Health insurance companies use one of three methods to calculate your group health insurance premium: medical underwriting, adjusted or modified community rating, or rating bands. The method used depends on the rules in your state.
- Plan deductible — The expenses a member must cover before the insurer covers expenses. The lower the plan deductible, the higher the premium.
- Out-of-pocket limit — The maximum annual amount the insurer will require a member to contribute toward the cost of care. The lower the out-of-pocket limit, the higher the premium.
- Coinsurance level — The percent of the allowed amounts for covered services that the insurer will pay after the deductible is met. Plans range 50% to 100%.
- Copayment for services — The fixed dollar amount that’s due when the covered service is provided. In most cases, this is the only cost that the member is responsible for paying — the plan covers the majority of the cost of services.
Employers have a choice to select the coverage and plans that are best suited for their business and employees. Group insurance plans can include a range of coverage, including but not limited to: Medical, Dental, Vision, Life, Short-Term and Long Term Disability, etc.
Finding the plan that works best for both you and your employees is a matter of balancing your coverage and budget needs.
Some insurance plans provide copayment coverage for most routine needs: annual physicals or monitoring a health condition. A plan with copayments covers doctors’ visits and prescriptions with a known copayment. The premiums for these plans reflect this level of coverage.
Other insurance plans offer a higher deductible, which results in a lower premium, but have higher out-of-pocket costs until the deductible and any coinsurance requirements are met. This type of plan provides coverage for significant medical expenses and can work for people who don’t anticipate frequent trips to the doctor.
Group health insurance is an employee benefit provided by an employer that offers medical coverage to employees and sometimes their spouses, partners and/or legal dependents.
For a small business owner, it’s important to understand the minimum participation requirements necessary for group plan eligibility. Though requirements vary by state, the following generally serve as an industry standard regarding group health insurance plan participation:
- A minimum of at least 75% of “net eligible” or 50% of “total eligible” employees participate in the health plan.
- “Total eligible” employees are the sum of all eligible employees (full-time working >30hr/week).
- “Net eligible” employees are the total eligible employees minus those eligible employees who have credible coverage through elsewhere (i.e. through a spouse, Medicare, etc.)
According to ACA, waiting time cannot exceed 90 days, and some states have adopted a 60 day maximum waiting period.
According to a Kaiser Family Foundation survey, small employers (2-199 employees) typically pay 86% of premiums for single-employee coverage, and 66% of premiums for family coverage. Midsized firms (200-999 employees) pay 88% of single-employee premiums and 82% of family premiums. Large firms (1,000-4,999 workers) pay 89% of single employee premiums and 77% of family premiums. 1
A carrier cannot deny coverage on the grounds of a pre-existing medical condition, depending on circumstances.
If you have a business that employs two or more people, you’re eligible to purchase group health insurance for your business. By pooling employees together, premiums for group health insurance plans can be less expensive than buying individual plans for your employees. In addition, employer-paid premiums are generally tax deductible. Your employees’ contributions to their premiums can be paid with pre-tax dollars, which lowers your employees’ taxable income as well as your payroll taxes.
On the other hand, individual plan premiums are determined by individual risk (may result in a higher cost), and individuals must reach 7.5% of their adjusted gross income in medical expenses in order to deduct any excess from their taxes.