The Complete Guide to Buying Group Health Insurance in Arizona

Year after year, paid health insurance continues to be a top benefit workers want from employers today. A recent report by CNBC found more than half of workers say paid health insurance premiums are their most sought-after benefit. In an era where more than one-third of workers are considering leaving their job, health insurance benefits can help companies retain top talent. 

There are many other benefits to providing health insurance for workers, including:

• Tax advantages: Companies can deduct their contribution toward their employees’ health insurance premiums as a business expense.
• Reduced operating costs: Nearly one in five workers would accept a lower salary in exchange for covered healthcare. 
• Better work outcomes: According to the American Mental Wellness Association, happy employees are 12% to 20% more productive than unhappy employees, which can increase profitability at your company.

If you’re a business owner interested in keeping employees happy and healthy, this guide explains how to buy commercial health insurance in Arizona.

1. What Is Group Health Insurance?

Nearly 58% of non-elderly Americans get their health insurance through their employer, according to the KFF. Most large and midsize companies offer group health insurance to their employees, as do many smaller businesses. According to the United State Census Bureau, around 86% of U.S. private-sector employees work for employers that offer group health insurance. 

Group healthcare coverage refers to a single health insurance policy issued to a business that covers all eligible employees and, many times, their partners and dependents. Individual health insurance, contrastingly, is one policy issued to one person or family for health insurance. 

One of the most significant differences between the two types of health insurance is how the insurance company calculates risk.

• With individual health insurance plans, the premium costs are primarily based on the age and medical history of the person or family seeking coverage, although location and tobacco use also play a role.
• With group health insurance, the risk is spread over the entire group, using information such as age, gender and prescription history of the employees. The goal of an insurance company is economy to scale, meaning the more the company can spread risk among a larger group of people, the better the rates will be.

Employers can choose to cover the full cost of the group health insurance premium for their employees, or they may require their employees to pay a portion. When you’re trying to determine how much of the premium you’ll cover for your workers, keep in mind the Affordable Care Act (ACA) offers tax credits to eligible small businesses to help offset the cost of health insurance.

2. The 4 Ways to Buy Group Health Insurance in AZ

There are four ways to buy group health insurance in Arizona:

1. Fully insured
2. Level funding
3. Self-funding and partial funding
4. Professional employer organization (PEO)

Note: The first two options on the above list are going to be ideal for 95% of companies that want to buy group health insurance, according to commercial health insurance broker Ryan Calloway. Let’s expand on the basics of each option. 

#1: Fully Insured

In the fully insured market, insurance carriers don’t price the policy based on the health/pre-existing conditions of your employees. Instead, rates are based on two things: age and county. 

Naturally, this makes the premium slightly higher, because anyone who meets the criteria to deploy a group health insurance plan can gain acceptance into the fully insured platform. 

“The good thing here is that employers can’t be discriminated against due to the health of employees,” says Calloway. “The rates are what they are, and they’re only based on age and county.”

Who fully insured group health insurance plans are good for: Small groups (2-50 eligible employees) and those with pre-existing conditions

You should also know: If your group is more than 50 people, you can go the fully insured route, but then you’ll need to get your policy underwritten. That changes the landscape a bit and should involve a more detailed discussion with your broker.

#2: Level Funding

This is an excellent option if you have a generally healthy group of employees you wish to provide coverage for. In level funding insurance, the insurance carrier underwrites the policy based on your employees’ current and past health. The more people you have in your group, the greater potential for savings, because the carrier can spread the risk out over the group.

Who level funded group health insurance plans are good for: Companies with employees that number from 6 to 1,000 – the healthier your group, the more discounted your premium will be

You should also know: You can get money back at the end of the year if the total amount of claims is lower than what was projected at the outset.

#3: Self-Funding and Partial Funding

Self-funding is a great option for large employers that have 1,000+ employees. Self-funding works like this: you approach the carrier and essentially “rent” their network. As the employer, you pay for claims as they’re incurred, and, as such, you absorb the risk. You reimburse the carrier for the difference between the amount the employee is paying and the contracted amount between the facility and the insurance carrier.

