Many public employees take for granted that their health insurance coverage will come from their employer. The district chooses the insurance provider they want to work with, and employees simply select one of the plans available to them. The process is simple. However, if you’re the person deciding which insurance providers and plans your district offers, the decision can get complicated.
California public entities have several choices for health care coverage for their employees. Some small entities choose not to provide health care coverage at all. This may make it difficult to attract employees but might be appropriate for smaller entities with part-time or limited full-time positions. In this case, employees can opt for individual insurance offered by private brokers or Covered California if not already covered on a spouse’s or domestic partner’s plan.
Most larger entities, however, will elect to obtain group coverage. In this article, we’ll look at the two major types of group insurance — large group and small group — to help you understand your health plan options and what would be best for your district and your staff.
What is Group Coverage?
Group health insurance plans are offered by an organization to employees and their dependents. Once the employer selects an insurance provider, management or human resources will select a variety of plans with different levels of coverage and costs, from which employees may choose. Upon hire – often after a short waiting period – or, for established employees, during open enrollment at the end of each renewal year, employees can opt into the plan that’s right for them.
Premiums for these health policies are adjusted annually and billed monthly. Employers are required to contribute at least a portion of the cost, and any remainder is deducted directly from employee paychecks. These are typically tax-exempt deductions and lower an employee’s gross wages for income tax purposes. Any entity with at least two full-time employees (including the business owner in the case of a private company) qualifies for group coverage.
Group coverage comes in two variations. Large group is for employers with an employee count of more than 100 employees. Small group is generally for employers with less than 100 employees. While the two offerings have similarities, there are differences that make one more or less appropriate for each employer.
Large Group vs. Small Group
Large group coverage and small group coverage are different from each other in several ways, including their underwriting approach, pricing for individuals, the availability to retirees and service level.
One of the greatest differences between large and small groups is that large groups are underwritten as one group. All employees are seen as an equal risk and therefore are charged an equal amount. In a small group, rates are age-based. That is, employees and dependents will be charged various amounts based on to what age group they belong. A younger person generally pays less, sometimes significantly, than someone older. This could make budgeting more of a challenge and may be seen as unequal treatment by employees.
Many large group plans allow an organization to cover retirees. This is a must for public entities that have this benefit included in current or past labor agreements. Small group generally does not offer retiree coverage.
Open enrollment, that is, the window in which employees may add or change plans, is approached differently as well. For large group, open enrollment occurs in the period prior to the calendar year’s end. Small group open enrollment occurs just prior to the anniversary of the organization obtaining coverage. So, it may occur at any time during the year.
Due to the size of large public entities and the associated size of the insurer’s team needed to support larger organizations, large group plans rely on a team of brokers and account managers. Such plans usually necessitate benefits expertise within the employer. Large group plans are less likely to offer the type of service and support required by small group entities.
Finally, large group may have a lower overall cost to an organization. Spreading the risk over a larger pool of employees can result in overhead and administrative savings. Entities with a majority of older or long-time employees may see additional savings as well since rates are set regardless of age.
Large Group Coverage for Small Organizations
Most public entities prefer the large group approach to health insurance. They require the ability to cover retirees, especially since many employees may retire prior to reaching Medicare age. Also, the variable cost for individual employees makes small group a bad fit when an organization needs to provide benefits at a standard cost within each employee group or bargaining unit.
The challenge, then, is for smaller organizations to obtain coverage with large group functionality. Luckily, there exist programs such as CalPERS (California Public Employees Retirement System) Health, SISC (Self-Insured Schools of California) and a few other large group risk pools in the State. Insurance carriers treat these programs as large groups but allow small entities to participate.
Make the Right Group Insurance Choice for Your Organization
The ability for a small public entity to secure the benefits of large group health insurance can contribute to the success of these organizations. Employee acquisition and retention, stable insurance costs and lower overall costs are all benefits of participation in a large group program.
GSRMA partners with PRISM (Public Risk Innovation, Solutions and Management) to provide group health for public employers with less than 200 employees. PRISM’s access to SISC’s large group health system allows it to offer all the benefits of large group insurance coverage to even the smallest public entity employer. GSRMA then brings the small group service level that these entities require. Large group programs with small group service: a winning combination for your public entity. Learn how we can help you help your team. Contact us today.