Small Group Health Insurance Overview
Each state has their own set of regulations that determine what size of business falls into the classification of "small business," making them eligible for small group health insurance. The common size for a small group classification is between 2 and 50 employees. In some cases, an insurance company may market a small group health insurance plan to a single individual that is self-employed. However, these one-man groups may not qualify for certain guarantees or regulations that apply to groups of greater numbers.
Any insurance company that offers small group health insurance must follow the regulations that are governed by the state in which the business maintains its physical address. If a business has employees or offices in several states, the regulations may be determined by the address of their headquarters. Because health insurance is state regulated, the laws that govern small business health insurance may vary so for purposes here, we will discuss the standard practices that govern most states. If you are looking for a small group health insurance plan, make sure to check with your State Department of Insurance or a knowledgeable small group health insurance broker in your state.
One of the primary advantages offered to a company that is classified as a small group is that their health insurance coverage is guaranteed by the health insurance carrier. This means that if a company meets the requirements of qualifying as a "small group," the insurance company must approve the application for coverage, regardless of the current or past health history of any of the employees. This is what is referred to as guaranteed issue coverage. The insurance company may ask health questions, but this is only done for the purpose of rating the premium to charge for the group health coverage.
To qualifying for a small group health insurance policy there will be certain eligibility requirements. You may need to prove that you are a legitimate business and have been in operation for a specific period of time. Business tax returns, a business license, a tax payer identification number, payroll records or other documents of proof may be required. This is done to prevent a group of people from calling themselves a small business solely for the purpose of obtaining guaranteed issue health insurance coverage. You may not need to have a paid employee to qualify for a small business health insurance policy. Partnerships may also be eligible by providing a copy of the partnership agreement along with other required documentation.
If a small business is able to provide the proper documentation and meet the qualifications to fall into this classification, their issuance of coverage is guaranteed. The insurance company may not decline for health reasons, regardless of the seriousness of the illness or the health care required for maintaining and treating this illness. However, certain types of health insurance plans may place a waiting period on paying benefits toward a pre-existing condition if the new member has not had prior insurance coverage in the past 6 months.
When obtaining a quote for small group health insurance, the insurance company will usually have a set number of health plans to choose from. The plans that are offered are standardized and not customizable for each group wanting coverage. The rates that are charged for each of these plans are typically published rates. The insurance company may make slight modifications to the published rates. The maximum percentages that these rates can be increased or decreased are determined by state regulations. This is one of the reasons that the insurance company may ask health questions during the application process. The health status of the applying members may cause the insurance company to increase the published rates, but only to the maximum percentage allowable by law. This rate increase or decrease percentage is referred to as the rate adjustment factor.
When shopping for a small group health insurance policy, make sure to review the plan offerings and rate quotes from several different insurance companies. A small business health insurance broker in your state may also be able to provide you with quotes from multiple insurance companies and assist you in understanding the differences. Although the regulations of eligibility are governed by law, some insurance companies may be more lenient in certain situations or in "rating up" you premium due to pre-existing conditions.
* Please refer to our legal terms and conditions for disclaimers pertaining to the content on this page.