Many businesses receive their group health renewal sometime between November through January. Is your business one of them? Have you found yourself reviewing your group health plan renewal and pondering decisions about the upcoming year?
If so, you know how quickly those decisions must be made about your group health program. Most of the time, you have less than two months to agree to the terms of the renewal.
With such a short turn around for your renewal, it’s important to understand the group health renewal process. Knowing what information you will need to gather will help move the process along.
And understanding how your premiums will be calculated can bolster your confidence as you meet with your Employee Benefits Consultant – helping you formulate questions before you ever get together.
With over 20 years in the health insurance industry, I’ve had the pleasure of helping small businesses and large businesses. I have helped write fully-insured group health programs, and I’ve also helped businesses incorporate non-traditional options for their group health plan.
Even though we’re not sitting down together right now to discuss your options, I want to give you some tools as you start your journey toward creating your group health program this year.
This article explores the top 6 questions about small group health insurance. We’ll discuss:
- What constitutes a small group health program?
- When can employees enroll in your small group health plan?
- What factors affect small group health premiums?
- What information will your Employee Benefits Consultant need to prepare your group health proposal?
- Are there other options small businesses can consider other than traditional insurance plans?
- What should I look for in an Employee Benefits Consultant?
#1 Is my business considered a small group?
When you begin planning your group health insurance plan, you first need to determine if your business will be categorized as a small group or a large group.
If your company has between 2 and 50 employees, the insurance company will categorize you as a small group health program. If, however, your business is in California, Colorado, New York, or Vermont, a small group health program can have up to 100 employees.
If your business employs over 50 employees, your business will be categorized as a large group health plan. Again, for businesses located in California, Colorado, New York, or Vermont, a large group health plan will have over 100 employees.
#2 When can employees enroll in your small group health plan?
With a small group health plan, your employees can enroll in your group health program any time during the year.
Most of your employees will enroll in your group health plan when you renew your policy. This is the open enrollment period.
During the year, employees or their families may need to enroll in your group health plan. Some examples include:
- New employees – Any time you hire an employee, they have the opportunity to enroll in your group health when they begin employment.
- Spouse with a change in their health plan – If an employee’s spouse loses their employment and their health insurance, they have the opportunity to be added to your employee’s group health insurance at that time.
- Birth of a child – An employee has 30 days to enroll their newborn child on their plan.
- Marriage – You may need to add a new spouse or step-children to an employee’s group health plan.
- Court-ordered health care – Courts can order that a parent has to include a child on their health plan. This would need to take effect immediately.
#3 What will the insurance company base your premium on?
Group health insurance companies rate a small group health insurance programs differently from large group health programs. If you are a small business, your premiums will be based on the following:
Insurance companies place individuals into rating brackets for their group health products. For instance, a child age 0 to 15 may be in one bracket, 16 to 20-year-olds in another bracket, 21 to 40-year-olds in another bracket, etc.
The insurance company then assigns a premium rate to each bracket. As age increases, so does the premium rate.
To determine your premium, the insurance company will add up all of the premium amounts for each person covered by your group health plan depending on their age bracket.
Employee’s home zip code
Insurance companies are permitted to rate your premium based on the county where your employees live. Generally, if your employees live in an area with many providers and high-quality providers, your group health plan will have a higher premium.
For instance, if your employees live in a larger metropolitan area like Allegheny County, you can expect your premiums to be higher because of the higher number of providers in the area and the expertise of providers in that area.
If your employees live in a more rural area like Greene or Fayette Counties, you can expect your premium amounts to be lower due to the lower number of providers.
Location of the company
Much like your employee’s zip code, your business’s zip code also can affect your premium. Again, this is due to the amount and types of providers in your county.
Another contributing factor to your group health premiums is the industry assigned to your business. If your industry has a higher potential for injury, you will have higher premiums.
For instance, a roofing business would have higher group health premiums than a tech company. The potential for an employee to be injured on a roofing job is much higher than an employee who works at a desk in a tech company.
It is important to note that every insurance company examines these factors and determines its rates. Rates are not universal among insurance companies.
What about pre-existing conditions? Do they impact our group health premium?
When you enroll in small group health insurance, your plan is under the guidance of the Affordable Care Act (ACA). This act states that insurance companies are not allowed to consider pre-existing conditions in their premium calculations for small group health plans.
Because of this, your small group health insurance premiums will NOT be based on the health history of your employees.
If you are a large business, however, insurance companies are permitted to evaluate your employees’ medical histories in determining a premium rate for your business This is significant if your business wavers between being a small group and a large group.
#4 What information do I need to gather for my company’s small group health insurance proposal?
Having the information needed to apply for group health insurance gathered in one place and ready for your Employee Benefits Consultant makes the application process smooth and easy. If your consultant has to wait for the needed information, the process will slow down significantly.
For small group health plans, you will need to gather the following information.
You will need a total count of your employees. To determine the number of employees that your company has, you will average the total number of employees in the preceding calendar year. This count must include seasonal and part-time employees.
