Key Difference Between Small Group and Large Group Health Policy
As an employer, providing health insurance to your employees is one of your largest expenses and biggest concerns. With so many options to choose from, it becomes confusing to decide what type of group mediclaim insurance would serve the company best.
It is a complex exercise to understand the benefits and financial requirements of each type of group health insurance, particularly for small businesses and startups, which are new to this whole thing. Group mediclaim insurance comes in two different sizes: small and large. It is important to understand the difference between the two, as their benefits and premiums vary widely.
The definitions of small group and large group health insurance policy are not very rigid. It varies from place to place. In most places, a small group refers to up to 50 employees, while any group having over 50 employees is considered large. Some places, however, consider a group policy having up to 100 employees as small.
Comparison between small and large group mediclaim insurance
The major difference between small and large group insurance is based on two factors: regulation and price.
- Small groups and large groups face different sets of rules and regulations. The tax regulations are different for each category.
- It is generally seen that small group health insurance has a higher cost compared to large group insurance for the same health coverage. This is mainly because, in the case of small group insurance, the premiums are decided by an insurance company, and these are non-negotiable once set. Thus, small groups have no negotiating power and no matter who their broker is, the price will remain the same.
On the other hand, premiums for large group insurance plans are not set and can be negotiated between the employer, the employer’sbroker and the insurance company. Thus, the negotiating power of your broker will determine the premium you pay and the plans you choose.
This factor leads to a substantial increase in the price of small group insurance policies and is a major concern for small businesses and startups. This is also a reason why small businesses avoid providing health insurance coverage to their employees.
- A second reason for the higher cost of small group health insurance plans is benefit mandates. The Affordable Care Act states 10 Essential Health Benefits (EHB), which are very precise and detailed categories of benefits. Small group health policy must include all the EHBs in their health plans. However, there is no such requirement for large group policies, which give greater flexibility to large companies in the design and coverage of health plans for their employees. Taking advantage of this, digital health programs such as telemedicine, wearable health technologies, and the likes are often incorporated into the large group health plans. This has immense benefits for employee health outcomes and also reduces premiums over time. Such digital health programs are not very popular in the small group policy segment.
- Another reason responsible for the higher cost of small group insurance plans is an insurance rule called the “medical loss ratio” (MLR). As per the Affordable Care Act, in the case of large group policies, at least 85% of all premiums collected by insurance companies must be spent on healthcare services and quality improvements. If for some reason, the insurance company cannot meet this requirement, it must issue rebates to its beneficiaries. On the other hand, for small group policy, only 80% of the premium is to be spent on healthcare services and quality improvements by an insurance company.
The higher MLR of large group health plans makes them more affordable as compared to small group plans for the same benefits. This is because a smaller percentage of premiums can be spent on profit, marketing, and administrative costs for large group mediclaim insurance.
How can small groups avail large group benefits? 😊
It is evident from the above points that large group healthcare plans are preferred by companies. However, employers with less than 50 employees cannot offer these plans. This is where Association Plans can help small businesses.
An association plan allows small companies to aggregate and gain the status of a large group health plan. This gives them the advantage of negotiating power, competitive rates, and flexibility with benefit plans. Such association plans provide employers with the best healthcare coverage for their employees along with more control over prices.
If you are still confused, new-age digital insurers such as Plum Insurance are there to help you out. It offers hassle-free Group health insurance and employee benefits online. Check out their website for more information. 😃