Small Group Health Insurance Rules

Top FAQs for Small Group Health Insurance Rules

What is small-group health insurance? | healthinsurance.org

Category: Medical Insurance Purchased By Businesses With 50 Or Fewer Full-time Equivalent Employees To Provide Health Coverage For The Employees And

Small-group health insurance is medical insurance geared toward groups – including businesses – with 50 or fewer full-time equivalent employees. (In four states, they apply to groups with up to 100 employees). Small-group plans effective since January 2014 are compliant with the Affordable Care Act's requirement of health coverage. Insurers cant' use a group’s medical history to set premiums for ACA-compliant small-group plans, and premiums for older employees cannot be more than three times those for younger employees.

In most states, small-group health insurance is medical insurance purchased by businesses with 50 or fewer full-time equivalent employees, to provide health coverage for the employees and their families. In four states, small group plans are sold to businesses with up to 100 employees (in most states, businesses with 51+ employees obtain coverage in the large group market, but in those four states, the large group market starts with businesses that have at least 101 employees).

Insurers can’t use a group’s medical history to set premiums for ACA-compliant small-group plans, and premiums for older employees cannot be more than three times those for younger employees. ACA-compliant small-group plans also have to fit into one of the four metal levels and cover the ACA’s essential health benefits with no dollar limits on how much the health plan will pay for a member’s treatment.

Businesses can buy small-group plans at any time of the year, directly from an insurance company, via a broker or private exchange, or from a state’s SHOP exchange (most states no longer have SHOP exchange plans available, but some do; in the District of Columbia, small group plans can only be obtained in the SHOP exchange).

In most states, insurers can impose participation requirements (in terms of the percentage of employees who sign up for the coverage) as well as employer contribution requirements (in terms of the amount of the premiums covered by the employer, as opposed to being payroll deducted). But there’s a one-month window each year, from November 15 to December 15, when small group coverage is guaranteed-issue even to small groups that don’t meet the normal participation or contribution requirements.

Purchase of a SHOP plan may qualify the buyer for the Small Business Health Care Tax Credit. In states that use Healthcare.gov, SHOP plans are now purchased directly through the insurance companies, or with the help of a SHOP-certified broker.

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What is Small Group Health Insurance and Who is Eligible? - Gusto

Mar 9, 2022 · There’s one pretty strong reason to use SHOP to purchase your small group coverage — you must go through SHOP if you want to qualify for the Small Business Health …

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Rules for California Small Business (Group) Health Insurance

Category: Small Group Health Insurance

California small business health insurance current rules and guidelines for business group health insurance with less than 100 employees.

If you’ve got fewer than 100 employees in your company and you’d like to offer employee benefits, then you should know about the guidelines the State of California has established for group health insurance. These guidelines implement the Affordable Care Act (ACA, or Obama Care) requirements. All of the insurance companies (Aetna, Anthem, Kaiser, etc.) must follow these rules. Click on the PDF image below and you’ll learn about:

While the ACA has standardized many aspects of group health insurance, there is still a lot of variation that allows you to set up the plans that will best meet the needs of your company and your employees. Contact us now and we can help you (800)746-0045.

This is a summary of the rules that govern small group health insurance plans in California. The rules described in this document include the “Obama Care” (Affordable Care Act, ACA) guidelines and are current and up-to-date as of April 2022. These rules apply to companies with up to 100 employees. If you offer a group health insurance plan – or you’re thinking of offering a plan to your employees – give us a call at (800) 746-0045 and we can become your agent/broker/advisor. We’re experts and we can help you.

All of the medical insurance companies must follow guidelines established by the Federal government and the State of California. Some of these rules may not make sense but we’ll try to explain the purpose of the rules in this summary. If you want to check out the source regulations see California Health and Safety Code (HSC) Section 1357.500; and the California Insurance Code (CIC) Section 10753 and CIC section 10755. The Federal regulations are 42 US Code Section 18024; Affordable Care Act Section 1304; and 45 CFR Section 155.20.

