State-specific health insurance requirements create hurdles for companies trying to cover employees in different states under a single health plan. With this type of scenario becoming more common as companies expand geographically, new options enable businesses to offer health coverage to workers in multiple states. Learn about the challenges of having workers in multiple states and what health insurance solutions are available for these employees.
The Challenges Of Having Workers In Multiple States
Companies with employees that reside in multiple states face certain challenges that may limit their ability to access group health insurance benefits. Some businesses may not qualify for group health insurance due to state-specific requirements. Some insurance carriers permit coverage for out-of-state employees when a majority of eligible workers reside in the same state.
In both small and large group markets, carriers will generally offer health coverage to out-of-state employees via a preferred provider organization (PPO). However, groups that use regional carriers may not have an out-of-state PPO network. Of course, these restrictions do not apply to emergency situations. All health plans cover emergency services at any hospital in the U.S. regardless of where the state plan was purchased. For the majority of health plans, if an emergency is considered life-threatening, it will be covered as an in-network service.
Businesses with employees in multiple states may also face other challenges. For example, a company may want to find a way to cover all their employees, but the out-of-state workers may not qualify for a company group plan. If suitable coverage is not offered by the employer, employees may opt to purchase their own private coverage and demand that the company pay for a portion of the cost. Many small businesses struggle to navigate the complicated, multistate rules of the Small Business Health Option Program (SHOP) marketplace, making it difficult to decide on the best course of action for employees.
There are many aspects to consider when choosing health insurance with workers scattered in different states. Companies must consider how different or similar the health insurance needs of employees are in these different locations. Additionally, employers need to review the cost and physician networks of the various health insurance options in each region to determine which best aligns with the company’s goals and budget.
Choices For Health Insurance For Employees In Multiple States
If any of the challenges mentioned above sound familiar, there are four viable health insurance options that may be a suitable solution: a national plan, professional employer organizations (PEOs), multiple separate state plans, or a health reimbursement arrangement (HRA) account. Not every option will be right for every business; therefore, it is important to consult with an insurance professional before making a health insurance determination.
The following choices for health insurance may be suitable for businesses that have employees in multiple states:
Offering A National Plan
When a company has employees in multiple states, they may choose to offer a national plan. A national plan helps eliminate the need to keep track of different insurance rules, underwriting guidelines, and notifications in each state. With a national plan, every employee regardless of location receives the same group health insurance coverage.
The biggest problem associated with offering a national plan relates to availability. Just a small number of health insurance companies in the U.S. offer national group plans. This means that it is more difficult for employers to find these plans because of the limited selection. National plans generally also come at a higher cost compared to traditional group health insurance plans.
A PEO offers comprehensive HR solutions for small- and mid-sized businesses. Under this type of arrangement, the PEO has the task of sharing and managing many employee-related liabilities and responsibilities. Employers then have the opportunity to outsource many of their human resource functions, such as payroll administration, employee benefits, employment taxes, and workers’ compensation.
Having a PEO can prove invaluable for companies that have employees in multiple states. A contractual arrangement with a PEO typically comes with access to cost-effective, high-quality health insurance, as well as other employee benefits like dental care, vision care, and retirement benefits. Small- and mid-sized businesses can also turn to their PEO for support with strategic and critical HR management matters so that they can focus on core competencies, such as creating and selling products or services.
Many types of businesses can benefit from a PEO, including companies in real estate, health services, legal services, accounting, HVAC services, nonprofits, computer services, management consulting services, engineering services, insurance, wholesale, manufacturing, and other business services. However, not all PEOs offer the same level of quality. When choosing a PEO, it is important to select an organization with a strong track record of fiscal stability that has the ability to meet the company’s unique needs.
Offering Separate State Plans
Another option for businesses that have employees in multiple states is to offer multiple separate state plans to accommodate each employee. This method allows workers to receive health insurance coverage that is specifically tailored to meet their unique needs and preferences. Offering separate state plans is an excellent option for employees who suffer from certain illnesses and require more extensive coverage options.
The biggest downside with offering separate state plans is the amount of administrative work involved. It can be costly and time-consuming to manage multiple health insurance policies, especially for small businesses. Complications also arise when businesses are located in a state that has its own health insurance exchange. In this case, the business must create a unique account for each marketplace instead of using a single account via the federal exchange.
Another important factor to keep in mind is that the selection of health insurance options can vary significantly based on which health insurance companies provide coverage in each state. For example, small businesses may choose to use the SHOP marketplace to obtain health insurance for employees. Unfortunately, SHOP plans are not yet available in every state and some states maintain their own healthcare exchanges.
Finally, it is important to remember that each state has its own provider networks and the hospitals and physicians that are available to one employee may not be available to another. When comparing small business health insurance plans in each state, take the time to research what medical providers are available in each carrier’s network. If network options are limited, consider choosing a different plan or insurance solution.
Offering An HRA
A health reimbursement arrangement (HRA) is a type of employer-funded plan that reimburses workers for qualified medical expenses. Workers have the option to claim tax deductions for the reimbursements that they make through their plan. In addition, reimbursement dollars provided to employees are typically tax-free.
HRAs are set up by employers that decide how much to put into the plan. Employees can then request reimbursement for any medical expenses that they incur up to that limit. All employees who fall into the same class must be given the same HRA contribution. It is important to remember that an HRA is not an account, meaning employees cannot withdraw funds to directly pay their medical expenses. Instead, they must first incur the expenses and have them reimbursed later.
There are several rules pertaining to how HRAs are handled. First, HRAs can only be funded by employers that cannot fund the HRA via a salary reduction election. Employers have the option to fund HRAs on a pay-per-period basis or as annual lump sums. Second, an employer can also choose to allow balances or a specified portion of balances to be carried from one year to the next. If paired with a health plan, employees may be asked to contribute to the cost of health insurance premiums.
How Group Health Insurance Can Help
Ultimately, the health insurance solution that a business selects for its multistate employees will depend on factors like cost and coverage preferences. Group health insurance, or group-sponsored plans, remain one of the most popular options of health coverage for companies.
Group health insurance plans offer convenience for both employers and employees. Employers can choose which plans are offered, saving employees time from having to shop for plans. When the cost of premiums is split between employers and employees, both parties save money. In addition, premium contributions made by employees are not subject to federal taxes as contributions are generally made pretax.
Employers can also benefit from offering group health insurance through tax breaks. The Affordable Care Act (ACA) provides small businesses that offer group health insurance plans tax credits to help offset costs. To qualify for these tax credits, the IRS requires businesses to have fewer than 25 full-time equivalent employees, pay at least 50 percent of the coverage, offer a qualified health plan through the SHOP marketplace, and pay average wages of less than $53,000 per year for each full-time employee.
Group health insurance can also protect the workforce. Most business owners strive to protect the health and well-being of their employees. With group health insurance, employers can provide workers with essential medical benefits that cover preventative care services, maternity and newborn care, emergency services, and prescription drugs.
Work With New City For Your Health Insurance Coverage
Having employees that reside in different states can make providing benefits like health insurance a complicated endeavor. Fortunately, employees do not have to go without the medical coverage they need to remain happy and healthy. Options like national plans, PEOs, separate state plans, and HRAs make it possible for employees in multiple states to receive comprehensive healthcare coverage. For more information about how group health insurance works when employees live in different states, contact the insurance professionals at New City Insurance.