For many small businesses finding affordable group health insurance can be difficult. The number of employees, the age of those employees and the state that you live in can all greatly impact the premium that the company pays. While all companies ideally would like to provide each employee with the best insurance coverage possible, matching ideals and budget is a serious undertaking.
The first item that you need to consider when looking for affordable group health insurance is how many employees your state requires your company to have to be eligible for small group health insurance. The majority of states requires a minimum of two employees and/or officers, while a few states will accept companies with just one employee. This can force a company to look at how they define an employee, whether they have independent contractors or if they hire people as employees. Generally independent contractors, such as sales representatives that work on commission, are not counted as an employee and therefore would not go towards your total employee count. You also will want to decide if you want to cover part time employees or just full time employees and officers.
The second thing you will need to understand is the risk adjustment factor (RAF). Each new group is given a RAF that will affect the monthly premium rate. The standard RAF is 1.0 and there are two factors that can move your company’s RAF higher or lower as described below:
1) Size: In general, the more people in the group, the lower the risk for the insurance company and the lower the company’s RAF. This means that the more employees you have that opt to take part in the insurance the better rate you should get. Comparatively speaking, a large enough group can get the lowest legal RAF of .9 (10% lower than the standard risk factor rate). Smaller groups can end up with the highest RAF of 1.1 (10% higher than the standard rate). Typically your company will not see lower a RAF until it has more than 5 employees participating in the group insurance. Note, that there is a difference in the number of employees in your company and the number of employees that take part in the insurance.
2) Age and Health of Employees: The second factor that plays a large role in the RAF is the overall age and health of your employees. The younger and healthier they are, the lower your RAF should be. This of course does not mean that you can discriminate when hiring.
When considering saving money, most states give companies the option to let employees pay a portion of the health insurance premium. It is important to note that if you go this route the insurance you offer needs to be affordable for the employees. You should not only make sure that the insurance rate fits your bottom line, but also ensure that it meets the budget of employee as well. An employee that only makes minimum wage is not going to be able to afford a premium of $500 a month. The best way to address this is to offer a range of plans with the company offering to pay enough to cover a basic plan and employees paying additional fees for more comprehensive plans.