Small Business Group Health Insurance EXPLAINED
Table of Contents
- Small Business Group Health Insurance
- The Beneficial Factor of Group Health Care
- Group Insurance Requirements
- State Regulations
- Small Business Health Insurance Resources
Small business group health insurance is one of the most popular means for medical coverage in the United States. Through the overwhelming majority of group plans, not only is the employee covered by the insurance, but his or her dependents (spouse and/or children) are also covered. This provides a priceless peace of mind in knowing that, should you or your family members fall ill, medical bills will not be overwhelming.
Most private employers in the country offer some type of health insurance for employees to buy into. It's not mandatory that all employers offer it - rules vary on a state to state basis. And it's also not mandatory that every employee working for said company receive that particular type of health care; but it is mandatory that insurance companies offer it to small businesses. Although, most employees will choose to go with their company's health care for multiple reasons.
For starters, there's a lot of money to be saved in premium prices. Group health insurance is more like a large pool. The insurance company will provide lower premium costs per individual if multiple individuals are signing up for the plan. Unless an anomaly occurs, the insurance company profits heavily and thus employees and their families get a break via prices.
It's also indiscriminate to a certain extent. With a group pool, the idea of "risk" is changed and based on the collective instead of the individual. For example, one person's medical cost could be enormous compared to the amount of money they pay in via insurance premiums. But the premium price paid by an entire group in comparison to the likelihood of high medical costs incurred by the group's members is much more economical for insurance companies.
This means that the dreaded preexisting condition isn't that much of a problem with group insurance. Nearly every employee can be covered if he or she so chooses, while also providing adequate care for their immediate family. Physicals and such are not required usually (not at all for family); employees just need to list out sufficient health history of themselves and their families.
It's important to note, however, that with small business group policies, insurance companies are not allowed to decline any applicant. So if you work for a small business, you're entitled to insurance regardless. With a larger business, where the self-insurance is acting as the group insurance, then you may be subject to rejection.
Health insurance companies appreciate the agreements with businesses. The lion's share of their billion-dollar-plus revenue comes by way of employees' paychecks, and companies that choose to constantly dispute claims and raise prices are quickly rendered extinct and are replaced with a more people-friendly company in today's harsh and competitive climate.
However, costs have still been on the rise for health care in general. With the ever rising costs of prescription medications and the higher fees doctors are charging, not only are premium prices costing more, but some companies are becoming increasingly fickle in what they're willing to provide. You'll find more HMO plans as a result, as opposed to PPO plans.
The difference: The insurance company has more say in where you go, who you see and what you receive through an HMO plan. A PPO plan provides more freedom of choice and thus has the potential to cost insurance companies more.
Another cost that is rising is the out-of-pocket cost of the employee for some treatment options and prescription meds. Companies are also struggling to keep up, and some are now requiring more per employee and even requiring them to have independent premiums for which they pay 100% of the cost (employers usually pick up part of the tab - a nicety, more than anything, that allows cheaper overall costs for the lot).
Even still, it is estimated that roughly 60% of all insured Americans have their health insurance through an employer. And while this number is decreasing, and changes in overall health care are uncertain due to America's newest (in work) legislation, there are no real signs that employer-based health care will experience significant drop off. It's still just more economical for the whole.
The Beneficial Factor of Group Health Care
The number-one benefit both employees and employers receive from a small group plan is, of course, the costs associated with the plans - this equates to money saved. Businesses thrive on money, and having more individuals involved in the health care pool is far more economical.
Truthfully, group plans are far more beneficial for business owners than employees, though. Since the group insurance is one of the biggest incentives for an employee and his or her family, many employees are often willingly accepting lower wages just to qualify for affordable insurance. This allows business owners to greatly benefit from the labor and still save money on insurance premiums.
There's also a fear of leaving a company due to the insurance being cancelled. When you start up with a new company, or are fired from or quit the previous, the insurance is no more. Even signing on with a new company and vesting in their group package will take time. There is a probationary period to go through, and for some individuals, preexisting condition clauses can be tougher with company B than they were with company A if B isn't a small group (guaranteed issue) plan, so this can lead to increased periods of uninsured time.
