Small Group vs Large Group Health Insurance

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

Lets kick it off – group health insurance is distinct from individual coverage that a particular person or family would purchase on their own. Group health insurance is an employee benefit that allows employers to offer health benefits to their employees and their dependents, which can lead to a healthier, more satisfied workforce. With so many options and regulations, navigating the world of group health insurance coverage can be overwhelming.

Before exploring the specifics of large versus small group health insurance, it's essential to grasp the basic concept of group health insurance. Group health insurance provides coverage to a certain group of people, typically employees who work for a particular company or who are employed by a company that is eligible to participate in a group plan due to being a customer of a Professional Employer Organization (PEO) such as Justworks. 

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. 

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.

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 ones 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 both large and small-group plans. 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 are often limited to predefined coverage options, while 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 are shopping for group health coverage for your company, the number of employees you have and the regulations specific to your state will determine whether you qualify for small-group or large-group insurance. 

When you are a Justworks PEO customer, however, you may have more options than if you were searching for group health coverage on your own. 

When you become a Justworks customer, we’ll assess your health coverage needs and work to find the perfect fit – at that time and again each year when it’s time for health insurance renewals. Whether a large-group or small-group plan suits your company best, our personalized approach will focus on helping you select and secure health coverage that aligns with your company’s size and unique requirements. 

Rely on Justworks to Find the Right Group Health Plan

Justworks helps take the stress out of finding the perfect group health insurance policy for your company’s needs while also simplifying open enrollment and benefits administration and providing access to other types of employee benefits. 

Ready to let Justworks help you navigate the complex world of group health insurance? Reach out to us today and get started.