Partial funding is the same idea, only in partial funding, you purchase reinsurance (also known as stop-loss insurance) to cap your risk. This can apply on an individual employee basis or the group as a whole (known as the aggregate).

• Individual employee basis: If any one employee incurs a major expense, you only pay whatever amount you set as your maximum employer liability. The stop-loss insurance then kicks in and covers anything above your maximum liability.
• Aggregate: The same principle applies, only it looks at the whole group. You set your maximum employer liability for the aggregate, and once you hit that, stop-loss insurance kicks in and covers anything above the cap.
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Who self-funded and partial funded group health insurance plans are good for: Large employers with 1,000+ employees

You should also know: You can tailor the self-funded or partial funded group health insurance plan however you like, setting things such as office visit and prescription copays.

#4: Professional Employer Organization (PEO)

A professional employer organization (PEO) exists to spread risk for smaller groups (15 employees or fewer). Instead of the benefits being under the employer’s tax ID number, you actually deploy benefits under the PEO’s tax ID number. Your group of employees joins a much larger group of people, thereby spreading the risk among the bigger group and, thus, reducing your rates. 

A PEO typically manages not just your company’s health insurance, but also your 401(k) and your payroll. PEOs provide human resources (HR) support, as well. 

Who PEO group health insurance plans are good for: Employers with small groups (15 employees or fewer) who want to offer rich benefits

You should also know: You’ll pay fairly steep administration fees for a PEO platform, typically $60 to $100 per employee on the payroll per month. This administration fee is typically the most significant reason why a PEO group health insurance plan may not be a cost-effective solution for most groups. However, it’s still worth exploring to compare your options.

3. The 5 Steps to Buying Group Health Insurance in AZ

Now that you understand the four options for buying group health insurance, let’s look at the five steps to actually getting your company enrolled in a plan. 

#1: Contact a Reputable Health Insurance Agent or Broker

There are many scenarios in which it won’t cost you extra to use a broker to buy group health insurance in Arizona. At AZ Health Insurance Brokers, we would love to set up a call to gain a complete understanding of your needs. Getting in touch with us is easy.

• Call us at 602.617.4107.
• Click the appropriate “Get a Quote” button on our website, and fill out the form.

In our first phone call, we’ll ask several questions to get a clear view of your group health insurance needs, including the size of your company. To be eligible for small business health insurance, a company must have two or more non-common law employees. Depending on the size, requirements for quoting will vary.

This determination is important, because the ACA limits what can affect the rates for small groups. Age of enrollees, tobacco use and location can influence small group rates, but medical claims history, health of enrollees and the business type cannot affect small group rates.

We’ll also discuss the types of employees you have, whether they work full- or part-time, and which of the four types of coverage would be the best fit.

#2: Fill Out an Employee Census Form

Your next step is to fill out what’s called an “employee census” form. Insurance companies use these to gather information about your employees, so they can estimate the healthcare costs for your group. This is how they come up with a rate quote.

The census form will ask for the following information for each of your employees, their spouses and their dependents:

• Name
• Date of birth
• ZIP code
• Gender 
• Whether the employee plans to waive coverage

#3: Get Quotes

Next, it’s time for your broker to get quotes from the insurance carriers they’ve identified would be the best fits for the type of group health insurance you need. An experienced broker knows the requirements set forth by the Internal Revenue Service (IRS), the ACA and the insurance carriers themselves, all of which affect the types of plans you can offer.

“We take the data you give us and bid to every carrier,” Calloway says. “This way, we can deploy the best tailored solution to meet your needs. Medical, dental insurance, vision, disability – we shop it all for you, to get you exactly what you’re looking for at the best possible rates.”

Remember that different carriers have different value-adds. Do you want a robust wellness program? Are you simply looking for the least expensive rates? Brokers listen to what’s important to you and your company culture, and then take the weight of finding it off your shoulders.

