Small Group vs Large Group Health Insurance
Selecting group health insurance for your business can feel complicated, but we’ve made it easy.
Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.
When exploring group health insurance options for your company, it’s important to understand the differences between large-group and small-group health insurance plans. We know how confusing this can be, so we’ve created this informative guide to help you understand key distinctions between large-group and small-group health insurance policies.
Understanding Group Health Insurance
Group health insurance is an employer-sponsored benefit that gives employees and their dependants access to health care and services. Some group plans are a better fit for larger companies and teams and some for smaller companies and teams. An alternative to traditional group plans is individual health coverage through a health insurance reimbursement model. With so many options and regulations, navigating the world of group health insurance coverage can be overwhelming.
We’re here to clear things up to help you understand the difference between small and large group plans, and even if a different approach might make more sense.
Small Group Health Insurance
What Qualifies as a Small Group?
Small group health insurance plans are designed for small businesses. According to the Affordable Care Act (ACA), a small group is generally defined as a business with 1 to 50 employees. However, some states – including California, Colorado, and New York – extend the definition to include businesses with up to 100 employees.
Benefits and Limitations
Small-group health insurance plans are subject to Affordable Care Act (ACA) regulations and any applicable state regulations. This means, for example, that the insurance company cannot exclude preexisting conditions from coverage and must provide certain preventive services to covered individuals without a copay.
A small group plan can be more expensive per employee than a large group plan. This is due to the fact that a small group plan covers a smaller pool of insured individuals than a large group, resulting in less bargaining power for the employer. However, this is not always the case, which is why it’s beneficial to explore all your coverage options.
Large Group Health Insurance
What Qualifies as a Large Group?
In contrast, large group health insurance plans are designed for larger businesses, generally those with more than 50 employees. Again, some states may have different definitions, with the threshold for this category of plan extending to businesses with more than 100 employees rather than 50.
Through a PEO, small companies can access large group plans they otherwise wouldn’t have access to by bringing multiple companies together under one larger shared policy.
Benefits and Limitations
Large-group health insurance plans must also comply with the ACA and state-specific regulations. Employers who qualify for a large group plan generally have more flexibility in plan design and greater leeway to negotiate with insurers than those in the small group category. Due to the larger number of insured individuals and the larger risk pool, large-group plans often provide more competitive rates than small-group plans.
Comparing Costs: Ratings and Premiums
Whether your company is eligible for a small-group or large-group plan, cost is a primary consideration when choosing a group health insurance plan. Different factors can influence the overall cost. For example, insurance companies use different rating methods to determine premiums for small and large groups.
Small group plans: For small groups, insurers must use the adjusted community rating method, which prohibits them from basing premiums on health status or claims history. Instead, premiums are determined by factors such as age, location, and tobacco use.
Large group plans: Large group plans can be subject to experience rating, which allows the insurer to evaluate a group's past claims history to set premiums. This can be advantageous for groups with a healthy employee base but can result in higher premiums for groups with poorer health histories.
Small vs. Large Groups: The Impact on Employees
The differences between large and small-group health insurance aren’t limited to the impact on the company. It’s also important to consider how employees may be affected.
Coverage Options
Regarding the impact on employees, the type of group health insurance plan can affect the coverage options available. Small group plans can be more limited to predefined coverage options. Large group plans, due to their negotiating power, are more likely to offer a broader range of benefits and potentially more comprehensive coverage.
Employee Contributions
Employee contributions towards premiums can also vary. With small-group health insurance, employees may face higher premium costs if the employer cannot afford to cover a large portion of the premiums. In large group plans, employers often have the ability to absorb more of the premium cost, potentially reducing the financial burden on employees.
Choosing the Right Group Health Coverage for Your Business
When you're evaluating health coverage for your business, qualifying for a small group or large group plan is only one part of the decision. You may also want to explore individual coverage options like an Individual Coverage HRA (ICHRA). Comparing all available approaches can help you feel more confident that you're choosing the coverage that best fits your business today with the flexibility to adjust as your needs evolve.
When you become a Justworks customer, we’ll assess your health coverage needs and work to find the perfect fit. Rather than steering you toward one type of plan, we'll evaluate the coverage options across small and large group plans and individual health reimbursement to help you make the best choice for your team and budget.
As your business grows, we'll help you review your options at renewal to determine whether your current approach is still the best fit or another coverage model meets your needs better. That means you have expert guidance to make informed decisions without starting your search from scratch each year.
Rely on Justworks to Find the Right Group Health Plan
Whether you're comparing small group and large group health insurance or exploring alternatives like individual health coverage, Justworks simplifies the decision. We give businesses access to all three major coverage models, expert guidance, and year-round support to help small businesses like yours choose the approach that best fits your team today.
Ready to let Justworks help you navigate the complex world of group health insurance? Reach out to us today and get started.
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