COVID-19 upset medical insurance company practices for two years, but now, the usual rules apply. California law (California Code Title 24, Ch. 38, Sec. 10 Stats. 2019) continues to impose a penalty of up to 2.5% of income on any Californian who doesn’t have medical insurance. California also continues to forbid a-sociation plans with SB 1375 and DMHC All Plan Letter 19-024. Legislators reasoned that a-sociation plans would weaken California’s strong market for small businesses.

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Group Health Insurance Plans As Low As $197 per Month

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Get quotes, compare plans and save on your health insurance costs. Find plans as low as $197 per month for yourself and your ...

Health Insurance for Small and Large Businesses - State and Federal Roles

Category: Health Insurance

Health insurance requirements have substantially changed between 2012 and 2017. So have state and federal roles in ensuring insurance delivery to both small and large businesses. Read about requirements, state and employer options and exemptions for individuals and small businesses.

Over the past decade or more, state and federal laws generally required that health coverage providers accept small employers applying for coverage. With groups such as small businesses, the insurer has determined a premium price based on risk factors balanced over the entire group, using general information on members of the group, such as age or gender. Small businesses often pay more for employee health benefits because they don't have the buying power of big employers. On average, small businesses paid about eight to 18 percent more than large firms for the same health insurance policy. Health coverage providers may charge different premiums to small employers based on the industry of the employer or on the employer’s prior health claims. As both workers and small employers feel the financial squeeze, fewer are able to afford to offer, or purchase, health insurance coverage. States most often review or approve policies that are offered directly to consumers or to small employers. Most states have had laws that require state-licensed health insuring organizations to provide coverage to small employers that want it, with some limitation on the rates that can be charged (e.g., restrictions on how premiums can vary based on age and health status).

Small Business Snapshot: Beginning in 2014, small businesses have been able to participate in small business health options programs or SHOP exchanges. These programs include new state-based health insurance purchasing pools or CO-OPs (in about one-half of the states) where small businesses are able to pool together to buy insurance. Small businesses are defined as those that have no more than 100 employees. States have had the option of limiting pools to companies with 50 or fewer employees. Companies that are currently defined as small businesses and grow beyond the size limit will be "grandfathered in" and treated like those still within the 100 or 50 maximum.

On Dec. 18. 2015 an unusual bipartisan action by Congress and the President 2016 postponed the Affordable Care Act’s (ACA) “Cadillac” tax on high-cost health plans until 2020. While the delay signals bipartisan support and momentum toward full repeal of the tax, those discussions will continue through the transition to a new administration in 2016. In the meantime, this two-year delay will, at a minimum, provide employers additional time to consider appropriate measures to reduce excise tax exposure. The legislation also addresses certain excise tax features as follows:

The thresholds for triggering the tax will continue to be indexed until the tax goes into effect in 2020 (the thresholds for 2018 were slated to be $10,200 for self-only coverage and $27,500 for other than self-only coverage);

Other ACA-related changes include a one-year moratorium on the ACA’s annual fee on health insurers’ net premiums (for US risks) and a two-year halt to the tax on sales of medical devices. These fees and taxes were likely to be passed on to employers through increased insured plan premiums and provider costs, and thus will be welcome relief to employers. [MORE]

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Small Business and the Affordable Care Act (ACA) | HealthCare.gov

The ACA established the Small Business Health Options Program (SHOP) for businesses and non-profits with 1–50 employees.

The Affordable Care Act (sometimes called the health care law, or ACA) established the Small Business Health Options Program (SHOP) for small employers (generally those with 1–50 full-time and full-time equivalent employees (FTEs)) who want to provide health and dental coverage to their employees.

Certain employers can enroll in SHOP through private insurance companies, or with the help of a SHOP-registered agent or broker. SHOP plans are generally the only way to qualify for the Small Business Health Care Tax Credit to lower premium costs.

