A business having number of employees equivalent or less than 50 full-time employees is considered as a small business legally in the US while a company that has more than 50 full-time employees is a large one. Having this business classification, the laws that governs the group insurance policies also differ. What will be discussed in this article is only about small group health insurance which is very important to both employers and employees of a small business.
Legally speaking, small businesses in the United States are not required to provide small group health insurance coverage to their employees. However, there are some business aspects that persuades employers to provide insurances to their employees such as employee’s retention and how to attract new talents. However, when the Affordable Care Act (ACA) has enacted in 2010, it requires that the small group health insurance plans meet certain requirements. Different benchmarks has set to ensure that employees has certain level of benefit. Below are the different levels or metal tiers of benefits that are based on what the plan pays off the average total medical expenses.
- Platinum plans: These are the best ones, but also the most expensive. They usually cover as much as around 90% of medical expenses
- Gold plans: These plans cover 80% of medical expenses
- Silver plans: A silver plan would usually cover around 70% of medical expenses
- Bronze plans: These are the most affordable ones and offer the least benefits, paying just around 60% of medical expenses
These different metal tiers reflect the average medical expenses they may cover. Coinsurance is not the same with these metal tiers since coinsurance requires an individual to pay a certain percentage of the overall medical expenses.
How to Determine Premium Rates
Since ACA has been enacted, premium rates has also been determined in different way. They are now based on the updated community rating which takes limited factors into consideration to come up premium rates. These factors include age, residential location and if an employee is a smoker or a non-smoker. Let’s say for example, the premium rate of a 50-year old regular smoker male employee that has an existing cancer which is a major health condition has a higher premium rate that regular type employees. On the other hand, the rates of a 30-year old healthy employee and a 30-year old employee with diabetes would be the same. In addition, depending on the state where they belong, an employer may allow their employees to choose the insurance company and the metal tier they want for themselves.