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California group health insurance - General Group Guides - Employer Contributions

Employer Premium Contributions and California Group Insurance

           Now that you’ve decided to offer your Employees a California Small Group health insurance plan you need to figure out how much coverage you are going to give and what amount you are going to pay of the Employees and their dependents insurance premiums.  It is a difficult issue to address, as typically relatively large sums of money are involved.  Since Employee benefits are of the utmost importance to the people you count on to operate your company you need to step back and make a careful consideration of the bottom line vs. keeping crucial Employees happy.  There are a few different strategies you can use as an approach such as straight percentage, defined contribution, and plan and percentage option.  We’ll explain to you what each one is and the advantages and disadvantages.  We are happy to help you choose the best one for your specific situation.

Percentage Requirements             State of California regulation AB 1672 requires an Employer offering a regulated California Small Group health insurance plan to contribute a minimum of 50% of Employee portion premium.  For an Employee’s dependents (spouse & eligible children deducted on their tax return) the company can contribute anywhere between 0% and 100% with no minimum  requirement.

Defined Contribution       Most California health insurance carriers will allow an Employer to pay the Employer Contribution through a defined contribution dollar amount.  For example, you could choose to offer each employee $250 towards their health care.  A normal minimum requirment is set by the Underwriting Guidelines of the health carrier but normally $100 is the bare minimum amount allowed.  This is convenient for  budgeting purposes and does a great job of controlling your cost.  The downside is some of your employees may be older or have large families enrolling which leaves them with a much greater out of pocket cost for health coverage than your young, single members.  The decision then is how much are your employees worth to you. 

Plan and Percentage        Becoming more and more popular nowadays is the ability to pick a plan you the Employer are comfortable with budget wise and choose an acceptable percentage.  You then offer all or several other plan options available and alllow your employees to take the base plan offered, or upgrade and downgrade according to the individual employee medical need and financial position.   This strategy accomplishes several things not appearant immediately.  First, it defines the company budget and doesn’t leave you exposed to runaway premium costs.  Second, it allows employees with major medical conditions within their family to enroll in a stronger health plan and pay extra permiums out of paycheck which they will be happy to due for the better coverage.  Third, an employee with no health issues who doesn’t have a high income can elect a less expensive plan than the base option to control premium expense or eliminate it entirely. 

Choosing the right Employer Contribution to premiums can be a tricky proposition, and making a rash decision can be expensive and disastrous on morale and employee productivity.  Let us know your situation by filling out an inquiry form and we’ll help you build your premium contribution model.


Other important resources:
California Small Group health quote
California Small Group online doctor listing
California Group Enrollment and Eligibility Center

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