If you offer health insurance to your employees, you must offer it to all eligible employees when they become eligible for health coverage. Learn about the 90-day waiting period from the IRS (PDF, 40.4 KB).

Employers must provide employees with a standard "Summary of Benefits and Coverage" (SBC) form explaining what their health plan covers and what it costs. The purpose of the SBC is to help employees understand their health insurance options. You could face a penalty for non-compliance. Get details about SBCs and see a sample completed form.

Employees can't contribute more than the annual dollar limit set by the IRS to their Flexible Spending Accounts. That limit doesn't apply to employer contributions to the employees' FSAs. Employers have 2 options to let employees carry over unspent FSA funds into the following plan year. Get more information from the IRS (PDF, 1.2 MB).

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Group Coverage Basics | Health Coverage Guide by Small Business Majority

Group medical coverage refers to a single policy issued to a group (typically a business with employees, although there are other kinds of groups that can get coverage) that covers all eligible employees and sometimes their dependents. Individual medical coverage, on the other hand, is a single policy issued to a single person or family.

The rules are quite different for group coverage versus individual coverage, in large part because the insurer’s risk is calculated differently. With individual coverage, the insurer has historically based its premium rates (or denied coverage) on the detailed medical history of the person or family. (The Affordable Care Act brought important changes to the individual market, including eliminating the ability of insurers to deny coverage based on preexisting conditions.)

With groups such as small businesses, the insurer determines a premium price based on risk factors balanced over the entire group, using general information on members of the group, such as age or gender. Insurers are required by law to offer coverage to small groups.

While there is no law requiring small business owners to provide health insurance, the Affordable Care Act makes substantial changes that small business owners should be aware of when deciding whether to purchase insurance for their employees. If you do choose to offer coverage, there are regulations you will have to follow—the most important of which we explain on this site.

Though large companies may face penalties if they do not offer coverage under the Affordable Care Act, small businesses with fewer than 50 full-time-equivalent employees will not be penalized if they do not provide coverage. If you have at least 50 full-time-equivalent employees but none receive an individual premium tax credit or cost-sharing reductions (both based on income), there’s no penalty—whether or not you offer health insurance.

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Laws Related to Health Insurance | Health Coverage Guide by Small Business Majority

Category: Health Insurance

Starting in 2014, the Affordable Care Act requires everyone to have health insurance or pay a penalty. Under the new law however, businesses with fewer than 50 full-time equivalent employees are not required to provide insurance to their employees. If you do offer healthcare coverage, you will be subject to both state and federal rules. This site gives a general overview of the most important regulations.

What it Does: Fully effective in 2014, the Affordable Care Act requires everyone to have health insurance or pay a penalty. However, businesses with fewer than 50 full-time equivalent employees are not required to provide insurance under the new law. Employers with 50 or more employees are subject to different regulations, some of which are discussed in this site. The law also makes important changes to rein in the cost of health insurance and offers tax credits to small employers to offset their healthcare costs. Since the ACA was passed in 2010, some states have passed several laws to match federal law.

Tax credits: Small business healthcare tax credits are offered under the law to help offset the cost of insurance. These tax credits have been available since the 2010 tax year. To qualify for a tax credit of up to 35% now and 50% in 2014 through the exchange, small business owners must pay at least half of employees’ healthcare premiums and have 25 or fewer full-time equivalent employees who earn an average of $50,000 or less per year.

What it does: At the time of termination, or under certain other circumstances, an employee may be eligible for the continuation of healthcare benefits as recognized under federal law, referred to as COBRA. Under federal law, an employer must normally employ more than 20 employees (both full-time and part-time employees count) to be subject to COBRA requirements. Also under federal law, an employee has 60 days after notification of their COBRA rights to sign up.

18 to 29 Months: COBRA benefits may be extended from 18 to 29 months for qualified beneficiaries who are totally disabled within the meaning of the Social Security Act at the time of the qualifying event (i.e., termination of employment or reduction in hours) or who become disabled within 60 days after COBRA coverage begins. For qualified beneficiaries who are disabled at the time of the qualifying event, extended coverage will terminate the month that begins 30 days after the date of final determination that the qualified beneficiary is no longer disabled, or after 29 months of coverage, if that occurs first.

