Group medical insurance

Group health insurance is a mixed blessing for small businesses. It provides a guarantee of coverage for all of the full-time employees of a business but often at a price that is difficult for smaller firms to justify. The paperwork and documentation requirements are more complex than other types of health insurance yet this coverage remains important to millions of employees of small firms across the country.

Who is Eligible

The full time employees of any small business that reports wage taxes. Full time is usually defined as working 30 or more hours per week. A copy of the employer’s most recently filed state quarterly unemployment tax return is usually required as proof of eligibility. This intentionally excludes most husband and wife businesses.

While group health insurance is available to businesses located in all states, this article focuses primarily on coverage that is available online. In those states where coverage is not available online, it is necessary to contact the insurance company directly or use a commercial insurance broker to find coverage.

Mandated Coverage

Group health insurance plans are controlled by state law. Over the past several decades, lawmakers have loaded these plans with required coverage though an explosion of new laws. These improve benefits to the employee but significantly raise the price of the insurance. Items like maternity care, for example, are a significant portion of the cost of group health coverage even for a business composed entirely of single males. The net result of these mandated benefits is that business owners have less ability to custom-fit these types of insurance plans to their business. In response, more businesses are moving toward a Health Reimbursement Arrangement (HRA) plan rather than rely solely on traditional group health insurance. As a practical matter, group insurance is the only way an employee of a small business can get financial help from insurance for maternity costs or the cost of treating pre-existing medical conditions. The cost is averaged into the premium rate for all of the employees of the business, and to a lesser extent, all of the members of the group plan at other companies.

Price

The rates for group insurance are highly regulated by each state’s insurance departments. The goal of price controls is to ensure that highest rate charged to the unhealthiest customer with the highest claims cannot be too much more than the lowest rate charged to the best customer with no claims. In many states the rate for businesses with a high risk employee is typically regulated to be 140% of the preferred rate for an otherwise similarly situated business.

The average cost for full coverage is about $380 per month for singles and about $850 per month for family coverage, according to a survey by the Kaiser Foundation. Larger firms tend to pay more (for more coverage) and smaller firms tend to pay less (for less coverage). This choice seems to be a matter of budget rather than availability of benefits. There are plans that offer coverage at a lower price by trimming benefits or by being more picky in allowing businesses to enter the plan.

Finding a Provider

There are dozens of providers in each state yet each year fewer of these plans offer coverage though commercial insurance agents. Instead, these plans increasingly rely on in house sales representatives who focus primarily on firms with larger numbers of employees. Health insurance companies are increasingly unwilling to pay independent benefits brokers a commission to help small business customers select a health insurance plan. As a result, most small businesses never hear about many of the group health insurance plans that are available to them and many small businesses now have trouble finding available health plans or getting the information they need to make purchase decisions.

Freedom Benefits Association2 offers a service to help small businesses find and compare group health insurance plans. Since this service is not based on commissioned sales, a larger range of health plans are considered.

Basic Health Insurance

There is an easier and less expensive way for a small business to get started with a group health insurance plan that offers minimal benefits for a minimal price. A type of coverage called Basic Health Insurance provides exactly what the name implies at a lower cost and without the usual hassles of most group insurance. No professional help is required and employers can easily set this plan up by themselves without any knowledge of group benefit plans. There are no eligibility requirements for businesses located in an approved state. This benefit may be combined with other coverage, perhaps at a later date, to build a more complete coverage.