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Covered California Q&A

Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.

Small-Employer Benefits Issues

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Question: I have 25 employees and currently pay 65% of health insurance premiums. The (small business) tax rebate is non-existant for my company, so we are considering ending our coverage but paying the employees more, using some kind of bonuses/special compensation.

  • Can the employer demand proof that the insurance was bought?
  • Is it feasible to ask for this every month, or is the employee locked into an insurance contract when they first sign up?
  • Can the employer only give the “bonus” money to insured employees or are all employees entitled to it?
  • Under what circumstances can an employer give pre-taxed money in their paychecks?
  • Can the amount vary by employee?

Answer: Thank you for sending in your question, because these issues will be faced by most small-business owners over the coming year. I must start with a disclaimer: I am a licensed insurance agent, not a tax accountant or HR professional. Have said that, I believe I can answer most of the issues you raise.

  • Yes, you can ask for proof of individual insurance coverage as often as you like. The individual is insured on a month-to-month basis. They can cancel their coverage or lapse it by not paying their premium.
  • Doesn’t bonus compensation usually has strings attached - performance goals for example? I see no problem with requiring employees to maintain uninterrupted coverage as a condition of qualifying for the bonus.
  • There is no 100% safe way to withhold pre-tax money from an employee’s pay to reimburse individual health insurance premiums. Some claim that a Health Reimbursement Arrangement (HRA) can be used for this purpose, but I believe this will have to be tested with the IRS, before we can safely do it.

1 Comment

This is an issue most of our small business clients are facing. We see the small group market shrinking as it will make much more sense for some employers to shred their bill and send their employees to the exchange. The problem with this is that your employees may feel abandoned when you scrap their current plan. If you need any assistance educating your employees on why this is in fact better for them or if you need any help enrolling your employees, StoneTapert are the experts when it comes to creating custom employee benefits packages that utilize the new state exchange.

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