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SF Admin Office (415) 690-7601

Frequently Asked   Questions

How much does it cost to use an agent or broker?

In most cases there is no additional cost. For small group and individual health insurance in California, agents are paid by the insurance companies in commissions. The commission amounts are built into the premiums which are the same whether or not you use an agent or broker. For larger groups commissions are negotiated and are an itemized portion of the premium.

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Is buying online the same as buying direct?

Many people think that buying health insurance online is the same as buying directly from the insurance company. While some insurers will allow direct purchases, many of the online sites are simply managed by insurance agents and brokers, and often customers do not even realize this. If you are well informed and know what you want to purchase, this can be very a very convenient option but with several hundred different health insurance options available, it often pays to work with someone who can help you find an appropriate solution for your specific needs and, if you do need help with something, you have a real person to talk to. Since the cost is the same to the consumer under either option, why not let a trained and licensed professional do some of the hard work for you?

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Do we qualify as a Small Group?

In California the Small Group Health Insurance Market is defined by and regulated under Assembly-Bill 1083 (AB1083), which replaced most aspects of Assembly-Bill 1672 (AB1672). The specific requirements can be found in the text of the bill but in general to qualify as a small group, you must meet the following criteria:

  • You must be active - you should be shown as active on the California Business Portal
  • You must have between 1-50 eligible full-time employees. You may also, at your option, offer benefits to part-time employees (between 20-30 hours per week) however they do not count in terms of establishing eligibility which is based on full-time employees (>30 hours per week).
  • Husband & Wife groups and owner-only groups no longer qualify as they must have at least one full-time W-2 based employee. Certain exceptions to this may be available where one spouse is an employee (W2) but not an owner - please call us for clarification if you think this might be applicable in your case.

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What has changed in AB1083 compared to AB1672

Assembly-Bill 1083 was enacted in 2010 mainly to bring California Regulations into compliance with the Affordable Care Act (ACA). There were many modifications to the regulations within the new law but some of the key differences were:

  • Group Size 1-50: Small Groups are still guaranteed issue and guaranteed renewable but are now defined in terms of statutory (W-2) employees, so owner-only and husband/wife groups must have at least one statutory employee to qualify. If they do, qualify, they are also eligible to participate in the plan. In 2016 and beyond the size limit for small groups will increase to 1-100.
  • Elimination of age-banded rating: Previously rates were grouped into age bands such as 21-30, 31-40, etc and everyone within the age band would receive the same rate. Now there can be a separate rate for each member based upon their actual age (at the beginning of the policy year). The affect of this is that everyone will see a small increase each year as they move to a higher age but there won't be so much rate shock as we have now when someone hits a milestone like 40 and moves to a new age bracket. The exception to this is for dependent children under 20, who are all rated the same.
  • Member-Level Rating: Until now subscribers were grouped into tiers as an individual, individual plus spouse, individual plus children and individual plus family. One aspect of this is that all the rates were based only on the age (and sometimes zip code) of the primary subscriber so it did not matter how old the spouse was or how many children of any age were included. With member-level rating each family member is rated by their actual age so for large families or individuals with an older spouse, the rate could be substantially higher with this methodology. There is a limit of 3 children under 20 that will be charged the child rate, but all children from age 20-26 will be charged based on their age group. For example a family with 4 children under 20 and 2 children over 20 would be charged for 3 of the children under 20 plus the 2 children over 20. Previously they would have received the family rate so the difference could be very large in some cases.
  • Elimination of Rate Adjustment Factors: Previously the insurer could impose a small Risk Adjustment Factor (RAF) based on their underwriting criteria and the groups health status. These factors could be plus or minus up to 10% from the filed rates. Under the current regulations there are no adjustments so all eligible groups receive the same rate based only on the age and location of the members.
  • Participation & Funding Requirements: Insurers may impose requirements regarding minimum employee participation and minimum employer contributions and, At present all insurers do have such underwriting criteria, however there are important exceptions in the next point. conditions among new members.
  • Group Open Enrollment Period: Under the new law there is an annual special open enrollment period for groups (November 15-December 15) during which insurers must accept groups even if they do not meet participation and contribution requirements.

    This is not the same as the groups open enrollment period for its own members. It is not clear that the insurer will renew such a policy at the anniversary date so the practical administration of this aspect of the law will have to be worked out in time. In the meantime any group may enroll without participation or contribution requirements during the open enrollment period and it is presumed that even if they are cancelled at renewal for not meeting the underwriting guidelines, the worst case is that they would be able to re-apply with the same or a different carrier and be guaranteed-issue again.

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What is AB1672

Assembly-Bill 1672 (AB1672) was passed in 1992 and modified the California Insurance Code to define the small group health insurance market in California and specify certain aspects of how small group health insurance is marketed, priced and sold. The specific requirements can be found in the California Insurance Code but some of the key provisions are:

  • Guaranteed Issue: The right to buy coverage (regardless of industry, health status or age of employees, or any other risk factors)
  • Guaranteed Renewal: The right to renew coverage (regardless of changes in employee health status or use of services, or any other risk factors).
  • Rating Protections: Limits on how much carriers may vary rates based on the health status of employees or any other risk factors.
  • Portability: Limits on the ways in which carriers can exclude coverage for existing health conditions among new members.

The California Healthcare Foundation has a nice PDF that summarizes the Rules for the California Small Group Market - Download it here.

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Which expenses can be reimbursed from an HSA?

An HSA can only be used to reimburse health care expenses that qualify as federal income tax deductions under Section 213 of the IRS code. If an expense is not reimbursable under Section 213, it cannot be reimbursed by an HSA. You can use funds to pay qualified health care expenses incurred by yourself, your spouse, or a dependent for whom an exemption is claimed under Section 152 of the tax code.

Qualified health care expenses as defined by Section 213 include amounts paid for the diagnosis, treatment, or prevention of disease, and for treatments affecting any part or function of the body. The expenses must be to alleviate or prevent a physical defect or illness. Expenses for solely cosmetic reasons generally are not expenses for medical care. Examples include face lifts, hair transplants, and hair removal (electrolysis). Also, expenses that are merely beneficial to one's general health (for example, vacations) are not expenses for medical care.

See IRS Publication 502 for complete information on deductible medical expenses.

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