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Employer Health Insurance Requirements | eHealth

Check out all the health insurance requirements and expectations for small business employers to make sure your employees are covered.

As a small business employer, you may be wondering what your health insurance requirements are. What are the criteria your small business needs to fulfill in order to offer health insurance, and what are your insurance obligations toward your employees?

The provisions of the Affordable Care Act (ACA) determine whether an employer is required to offer health insurance or not. In most states, small businesses with fewer than 50 full-time or full-time equivalent (FTE) employees have no legal requirement to offer health insurance. But many small business owners do to attract and retain good workers. As a small business owner if you decide to offer medical coverage, you’ll have to meet the following health insurance requirements.

Group health insurance plans are a form of employer-sponsored coverage. This means that a business is required to share the cost of group health insurance with employees. Typically, this cost-sharing element of health insurance requirements refers to a small business splitting monthly premium costs with workers. If you opt for a group health insurance plan, in most states, employers are required to contribute or pay at least 50% of each employee’s health insurance premium, although this may vary, depending upon the state in which your business is located.

If you offer group health insurance, you also have to allow plan-eligible employees to cover their dependents. Dependents include spouses, in some cases unmarried domestic partners, and children. Under the Affordable Care Act, group insurance plans are required to extend coverage to dependent children through age 26, whether or not they live at home. Generally, dependents cannot enroll for coverage unless the employee has enrolled.

However, you aren’t required to contribute to dependents’ health insurance premiums. Nevertheless, in most cases, employees can add qualified dependents to the group health plan coverage, regardless of whether you decide to contribute to dependent premium costs.

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Rules for California Small Business Health Insurance

Category: Small Group Health Insurance

All small group health insurance plans must have a minimum actuarial value of 60%. The actuarial value (AV) is “the percentage of total average costs for benefits that a plan covers.” A …

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The New Jersey Small Employer Health Benefits Program …

total. cost of a health benefits plan issued to the employer’s group. A small employer may, of course, elect to pay a greater percentage – up to 100 percent – but a carrier may not require …

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Small Employer Exception | CMS

Small Employer Exception - This page describes the requirements for a Small Employer Exception (SEE) from the MSP working aged rules and the insurer’s role in those situations. It also explains the procedure for Small Employer Exception Requests and includes a link to the Small Employer Exception Package in the Downloads Section at the bottom of the page.

If an employer, having fewer than 20 full and/or part-time employees, sponsors or contributes to a single-employer Group Health Plan (GHP), the Medicare Secondary Payer (MSP) rules applicable to individuals entitled to Medicare on the basis of age do not apply to such individuals. If such an employer participates in a multiple employer or multi-employer GHP and at least one participating employer has at least 20 full and/or part-time employees, these MSP rules apply to all individuals entitled to Medicare on the basis of age, including those a-sociated with the employer having fewer than 20 employees. However, the law provides that a multi-employer GHP may be granted an exception with respect to certain individuals entitled to Medicare on the basis of age and who are covered as a named insured or spouse (covered individual) of an employer with fewer than 20 full and/or part-time employees.

In order for an MSP Small Employer Exception (SEE) to exist, the multi-employer GHP must request an exception to the Working Aged MSP rules which must be approved by the Benefits Coordination & Recovery Center (BCRC). An approved exception will apply only with respect to the specifically named and approved beneficiaries a-sociated with a specifically named employer participant in a specifically identified multi-employer plan. This exception applies only to individuals entitled to Medicare on the basis of age. All approvals are prospective. To request Medicare approval of a SEE, the multi-employer GHP must submit a written request, with all required supporting documents to the BCRC stating that the plan seeks to elect Medicare as the primary payer for each beneficiary who is a-sociated with identified employers that participate in the specific multi-employer plan.

