Understanding Requirements and Premium Rates for Small Group Health Insurance
Any company or business having less than 50 full-time or full-time “equivalent” employees is legally considered a small company or employer. Similarly, any business with more than 50 full-time employees would legally be a “large” employer.
The laws governing group health insurance policies for small businesses and large businesses tend to differ quite a bit, and this article will be discussing the ones related to small group health insurance, which is considered a very important employee benefit.
Understanding the Coverage Requirements
First things first, small businesses aren’t “legally” required to provide group health insurance coverage to their employees. However, many small employers still do so simply because it’s an important factor when it comes to attracting new talent and retaining the top employees.
Also, while the federal and state laws may apply to small employers, it depends on various factors, such as the number of employees, the type of business and whether the coverage is being provided through an insurance company.
However, the Affordable Care Act (ACA) requires that the small group health insurance plans meet certain requirements. It has set different benchmarks to ensure that the employees get a certain level of benefit.
The different levels or “metal tiers” of benefits are simply based on what the plan pays of 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
You may also want to note that the above mentioned tiers reflect the average medical expenses they may cover. It isn’t the same as coinsurance, which requires an individual to pay a certain percentage of the overall medical expenses.
There are also several other requirements when it comes to group insurance coverage, based on laws that are covered under the ERISA, HIPAA and other such acts.
Determination of the Premium Rates
After the introduction of the ACA, premium rates are determined in a very different way than they used to be. Basically, they are based on the modified community rating, which takes limited factors into consideration for coming up with the premium rates.
Such factors include age, geography or whether the employee is a smoker or not. So for example, the rate would be higher for a 50-year-old male employee who’s a regular smoker and suffers from cancer and a major health condition.
However, the rate would be same for providing insurance coverage to a 30-year-old healthy male employee and a 30-year-old male employee with diabetes.
Finally, depending on the state, an employer may be able to allow their employees to choose the insurance company. Similarly, they may also be able to offer them different plan options within a particular metal tier (platinum, gold, silver or bronze), or different plans at different levels.