The New Small Group: 50 – 100 employees (Part 1)

The definition of a ‘small group’ changed in 2015, from 1-50 employees to 1-100 employees. Prior to this time, businesses with 50-100 employees fell into the ‘large group’ category. Most people do not realize that the medical benefits available – as well as the cost of those benefits – are very different between the two classifications of employee groups. This series of three articles will address these differences in the hopes of helping the New Small Groups understand their new rules and obligations according to the Affordable Care Act.

1. Rating –

a. Large groups are rated on a tiered system which makes adding spouses and dependents relatively affordable to add to an employee’s plan. However, members of a small group plan, including spouses and dependents, are rated on an individual basis according to their age, making the total premiums for a family more expensive.
b. Small groups are rated by community rating. Community rating is determined by the cost of medical care within a region as well as the age of the insured. California is divided into 19 rating regions. Members are then rated based on the age band in which they fall. There is one age band for ages 0-20. For ages 21-64, there is one age band per year. Rates are increased each year that you get older. With the small group rating, the difference between the rates for the youngest and the oldest insured cannot be greater than a 3:1 ratio.
c. Insurance carriers will consider the negotiation of rates when it comes to insuring a large group. This is not an option with small group plans.
d. Large group rates are also dependent on the claim history of the group. This determines their Rate Adjustment Factor (RAF). Claim history is not a factor with the small group, so they do not have a RAF.

2. Guaranteed Issue –

a. Small group insurance is guaranteed issue, which means that it does not matter if there have been medical issues in the history of the insured. They cannot be denied, nor can they be rated up based on their medical history. They are guaranteed to receive the insurance as long as the premium is paid each month. Large group insurance does take medical history into consideration, so someone can be denied coverage, or have their premium increased for being a higher risk.

3. 10 Essential Health Benefits – 

a. Large group plans typically do not include the 10 Essential Health Benefits (EHB’s). This is because large groups are allowed to negotiate which benefits they will offer their employees. It is not unusual for the benefits that are offered to have either annual or lifetime benefit limits.
b. Small groups do not have the option to negotiate coverage. They have the choice of 4 Metallic Level Plans: Bronze, Silver, Gold, and Platinum. All four of these levels cover the 10 EHB’s which have no annual or lifetime limits.

4. Out of Pocket Maximums –

a. Both large and small group plans have a maximum limit that an insured may spend in one calendar year. That amount varies according to the plan. All in-network EHB’s must accumulate to the Out of Pocket Maximum.

In Part 2, we will look at the Pay or Play Mandate for employer groups of 50 or more. For more information, call Pronoeo Insurance Agency at 800-495-2886 or contact us at [email protected].