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Requirements for Group Health Insurance

As an employer, you purchase a health plan and offer it to all eligible employees. There are two types of group health insurance and several factors you should consider when looking to purchase insurance.

  1. Benefits

    • The benefits to having a group health plan are many. As owner, you are able to claim tax deductions for your company. You get to choose a plan that fits your needs and your employees' needs best. And you offer an incentive for employees to stay with your business.

    Small Group

    • If you own a business of from two to 49 employees, you would be looking to purchase a small group policy. For a group of this size, you would be required by the insurance company to complete medical questionnaires for all eligible employees and dependents. An employee is considered eligible for coverage if she is listed as working full time. The health insurance coverage is considered a guaranteed issue, which means that your group cannot be declined based on the medical history indicated on the medical questionnaires.

    Large Group

    • A large group is composed of 50-plus eligible employees. Large groups are medically underwritten but do not complete medical questionnaires. Your rating is determined by the overall past claims for your company. If your business has too high of a medical risk factor, you may be rejected for coverage. If coverage is offered to any employee, it must be offered to all eligible employees, not just the healthy ones.

    Types of Coverage

    • While smaller groups are considered fully insured and regulated by the state, larger groups are able to take responsibility for their members' medical claims. This type of coverage is considered self-funded and is regulated on a federal level. Your business is self-funded when it uses funds that have been set aside to cover such events instead of paying premiums directly to an insurance company.

    Premiums

    • If your group has a high amount of past medical claims and high-risk cases, the insurance company may increase the premium by a percentage established by the rating band. A rating band gives the average cost for group claims and allows the insurance company to adjust premiums to offset the increased cost of medical care.

    COBRA

    • If your employees change jobs or lose coverage from your company, most states offer them a temporary continuation of your medical plan through COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985).

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