The employee count determines if your company is considered a small or large group.
It is possible for a company to be a large group one year and a small group the next year. These companies are “on the bubble.” Because of this, these companies need the guidance of a benefits consultant to ensure they are placed in the correct category.
If you are “on the bubble” and enroll incorrectly as a small business when you are actually a large business or vice versa, you may find yourself out of compliance with government policies or insurance company policies. This can lead to fines and even termination of your coverage.
Your employee census includes ALL of your employees. This includes part-time employees and employees who are waiving their health insurance enrollment.
For employees including their families on your group health plan, you need to provide information about their spouses and ALL of their children.
As part of the census, you need to supply the following information:
- First and last name of all your employees
- First and last name of spouses and children that will be enrolled on the health plan
- Home address for each employee, spouse, and child (You must also provide this for employees who part-time or waiving their insurance enrollment.)
- Relationship (Employee, spouse, child)
Sometimes a census will also ask about tobacco use. Tobacco use can be used by group health insurance companies to determine how they will rate your premium. The ACA still allows group health insurers to do this.
Most group health insurance companies will not require this information to rate your group health premium. This information has been difficult for companies to gather.
I also want to reiterate here that gender will not play a role in your group health premium rating.
You will need to provide a UC-2 or similar tax form from your company’s latest employee filing.
Why do insurance companies want this information?
Group health insurance companies use this information to audit a company’s submitted census against their employees listed on the tax form. Group health insurance coverage does not extend to 1099 employees or independent contractors.
Your tax form will ensure that only employees eligible for coverage will be included on your plan.
SIC Code and Company Address
A SIC Code (Standard Industrial Code) is a four-digit code assigned by the federal government to identify a company’s industry. Group health insurers use this information to determine how they should rate your company.
If you are in a more hazardous industry, the insurance company can apply higher premiums to your policy.
#5 Are there other group health options for a small group health plan?
While fully-funding your group health program is the most common approach to providing group health benefits for your employees, self-insurance, or participation in a Professional Employer Organization are two other approaches for small businesses.
While not a common option, a small business can apply to become self-insured.
In essence, rather than paying an insurance company to cover your employee’s medical claims your business sets up an internal program to cover your employee’s claims. Self-insuring is not the right fit for every company, but there are small group health programs that benefit from this option.
If your business chooses self-funding, you will need a stop-loss insurance company to cover your business in the case of a large claim that your business is unable to pay out-of-pocket.
The stop-loss insurance company can require medical underwriting for each employee and each of the enrolled family members. Medical underwriting is the process by which insurance companies review your employees’ medical histories to determine your premium rate.
If this is the case, you will need to complete a medical questionnaire for each individual’s personal health. These questionnaires will be reviewed by the insurance company to help them rate the employer.
These stop-loss insurance companies are under no obligation to offer coverage and can “decline to quote” your application if your employees have higher health risks.
Professional Employer Organization
One other non-traditional group health option that works from some small businesses is participation in a Professional Employer Organization (PEO).
In this scenario, your business can join a larger pool of people and enroll together in a group health insurance plan. Theoretically, when you do this, you can get better rates – rates similar to large group rates.
In order to get into a PEO, you must be medically underwritten. Your employees’ medical histories will be evaluated before you can join a PEO. For this reason, this option works best for individuals or groups that are generally healthy.
Also, small businesses that use this option are not required to use it for all of their employees. They can make this option available to a portion of their employees.
#6 What should I look for in an Employee Benefits Consultant?
Having a knowledgeable and hard-working Employee Benefits Specialist is crucial to creating a group health program that meets your expectations and desires, accounts for your employees’ needs, and is cost-effective.
A knowledgeable Employee Benefits Specialist should not only negotiate on your behalf with group health insurance companies, but also present you with other products and possibilities that may better suit your group health goals.
Your Employee Benefits Specialist should make sure you are in compliance with government policies.
A good Employee Benefits Consultant should take a proactive approach to help you understand your group health costs and create a long-term group health plan. Here are a few questions you should expect to discuss with your Employee Benefits Consultant.
- How have your benefits been included in your strategic plan?
- What is your 3-5 year expectation related to benefits and their costs?
- What is your annual budget for benefits?
By answering these questions, your Employee Benefits Consultant will be better equipped to work with the group health insurance company to construct a proposal suited to your needs.
Every company is different and your group health plan should be tailored to both your short-term and long-term goals and desired outcomes.
Looking For Ways to Reduce Your Group Health Costs?
One of my favorite aspects of being an Employee Benefits Consultant is that I get to help businesses of all sizes explore options that will provide excellent health coverage for their employees.
At Baily Insurance Agency, we explore various options that can help each company reduce its group health costs. With so many options available today, we tailor each business’s group health plan to meet the needs of their unique business!
With over 25 years of combined experience, our Employee Benefits team has the expertise to help you find the most effective solutions for your group health program.
Get in touch with us today so we can start working together to find the best group health solutions for your business!