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Tips and Tools
You have been approached by an agent who suggests you replace your group health insurance program with individual policies for each employee. The numbers look great, but should you do it?...

It seems too good to be true, and for good reason. We actually asked the compliance agency of the Indiana Department of Insurance to give us some feedback on this idea. This was the reply from a deputy commissioner:

"There is no law or regulation (in Indiana) wherein an employer can sign a form that makes it 'legal' to replace a group health plan with individual plans.  This action is not illegal either, however.  The issue that makes it questionable to advise an employer to do this, is that the Department of Labor has issued guidance indicating that if an employer does this, the DOL interprets this as still an employer sponsored plan....then that (insurance) company would be expected to treat those plans as though they were group-based and HIPAA would apply.  As you can imagine, no carrier writing individual policies would accept or expect that."

That is why applicants for individual health insurance policies are asked to attest, under terms and conditions requiring their signature, that no part of the premium is being paid by an employer or reimbursed by an employer. Of course, the employee can lie, but their signature releases the insurance company of this liability, and puts is squrely on the back of the employer. A common ploy to get around this is to 'bonus the money to the employee' and not list it in the company books as going to insurance; however, that probably will not hold up if the DOL gets involved, or if you are subject to a privacy or discrimination lawsuit. Another, even more dangerous ploy, is an agent who offers this idea representing a 'limited benefits' program. You've probably seen them advertised on TV (we won't name names) offering extremely low rates for individuals and families, and even stating that this is real insurance! Of course, the reason the premiums are so low is because they limit the payouts as defined by medical conditions. Those payouts, for example $50,000 for cancer, obviously won't protect anyone.

So should you do it?... In the words of Clint Eastwood in Dirty Harry, Do You Feel Lucky?