What Are the Differences Between Large Group and Small Group Health Insurance?

If you’re a business owner investigating your group health insurance options, you will quickly realize you need to answer a series of questions to narrow your options. One of the first will be, “Do you need a small group or large group health insurance policy?” And you might also be curious about the differences between these two types of plans. Here are the primary differences you need to know…

Eligible Group Size. Generally, in California, a small group health insurance plan is designed for businesses with 1 to 100 employees.  Large group health insurance plans are intended for businesses with more than 100 employees.  Rules differ based on where you live, so make sure to check your state’s guidelines.  In many states, the break between small and large group is 50 employees.

Underwriting and Pricing. Insurance companies typically use community rating for small group plans, meaning the premiums are based on the average rates of the geographic area and the age of the employees. Pre-existing conditions cannot be factored into the pricing.Large group health insurance often uses experience rating, which means the premiums can be influenced by the claims history of the specific group. This may result in more variability in pricing compared to small group plans.

Plan Options. Insurance companies must offer certain essential health benefits in their small group plans to comply with the Affordable Care Act (ACA). These essential health benefits include services like preventive care, maternity care, mental health services, and more.While large group plans also provide comprehensive coverage, they may have more flexibility in the benefit design. They may offer additional optional benefits or have different cost-sharing structures.

Employer Contribution and Participation. In California, employers are required to contribute a minimum percentage towards their employees’ premiums to be eligible for small group coverage. Additionally, a certain percentage of employees must participate in the plan for it to be considered a valid small group plan.There may be more flexibility in employer contribution requirements and employee participation percentages for large group plans.

It’s important to note that insurance regulations can change over time. For the most up-to-date information regarding health insurance in California and the specific differences between small and large group plans,  consult with a licensed insurance broker. Give us a call and we’ll be happy to explain the differences between these plans, and help match you to the one that best suits your business needs.