For these reasons, employees are willing to stay in poor working conditions longer just to have some health security. Any company offering good health insurance or simply a small business group plan usually keeps its employees longer altogether. This last fact is an incentive for companies to have good health care plans. It attracts more employees to their respective businesses and more want an actual career rather than a job.
Group Insurance Requirements
Typically, in most states in the country, health insurance companies will offer discounted group insurance packages to any business with two or more employees. This works out great for the small business world, especially considering that nearly 80% of all employed in America are employed via small business and not large corporations (ala Wall St. and Wal-Mart).
Prices of premiums will generally reduce based on number of overall employees. So the company with only a handful of employees will pay higher premium prices than the company with a few hundred employees. But the smaller company with the small business group plan will have better overall health coverage for its employees based on the guaranteed issue factor.
Employee numbers also often determine what types of plans are available to the group. A smaller employee base will have a small group plan, whereas a company with many employees will have a more customizable plan.
Small group and customizable benefits do differ, with the latter providing a better quality of care for a competitive price, but the care package being more discriminatory. Many large companies also choose to go the self-insure route, wherein the company is providing the health insurance to the employees, and the health insurance company is only handling the plans and benefits. In other words, employees are insured through their company and not their company's insurance carrier.
Self-insurance options offered by companies may have many more requirements for employee behavior, employee choice and other aspects of the care. And any employee would be expected to go through a more stringent qualifying process, since it's the company that would be on the hook to the insurance company.
There's also mid-sized group insurance, making for three categories in total:
- 1: Small group
- 2: Mid-size group
- 3: Large group.
These standards aren't set in stone, per se, but are simply classifications.
Small group insurance works in the opposite way from large group, while still supplying the same basic type of coverage. If a company qualifies as a small group, then the particular insurance company must approve every application for coverage, no matter what type of preexisting condition or health history a person has. Also known as guaranteed issue coverage, small group coverage is certainly desirable to most employees.
Small group coverage is also very appealing to businesses. In order to qualify for this type of coverage, companies need to prove that they're a legitimate business and have been in operation for a certain amount of time (varies by company and by state). Tax information, a business license, a taxpayer ID number and payroll records are also required, and insurance companies may even require more.
This information is needed to ensure that not just anyone claims they're a business to vest in the small group insurance package. If a small business is able to produce the abovementioned documentation, then it's required by law that insurance is given. Once the insurance is in place, any employee must be approved; however, depending on the plan, a six-month waiting period may be required before an employee can receive the insurance.
Small business insurance isn't customizable like large business insurance. Instead of working on a custom plan for employees, businesses are left to choose the best predesigned plan. Most insurance companies are going to have quite a few options to choose from that vary in price and practice, but once locked in with the package, all employees will have the same plan from the group pool.
Qualifications for small group insurance are basically the same state by state, with minor variations. However, other aspects of the insurance vary widely from state to state. For example, the ability of the insurance company and/or employer to raise rates on the health care premiums is limited to state law. Since insurance companies must compete within the state they're located, this means that every state's companies are different in most respects.
While some states only require two employees for a small group pool, others require more and can consider you a "large" group if you have more than fifty employees. There are even some state laws that allow a self-employed individual to file as a "small group" and receive discounted, guaranteed issue insurance.
Any insurance company has to operate under the rules and regulations of their particular state of operation. This means that a lot of businesses will relocate to states with kinder laws allowing them to receive a better deal on group insurance, and it also has many employees traveling to other states in an attempt to find better insurance.
You will need to look at the individual state laws while comparing insurance quotes to fully know which plan is best for you and your family or for your business. State laws are subject to change, and with the new legislation passed, they may soon change in all 50 states. Check for current information in your state of residence when proceeding with any insurance option.
Small Business Health Insurance Resources
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