Thinking about offering your employees health coverage? We’ve noticed 6 common things that slow down business owners on the path to getting small business health insurance:
- Do you meet carrier participation requirements?
- Do you have a copy of your most recent Quarterly Wage and Tax Statement?
- Do you have a payroll report that shows at least six weeks of payroll history?
- Do you have an official copy of your Articles of Incorporation/Organization?
- Do you have a documented listing of your company’s officers?
- Do you have an active Workers’ Compensation Insurance policy (prior to your desired coverage effective date)?
Don’t have it all in order just yet? Keep reading, and we’ll show you what you need (and why the carriers require it).
Carrier Participation Requirements
WHAT IT IS: Insurance carriers require that a percentage of a company’s eligible employees enroll (or decline, with valid waiver) in their small business health insurance plans. With most carriers, we’ve found 75% participation is the requirement for companies with fewer than 10 enrolled subscribers.
What’s a valid waiver? Valid waivers are when employees decline coverage because they already have coverage through a spouse or another employer. Depending on the carrier, employees with valid waivers are either counted toward the carrier participation requirement or excluded from the total employee count. One valid waiver can really make a difference!
Example 1: Tara’s Terrariums has 4 employees who work 25+ hours per week.
- 2 eligible employees enroll in a health insurance plan.
- 1 eligible employee submits a valid waiver because of coverage through a spouse.
- 1 eligible employee waives coverage without a valid waiver.
If valid waivers are included in the eligible employee count: Tara’s Terrariums meets the 75% participation requirement (1+1+1=3), and the carrier can issue them small business health insurance.
If valid waivers are excluded from the eligible employee count: Tara’s Terrariums doesn’t meet the 75% participation requirement. By subtracting the employee with the valid waiver, there are now 3 eligible employees. With only 2/3 employees enrolling, Tara’s participation is 66%.
Example 2: Bob’s Book Emporium has 8 employees who work 25+ hours per week.
- 3 employees enroll in a health insurance plan.
- 2 employees submit a valid waiver because of coverage through another employer.
- 2 employees submit a valid waiver because of coverage through a spouse.
- 1 employee waives coverage without valid waivers.
If valid waivers are included in the eligible employee count: Bob’s Book Emporium meets the 75% participation requirement (3+2+2=7), and the carrier can issue them small business health insurance.
If valid waivers are excluded from the eligible employee count: Bob’s Book Emporium also meets the 75% participation requirement. By subtracting the employees with valid waivers, there are 4 eligible employees. With 3/4 employees enrolling, Bob’s participation is still 75%.
WHY IT’S NECESSARY: Participation requirements ensure a level of profitability for the carrier, particularly when it comes to small business health insurance.
Quarterly Wage and Tax Statement
WHAT IT IS: The Quarterly Wage and Tax Statement is used by employers to report wages and payroll tax withholding information. As its name implies, the QWTS is filed every quarter:
- Q1: Jan 1 – Mar 31
- Q2: April 1 – Jun 30
- Q3: July 1 – Sept 30
- Q4: Oct 1 – Dec 31
You’ll want to send the underwriter the QWTS that’s closest to your group’s health insurance coverage desired effective date.
WHY IT’S NECESSARY: Underwriters for small business health insurance consult the QWTS for employees’ names. By law, businesses are required to offer insurance benefits to every eligible employee, so underwriters must account for all eligible employees at a company.
Payroll Report
WHAT IT IS: The payroll report shows the payroll history for employees at a company. Underwriters prefer as much detail as possible in a payroll report. Generally, the minimum amount of payroll required to get approved for small business health insurance is:
- Six weeks of payroll history for full-time employees
- Two weeks of payroll history for part-time, temporary workers or contractors who later convert to full-time employees
WHY IT’S NECESSARY: If a current QWTS is unavailable or an employee isn’t on it, payroll records provide underwriters with the complete picture. An exception to this is a company’s owners. Owners sometimes aren’t in a payroll report or the QWTS because they don’t take a salary. Underwriters still need to account for owners on official documentation, which brings us to…
Articles of Incorporation
WHAT IT IS: The Articles of Incorporation document is filed when a company gets incorporated (legally becomes a corporation). Note that this only applies to corporations; limited liability corporations (LLCs) file a document called the Articles of Organization, instead.
WHY IT’S NECESSARY: Underwriters use The Articles of Incorporation to help establish that the company seeking small business health insurance is, indeed, a legitimate business.
Documented Listing of Company Officers
WHAT IT IS: This official document establishes the names and addresses of a company’s owners and officers. It also contains a short description of the company’s type of business. These forms are known by various titles in different states. In California, we use a Statement of Information.
WHY IT’S NECESSARY: Underwriters use this document to confirm the names of owners and officers and ensure that their addresses match those provided in the employer application for small business health insurance.
Workers’ Compensation Insurance
WHAT IT IS: Workers’ compensation is a type of insurance that provides compensation and benefits to employees who suffer work-related injuries or illnesses, regardless of who was at fault. Workers’ comp protects employers from getting sued if any of their employees get hurt.
WHY IT’S NECESSARY: For legal protection, the majority of insurance carriers require a workers’ compensation policy in place for any group that has at least one W2 employee. Note that this policy must be active prior to a company’s desired effective date for health insurance coverage.
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