extra for additional coverages.

  • Is it normal for employers to ask employees to pay a portion of the health insurance premium?
    As insurance costs continue to rise, more and more employers are asking employees to contribute to the cost. Even with employees making contributions, it is usually still the most cost-effective way for them to obtain coverage.

  • Does it make sense for me to have a deductible on my plan?
    Since most deductibles apply to hospital services, it could make a lot of sense depending on your group's claims experience. It is usually a small percentage of the group that has services performed in the hospital. Most people have deductibles on their homeowners and car insurance. Why not health insurance?

  • Is it true that employees can pay for their own out-of-pocket medical expenses with pre-tax dollars?
    Yes. Depending on the type of plan you set up, employees can pay for their portion of the premium and certain pre-determined expenses with pre-tax dollars.

  • As a small employer, does it make sense for me to self-insure?
    It may. Depending on the amount of employer contributions. Employers can partially self-insure with limited exposure through the use of HRAs. HRAs can also be a very effective tool in lowering premium costs.

  • If I wanted to, could I band together with other employees to obtain coverage in the large group?
    No.

  • What is "self-insurance" and "stop loss" or "excess risk" insurance?
    Some employers, especially large employers, opt to provide health coverage to their employees through a self-funded arrangement. Under such an arrangement, the employer is liable for expenses for the health coverage offered to the employees. Most employers that self-fund elect to purchase "stop-loss" or "excess risk" insurance for some portion of their potential liability from claims under the contract for health coverage. Stop loss and excess risk insurance is designed to reimburse the self-funded arrangement for catastrophic, excess or unexpected claims expenses. If an entity offers you a stop loss or excess risk plan and you are a small employer, make sure the limits in the plan, which are called "attachment points", are at least $20,000 per person and 125 percent of expected claims per year. If a plan is offered to you with attachment points lower than that, the plan should not be offered or renewed and you should contact the SEH Board.

  • What can I do if I am unhappy with the rates being charged by my current carrier?
    You may be able to switch to a lower cost plan offered by your current carrier, or switch to another carrier offering lower rates. One of the goals of the reforms was to provide for "portability". Portability enables you to shop around for coverage from another carrier without having to worry about new pre-existing condition exclusions. Remember, even if your employees or their dependents are considered poor health risks, all carriers must accept your group for coverage, and the premiums charged may not be based on health status or prior claims history.

    The premiums charged by carriers for the same coverage vary considerably. In general, you can reduce the premium by choosing a higher deductible in Plans A through E, or increase your copay under an HMO plan.

  • What is the impact on a small employer group with fewer than 20 employees with a full-time employee turning age 65 and becoming eligible for Medicare?
    There are several issues to consider, from the employee perspective as well as the employer perspective. First, eligibility for Medicare does not preclude eligibility for coverage under the employer plan. Thus, the employee may be covered under both Medicare and the group plan. Second, while the employee may be covered under both Medicare and the group plan, there will be a coordination of benefits. There are rules to determine which plan pays first and which plan pays second. In this example where the employer has less than 20 employees, Medicare is the primary carrier, and must pay first. The employer plan will be the secondary carrier.

    The purpose of a coordination of benefits is to allow a person to claim benefits from both Medicare and the employer plan, with the primary carrier paying benefits as if there were no other coverage, and the secondary carrier paying up to the difference between what the primary carrier paid and the amount of the allowable charge. Lastly, there may be an impact on the group rate. Carriers may, but are not required to, consider Medicare eligibility in establishing rates, recognizing the fact that as the secondary payor, there is a reduced liability.

  • What is COBRA?
    COBRA is an acronym for the Federal Consolidated Omnibus Budget Reconciliation Act of 1985. COBRA gives employees, spouses, and independent children currently enrolled under the State Health Benefits Program (SHBP) the opportunity to purchase continued health benefits for a limited period of time. COBRA applies to employees and dependents who would otherwise lose coverage as a result of a COBRA qualifying event. COBRA qualifying events include:

    • work termination for reasons other than gross misconduct
    • a reduction in work hours/leave of absence
    • divorce or legal separation of a spouse
    • death of an employee
    • dependent ineligibility (i.e. child marries, is over the eligible age of 23, or moves out of household)
    • Medicare becoming the primary insurance

    The cost of your coverage under COBRA will amount to the full group rate plus a 2 percent administrative fee.

    For more information on COBRA, click here to download PDF

  • What is the New Jersey continuation law?
    Pursuant to New Jersey law (N.J.S.A. 17B:27A-27), small employers must offer employees the option to continue their group health coverage when an employee is terminated, goes to part-time status, or ends employment. The employer may require the employee to pay for this coverage in an amount not to exceed 102% of premium. Employers with 20 or more employees (except for the Federal government and certain church-related organizations) must offer continuation of coverage under federal law, commonly referred to as "COBRA," which contains provisions which differ from those described below. State continuation of coverage is available to employees of small employers who are not subject to COBRA.

    Under State continuation of coverage, a terminated employee or one on part-time status has the right to continue coverage for up to 12 months. New Jersey small employers have an obligation under State law to notify their employees of the right to continue coverage at the time of termination or at the time the employee assumes part-time status.

    An employee who elects State continuation of coverage is required to provide his or her employer with a written request to continue coverage within 30 days of either the termination or the effective date of the decrease in work hours. An employee on State continuation of coverage pays his or her premium to the employer who remits the payment as part of the employer's regular premium payment. The decision to continue coverage under State law may be made by the employee only; dependents do not have an independent right to elect continuation. An eligible dependent may continue coverage only as long as the former full-time employee is covered as a continuee.

    The policy or contract issued to the employer, and the certificate or evidence of coverage issued to the covered employees, more fully outline the procedures that an employee must follow to effectuate State continuation of coverage.