For the purposes of requesting the SEE, the term multi-employer GHP shall mean any trust, plan, a-sociation or any other arrangement made by one or more employers to contribute, sponsor, directly provide health benefits, or facilitate directly or indirectly the acquisition of health insurance by an employer member. (If such facilitation exists, the employer is considered to be a participant in a multi-employer GHP even if it has a separate contract with an insurer.) However, the GHP can, by agreement or otherwise, delegate the responsibility for requesting the SEE to the insurer.

The multi or multiple employer plan/authorized insurer should submit all requests for exceptions to the Benefits Coordination and Recovery Center (BCRC). Only those requests that are considered complete will be evaluated. Incomplete requests will be returned for completion and resubmission. In order to be considered complete, the request must be written and addressed to the BCRC using the Small Employer Exception (SEE) Package available in the Download section below.

The completed documents may be faxed or mailed. All information on the documents is required and must be fully completed and accurate for each covered individual for whom an exception is being requested. All new SEE requests must be accompanied by an employer certification. Make sure to read all instructions before completing the documents.

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Small Group Health Insurance | Mass.gov

Category: Small Group Health Insurance

211 CMR 66.00

Pursuant to M.G.L. c. 30A and the authority granted to the Commissioner of Insurance (“Commissioner”) under M.G.L. c. 175, c. 176A, c. 176B, c. 176D, c. 176E, c. 176F, c. 176G, c. 176I, c. 176J, c. 176O, and c. 176T, a hearing will be held at 10:00 a.m. on July 26, 2016, at the Division of Insurance (“Division”), Hearing Room 1-E, 1000 Washington Street, Boston, Massachusetts. The purpose of the hearing is to afford all interested persons an opportunity to provide oral and written statements regarding eight regulations that are the subject of proposed amendments or rescission. The docket number a-signed to each regulation and a description of the proposed actions to be taken follow.

211 CMR 38.00. Coordination of Benefits. The regulation establishes a uniform order for payment of health insurance claims when a person is covered by more than one plan that includes health benefits. Any plan that includes a provision for coordination of benefits must comply with the regulation. The Division’s proposed amendments, which are primarily based on a Model Regulation on Coordination of Benefits developed by the National A-sociation of Insurance Commissioners, update, reorganize and clarify the regulation.

211 CMR 43.00. Health Maintenance Organizations. The regulation addresses the administration and operations of health maintenance organizations authorized by M.G.L. c. 176G. The Division proposes to amend the regulation to simplify administration by reducing regulatory duplication and enabling the Division, when possible, to obtain HMO reporting information from sources other than the particular regulated party.

211 CMR 51.00. Preferred Provider Health Plans and Workers’ Compensation Preferred Provider Arrangements. The regulation addresses the administration and operations of preferred provider arrangements authorized by M.G.L. c. 176I. The Division proposes to amend the regulation to reduce the administrative burdens on such plans by providing greater flexibility with respect to their statutorily required reporting requirements.

211 CMR 52.00. Managed Care Consumer Protections and Accreditation of Carriers. The regulation provides managed care standards for health insurance through accreditation and procedures applicable to managed care health insurance carriers. The Division proposes to amend 211 CMR 52.00 to implement requirements mandated by the federal Affordable Care Act and Massachusetts legislative changes to the managed care statutes.

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NJDOBI | Small Employer Health Benefits Program (SEH)

DOBI Home Health Insurance Programs Small Employer Health Benefits (SEH) Shopping Information SEH Buyer's Guide About the Program/ Regulatory Activity Forms Program Data Individual Health Coverage (IHC) Medicare Supplement Under 50 Plan Management Information Consumer A-sistance - Inquiries/Complaints Topics A to Z

Home > Insurance Division > Health Insurance Programs > SEH Small Employer Health Benefits (SEH) Program The Small Employer Health Benefits (SEH) Program became operational in 1994 to ensure small employers: (1) have access to small group health benefits plans without regard to the occupation of the group, or the health status of any of the group’s members; and (2) have the ability to renew the coverage from year to year regardless of the group’s claims experience or any changes in the health status of the group’s members.

