Small Business - Group Health Insurance Plans
What does it take to get small group health insurance?
In order to get a Small Group Health Insurance Policy, you typically need to have been in business for about a year. This is not a hard and fast rule, though. The number of employees insured under the group health plan may also determine the types of coverage available to the employer, as well as the per-employee premium. Usually, a company with between 2 to 50 employees is classified as a small business and may offer small business health insurance plans.
Many companies have thousands of employees and will have health plans customized for them by a health insurance carrier. Many of these customized plans may include additional benefits that would be excluded from standard issue policies normally included in the small business health insurance plans. Some large corporations may choose to self-insure and only use the insurance carrier to administer the health plans and benefits. This is done by placing a sizable bond with their state and pulling from this account to pay medical claims via the administrating health insurance carrier. In doing so, the company is assuming the risk of major medical claims and acting as the insurer.
Most health insurance companies in the U.S. will have three classification levels based on the number of enrolled employees on the health plan: 1) small group, 2) mid-size group, or 3) large group. Although the number of employees that are required to fall into a specific category may be determined by the insurance company or by state legislation, there are common standards for these classifications. Formally created businesses, such as corporations or limited liability companies (LLCs) may be able to get a small business health insurance policy right away. Our health specialists at RJames Associates, Inc. will help navigate the various available group plans and help you determine which is the right plan for your business.
How many employees do I need in order to qualify?
This depends on which state the business is located. In some states, such as North Carolina, you need only one person, and in others you need two people. If you are covering yourself and a spouse, then that may count as two, especially if you list both as employees to be covered on the application.
What kind of paperwork am I getting myself into?
Expect to fill out an application that lists employees, and to some degree medical information on the employees. Since the group policies are almost always guaranteed issue, such that your business and employees can’t be turned down, the rate can vary according to the laws of the state - sometimes a little and sometimes a lot. Once you’ve signed up for a policy, you’ll probably need to provide annual paperwork such as company information (a profit & loss statement, etc.), and actually re-apply each year for coverage.
Won’t rates go up a lot year after year?
Yes, rates go up every year. But they may go up a different amount depending on the insurer that you choose, the state that you live in, and how much health insurance you use. For example, when I was working at a start up company a few years ago, someone at the company had a series of expensive operations for obesity. The amount of health insurance used by that individual drove up the rates for the group as a whole, and when that person left the start up, the human resources person shopped around for a new carrier to get a better rate so that the company would be starting over with a new experience rating.
Why do I want small business group health insurance?
With some of the most common questions answered already, you may be curious to know if you would be a good candidate for small business group health insurance. From my perspective, there are two top reasons to pursue a small group health insurance plan.
The first is as a benefit to attract and retain employees. If your competitors offer health insurance as a benefit to employees, and you wish to attract and retain similarly qualified people, then you may not just want but need to have a small group health insurance plan.
The second reason is if you or a key employee or dependent needs to get guaranteed issue health insurance because of a medical condition. In most states individual health insurance is medically underwritten and you may be denied coverage due to an existing condition, or even the use of prescription medicines for simple things like acne! A small group health insurance policy will ensure that everyone gets coverage, possibly at a lower cost than when buying individual health insurance for someone with a condition.
Shopping for small business health insurance
It’s more work to shop for a small business health insurance policy than an individual policy. In most cases you won’t be able to pick up quotes online. You’ll have a lot more companies and choices to make. You’ll have to work closely with a good health insurance agent licensed and in good standing in your state. My own small business policy experience has shown that in some cases the responses are slow from personal contact with agents, though that varies depending on the agent. And I got little to no response to my online queries for small business health insurance.
Hopefully you’ve got a better picture of when you might want to consider a small business health insurance policy. There’s more work to do with this type of policy, including the shopping and the annual renewal, than you’d have with either an individual policy or as an employee of another company. There are alternatives, too, such as employee leasing companies that take care of all of these mechanics and choices, which may be worth it for the busiest and best financed start ups.