Buying group health insurance often requires significant time and effort and presents an overwhelming challenge for those unfamiliar with the process and the industry itself. The large number of variables to consider also results in multiple policy options, potentially exacerbating an already confusing decision-making endeavor. By becoming familiar with the general basics surrounding group health insurance, an employer's task of purchasing a new policy should be less stressful and more efficient.
Small Groups
The minimum number of employees usually required to qualify as a "group" is two. Organizations with more than two eligible workers --- but fewer than 49 --- remain classified as a small group. Minor differences usually exist in the rules for purchasing and obtaining group health insurance for small groups and large ones. Perhaps the most relevant rule difference involving small groups is the inability for insurance carriers to reject or decline coverage based on the health history of the individuals within the group, a feature called "guaranteed issue."
Large Groups
A company with 50 or more employees is considered a large group. Purchasing health insurance for a large group becomes more difficult because additional factors affect the policy that are irrelevant to small groups. Large-group health insurance policies aren't issued on a guaranteed basis, meaning carriers may reject or decline to insure a group based solely on the health history and previous claims of the employees.
Premium Rates
The prices for group health insurance coverage arise from a combination of factors, some of which differ from state to state. Small-group policies are usually medically underwritten, and premiums are affected by workers' responses to health questionnaires. Premiums increase if the group includes employees with certain medical conditions or other anticipated or expected treatment needs. Conversely, most large-group policy premiums are based on prior claims history, which the industry consolidates and condenses into a simple indicator called an "experience rating."
Coverage Continuation
Federal COBRA regulations provide for the continuation of health insurance benefits even after an employee's termination. However, small groups, typically those employing fewer than 20 workers, are usually exempt from COBRA laws. To provide similar protection for employees of these small groups, 40 states and the District of Columbia enacted their own legislation regarding continuation of health insurance coverage. Only Alabama, Alaska, Arizona, Delaware, Hawaii, Idaho, Indiana, Michigan, Montana, Virginia and Washington haven't passed laws permitting employees of small groups to maintain health insurance coverage after employment is terminated.
Industry Regulation
Group health insurance is regulated at the state level, with many federal guidelines or other national policies imposed on the industry. Each state government has its own insurance department responsible for creating and maintaining rules and regulations applicable to health insurance policies sold within its jurisdiction. Industry issues usually become the responsibility of the state insurance department, unless those issues involve a facet of insurance controlled or maintained by the federal government, such as COBRA.