The SEH Program restricts carrier use of small group participation requirements, employer contribution requirements, preexisting condition limitation provisions, and factors related to rates for health benefits plans offered to small employers. The SEH Program establishes standard health benefits plans. In addition, the SEH Program includes a right for employees and their dependents to continue coverage when no longer eligible for the group’s health plan. This continuation right applies even when an employer is not subject to COBRA.

To learn more about coverage for small employers, see Shopping for Health Insurance information for a brief primer, a more detailed buyer’s guide, FAQs, a premium comparison survey, carrier contact information and more. Then, contact an agent or broker that sells group health insurance or a carrier that offers small employer health benefits coverage for help with your specific situation. Latest News Department Places Health Republic Insurance of New Jersey into Liquidation

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Health Insurance | Iowa Insurance Division

Category: Small Group Health Insurance

Learning more about health insurance allows you to better choose a health insurance plan that fits both your health needs and your budget. It's important to also review and compare the quality of care from hospitals and providers available under a health insurance policy. Health insurance is complicated, and there are many different options of coverage available from a variety of sources which are discussed in greater detail below.

Medicare is available to those age 65 and older as well as those with certain disabilities or diseases. Medicare recipients receiving traditional Medicare (Plans A and B) are eligible for Medicare supplement insurance. The Iowa Insurance Division’s Senior Health Insurance Information Program (SHIIP) offers free, confidential and unbiased resources to help Iowans make informed decisions on their Medicare and other health insurance coverage. For more information about Medicare Supplement rate changes, view this report or browse its data directly.

Medicaid is available for certain people based on health conditions or income levels and has three programs for those receiving coverage: Iowa Medicaid’s managed care program called IA Health Link; those covered by Medicaid Fee for Service program; and those uninsured children of working families covered by the hawk-i program.

Individual health insurance is insurance you purchase yourself – not through an employer or provided through a government health insurance program. Individual health insurance policies come in two main forms –they are available either on or off the federal Health Insurance Marketplace. Health plans compliant with the Affordable Care Act are based on Essential Health Benefits (EHB) Benchmark Plans.

If you are purchasing a policy that is on the federal Health Insurance Marketplace, you may receive help from a navigator, an a-sister, or an insurance agent certified to sell on the Health Insurance Marketplace. There may be tax credits available to you depending on your income that can help reduce the cost of purchasing a plan on the Marketplace. If you want to purchase a policy that is off the federal Health Insurance Marketplace, you can talk with an agent who is licensed to sell health insurance.

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Does employer have to offer health insurance to all employees

Category: Health Insurance

As a small business employer, you may be wondering what your health insurance requirements are. What are the criteria your small business needs to ...

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2022 Small Business Health Insurance Requirements

Category: Health Insurance

Health insurance is a complicated topic, especially for small businesses. Our guide on health insurance requirements for SMBs in 2022 can help.

In the battle for talent, benefits matter. Even though businesses with fewer than 50 employees aren’t legally obligated to offer health insurance, can you afford to risk missing out on preferred hires because you don’t offer health care benefits? Adding health insurance can also boost engagement and morale, convincing your best people to stick around longer.

Small business owners shouldn’t have to be insurance experts. The problem is, many in charge of evaluating benefits packages are in the dark about the myriad compliance requirements surrounding health insurance coverage. If your company plans to provide health insurance for your employees, it’s important that you understand your choices and the laws around them.

Some employers with more than 50 employees (in the previously reported calendar year) may be subject to shared responsibility provisions, which means that they must make a payment to the IRS if one or more employees receives a premium tax credit for purchasing individual coverage on the Health Insurance Marketplace.

QSEHRA – A Qualified Small Employer Health Reimbursement Arrangement, pronounced Q-Sara, is a new benefits option that has been beneficial for small business…that are aware it even exists. The arrangement lets small business owners put aside a set sum of money each month for employee premiums and medical expenses. Under this program, employees are responsible for paying they own medical bills or insurance premiums, but the employer then reimburses the submitted expenses with pre-tax dollars.