#4: Choose Group Health Insurance

This is a critical step. You and your broker should examine the plan details, including things such as:

• The waiting period for new hires: You get to set this.
• Eligibility restrictions: Arizona is a right-to-work state, and employers get to define eligibility restrictions. For example, you may offer health insurance to employees who work any number of hours. You’re not bound by the minimum 30 hours of work a week that many states require.
• Open enrollment: You get to decide how long you want the window to be for employees to make their elections.

Your broker can help you understand the details and quotes. Then, it just comes down to enrollment, which brings us to the final step.

#5: Enroll in Group Health Insurance

Once you decide on a group health insurance type, it’s time to enroll. Make sure to choose a broker who does this process electronically, as that makes the process faster and simpler. 

“Conducting the enrollment process online is not only easier for everyone, but it gets better engagement with employees,” Calloway says. 

AZ Health Insurance Brokers: Boutique Customer Service & Robust Resources

AZ Health Insurance Brokers acts as an extension of our clients’ HR departments. We offer an overall strategy for payroll, benefits, compliance, acquisitions and more. When you work with AZ Health Insurance Brokers, you receive the following tools.

Employee Navigator

We offer this robust platform to our clients at no cost. Employee Navigator is a benefits administration tool that facilitates benefits onboarding for new hires and open enrollment. 

It integrates with many payroll systems and Consolidated Omnibus Budget Reconciliation Act (COBRA) vendors, thereby providing a single solution for payroll, benefits, onboarding and paid time off (PTO) management. Everything is done digitally through this one platform, creating an exceptional experience for everyone involved.

Boutique Customer Service + Dynamic Strategy

“We provide white glove, concierge service,” Calloway says. “Our relationship doesn’t end once you sign on the dotted line, as it does with many other brokers. We offer a true, one-point-of-contact support system for all our clients. We appreciate our clients, and that reflects on the services we offer.”

AZ Health Insurance Brokers focuses on creative strategies that maximize our clients’ budgets. “We make sure employees understand their benefits, by talking with new hires, building open enrollment guides, and hosting virtual and on-site company meetings,” Calloway says. “Our setup procedures help mitigate increase, known as a claims redirection strategy. Everything we do is informed by your needs and priorities. We aim to build, expand and improve upon the process for all parties involved.”

COBRA/State Continuation

We have many solutions for COBRA administration. State continuation is a relatively new state law that’s very similar to COBRA but that requires all employers with 2 or more employees to offer state contribution, which is essentially COBRA. We have solutions for this, as well. They vary from client to client. 

>>Learn more: What Is COBRA? An Employee’s Guide to COBRA Insurance 

Even More Services

When you work with us, we also help with:

• Compliance: A cafeteria plan, also known as a section 125 plan, offers tax advantages for both you and your employees, but several documents are required to make sure your cafeteria plan complies with laws and regulations.
• Premium-only plan document: This form is required for all groups offering a pre-tax plan to employees.
• WRAP document: This form is required for all groups offering more than one plan and/or a variety of benefits.
• 1095/1094 reporting: This end-of-the-year tax document is required for level-funded and self-funded groups. 
• PCORI fees: This annual fee is associated with level-funded and self-funded groups.

Talk With an Insurance Professional to Find the Best Commercial Insurance for Your Needs

When you need to buy group health insurance in Arizona, first talk to an experienced broker who can further explain the above options and help you choose the best one for you and your employees.

“Insurance is a commodity,” Calloway says. “You can shop for it at 10 different places, and you’ll basically get the same rates. A broker adds value, acting as an overall fiduciary for your company and ensuring you spend your money in the best possible way.

“It costs nothing extra to consult with us to figure out what makes the most sense,” Calloway adds. “We will guide you through a somewhat confusing industry and offer expert advice on what’s appropriate for your needs.”

Not only can a broker advise you on which type of commercial health insurance is right for your business, but they can help you manage risk, generate price quotes, cross-reference policy packages, provide tech support with paperwork and help with compliance issues.

Contact AZ Health Insurance Brokers, Experts in AZ Group Health Insurance

Our mission is to gain a complete understanding of your insurance needs, serve as your strategic advisor and exceed your expectations. We are happy to answer your questions, explain your options and get you a free quote. Call us at 602.617.4107, or send us a message today.