Maryland’s Small Employer Subsidy Program
Enrollment begins in September 2008!
Program Summary
Eligibility Requirements
Amount of Premium Subsidy
Premium Subsidy Table
Application Process
FAQs
Establishing a Section 125 Plan Coming Soon!
Governor O’Malley proposed and signed into law a program to reduce the number of uninsured Marylanders. The Working Families & Small Business Health Coverage Act, approved during the Special Session of 2007 establishes the Small Employer Health Benefit Plan Premium Subsidy Program for small employers not currently offering health insurance to their employees.
The Small Employer Subsidy Program will
- provide an incentive for employers with 2-9 employees to offer health insurance for their employees;
- assist low and moderate income employees of these small employers in obtaining health insurance; and
- promote access to health care services and reward participating individuals for efforts to improve their health and/or manage chronic disease.
Please note: The program description on this web site contains details that are preliminary and subject to change. After final regulations are adopted, detailed information will be published on this web site.
Under the Small Employer Subsidy Program, a small business that has 2 to 9 full-time employees, has not offered health insurance to its employees during the previous 12 months, and meets wage and salary requirements established by the Commission, is eligible to receive a subsidy of up to 50% of the premium. Family coverage can also be subsidized. Once enrolled in the Program, the business is likely to continue to be eligible for the subsidy in following years. To receive the premium subsidy, the employer must establish a Section 125 premium conversion plan and must also purchase a wellness benefit as part of the health plan. The subsidy goes both to the employer and to the employee. Enrollment will be capped to stay within the Small Employer Subsidy Program’s approved annual budget.
Eligibility Requirements for the Business [top]
At the time of initial application, the business must meet the following requirements:
- The business has at least 2 and no more than 9 full-time employees. Full-time is defined as any individual who is not a temporary, seasonal, or substitute employee and works 30 hours or more per week. Owners and partners working more than 30 hours per week at the business count as full-time employees.
- The business has not offered insurance to its employees in the most recent 12 months.
- The average wage of the full-time employees is below $50,000.
Eligibility Requirements for the Employee
Any full-time employee who obtains health insurance through an eligible small employer’s plan may receive a subsidy toward the cost of employee-only coverage. A full-time employee seeking an additional subsidy for dependent coverage (spouse and/or children) must have a family income of less than $75,000. Part-time, temporary, and seasonal employees do not qualify for a subsidy.
Amount of Premium Subsidy [top]
The subsidy per employee depends on the health insurance coverage chosen and the average annual wage for the business. The premium subsidy is up to 50% of the premium for each participating employee, not to exceed a maximum amount set by the Commission. Each year, the Commission will publish a premium schedule on the Commission’s website showing the maximum subsidy amount for different types of coverage (employee-only, employee plus children, employee plus spouse, and family) and different average annual wage amounts.
Because some employers prefer health insurance that combines a high-deductible health plan with a tax-advantaged Health Savings Account, any planned employer contribution to an employee’s Health Savings Account is treated as an additional employer premium contribution in calculating the premium subsidy.
This table is for illustrative purposes only. Actual subsidy amounts will be published on this website in August 2008.
Proposed Maximum Subsidy Amount
Average wage |
Employee only |
Employee + child |
Employee + spouse |
Family |
|---|---|---|---|---|
<$25,000 |
$2000 |
$3000 |
$4000 |
$5000 |
$30,000 |
$1600 |
$2400 |
$3200 |
$4000 |
$35,000 |
$1200 |
$1800 |
$2400 |
$3000 |
$40,000 |
$800 |
$1200 |
$1600 |
$2000 |
$45,000 |
$400 |
$600 |
$800 |
$1000 |
$50,000 |
$0 |
$0 |
$0 |
$0 |
How is the Subsidy paid?
The insurance company will bill the State for the subsidy and will bill the employer for the total premium less the subsidy. The employer collects the employee’s share of the subsidized premium through payroll deduction, and pays the subsidized employer and employee share of the premiums to the insurance company.
Employers should first select a health insurance broker/agent who will assist with the subsidy application process. The employer will have to provide the required information in an application for health insurance plus additional information about the wages of each full-time employee. Based on that information, the broker/agent will be able to calculate the total subsidy per employee for different health plans as well as the total cost to the employer after the subsidy is applied.
The employer and broker/agent will work together to select a small employer health benefit plan that includes a wellness benefit. A wellness benefit must be included within the health plan in order for the plan to qualify for the subsidy. The employer also decides how much to contribute toward the premium for employee coverage, toward the additional cost of dependent coverage, and toward the employee’s Health Savings Account, if any. No specific employer contribution is required, but the employer contribution, supplemented by the subsidy, needs to be high enough so that 75% of the full-time employees without other health insurance will choose at least employee-only coverage.
The total subsidy is divided between an employer and the employee based on the contribution each makes toward the cost of coverage. The employer receives the total subsidy in the form of lower premium payments, and passes the employee’s share through to the employee in the form of lower payroll deductions for the health insurance.
Finally, the employer will establish a Section 125 plan within 60 days of enrollment in the Small Employer Subsidy Program. This plan can either be a premium only plan or a cafeteria plan. A Section 125 plan allows employee premium payments to be withheld from pay on a pre-tax basis, saving income and social security taxes for the employee and social security taxes for the employer. Please consult with a tax advisor about the tax advantages of a payroll deduction plan under Section 125 of the Internal Revenue Code.
Is this Small Employer Subsidy Program only available for a limited time?
No, the Governor and the General Assembly intend for this to be an ongoing program.
What happens when the Small Employer Subsidy Program reaches its capacity?
The subsidy for each participating business will be capped at its then-current total subsidy amount. No new applications will be accepted, unless the funding cap is increased. If you are interested in the subsidy, see your insurance broker/agent promptly about qualifying.
What happens if my business’s average wage increases?
Subsidies will be re-calculated annually at policy renewal to reflect the business’s average wage at the time of renewal, using the premium subsidy table in effect at that time. The maximum subsidy available phases out when average annual wage grows between $25,000 and $50,000.
What happens if my business grows?
Each business qualifies based on its size at the time of application. During the policy year, new full-time employees are eligible for the subsidy. The business pays the same premium per new employee and receives the same subsidy per new employee as all other currently enrolled employees. Once qualified, businesses remain eligible until they reach 20 full-time employees.
What happens at annual renewal?
Your premium will be re-calculated by the carrier based on the characteristics of the group. The subsidy amount will be re-calculated based on the average wage of full-time employees. These subsidies will then be reduced for businesses that have grown to 10 - 19 employees at the time of renewal. Businesses with 20 or more full-time employees will no longer be eligible for a subsidy.
What is a “wellness benefit”?
A wellness benefit consists of a Health Risk Assessment with written recommendations to reduce risk, and a financial incentive to promote preventive care, healthy behavior, or disease management.
Establishing a Section 125 Plan Coming Soon! [top]