ICHRA – An ICHRA or Individual Coverage Health Reimbursement Arrangement allows employers to provide a monthly tax-free allowance for individual health coverage expenses. This enables employees to shop for insurance outside of an employer’s group health plan or when an employer does not offer health insurance at all.

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Affordable Care Act Tax Provisions for Small Employers | Internal Revenue Service

Some of the provisions of the Affordable Care Act, or health care law, apply only to small employers, generally those with fewer than 50 full-time employees or equivalents.

If you have fewer than 50 employees, but are a member of a group with a certain level of common or related ownership with 50 or more full-time employees, including full-time equivalent employees, you are subject to the rules for large employers.

You may be eligible for the Small Business Health Care Tax Credit if you cover at least 50 percent of your full-time employee's premium costs and you have fewer than 25 full-time equivalent employees. See the Small Business Health Care Tax Credit Estimator.

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Large Group vs. Small Group Health Insurance | A-sociation Health Plans

Category: Small Group Health Insurance

Large Group vs. Small Group Health Insurance | Association Health Plans

New regulation makes it easier for smaller employers to band together and offer a large group a-sociation health plan. Learn the differences between large group and small group health coverage.

Small businesses pay substantially more than large businesses for the same health insurance coverage. Therefore, it is not surprising that the higher cost of health insurance is the No. 1 concern of small businesses and the top reason why small businesses often do not purchase coverage for their employees.

A primary reason for the higher cost of small group health insurance is that a small business can’t bargain with the insurance company. Small group premiums are set by the insurance company, and once set, premiums are non-negotiable and can’t be discounted. By contrast, premiums for large group health plans are negotiated between the employer, the employer’s broker or benefit consultant, and the insurance company.

Another driver of the higher cost of small group health insurance is benefit mandates. Small group health plans, in contrast to large group plans, must cover all of the Affordable Care Act’s 10 Essential Health Benefits (EHB), which are very specific and detailed categories of benefits. The inclusion of EHBs in a health plan is further conditioned by the “benchmark” plan for the state, which sets additional requirements within each EHB category. Large employers have greater flexibility in the selection and design of health plans for their employees. Most significantly, large employers often incorporate digital health programs such as wellness, telemedicine and wearable health technologies into their health plans, which have been proven to improve employee health outcomes and drive down employer and employee premiums substantially over time. The most innovative digital health programs and technologies are typically absent from the small group market.

A third major cost driver of small group health insurance is an insurance rule called the “medical loss ratio” (MLR). For fully-insured plans, the Affordable Care Act requires that at least 85% of all premium dollars collected by insurance companies for large employer plans be spent on health care services and health care quality improvements. If an insurance company does not meet this threshold because their administrative costs or profits are too high, they must issue rebates to their health plan participants. By contrast, only 80% of the premium collected for small business plans must be spent on heath care services and quality improvements. Notably, this 80% MLR in the small group market is the same MLR percentage that applies to the very fragmented, high-touch, and paper-based individual insurance market. The higher medical loss ratio of large group plans basically makes large group health plans more affordable than small group plans for the same benefits since a smaller portion of premiums can be spent on profit, marketing, and administrative costs.

Due to the lower cost of large group plans for the same coverage, most businesses (if given a choice) prefer large group plans over small group plans. However, not all businesses can qualify as a large group. For most states, a business can only buy a large group plan if it has 51 or more full-time equivalent employees. An employee who works an average of at least 30 hours a week is considered full-time. So if a business has at least 51 employees working more than 30 hours every week, that business can qualify for large group coverage. Qualification is more complicated if the business has part-time employees. Each part-time employee will need to be converted to a full-time equivalent using a formula based on the 30 hour threshold. Additionally, some states set an even higher threshold of 100 employees in order for a business to access the large group market.

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