Starting A California Small Group Health Plan

Basics Of A Small Group Plan

• You need two employees to create a small group. One of the participants can be the owner, but the second employee cannot be related or dependent upon the owner, such as a spouse or dependent child.
• The company needs to make minimum contribution of 50% toward the employee’s health insurance premium. Some carriers allow a set dollar amount contribution.
• Employer’s don’t have to offer any contribution toward the employee’s spouse or dependents.

Small Group Benefits

• Small group plans usually have a larger network of providers than individual and family plans.
• The rates for small groups tend to be less than individual and family plans.
• Employer contributions are an expense and the employee’s contribution lowers the employee’s taxable income amount.
• Employers can also offer voluntary vision, dental, life, disability income insurance to employees at rates that are often lower than individual and family plans.

The Downsides To Employer Groups

• Employees offered affordable group coverage, based on the employee’s contribution and their household income, makes the employee’s spouse and dependents ineligible for the Covered California tax credit subsidy. One way around this is to offer Employee Only coverage, allowing the employee’s family members to receive the Covered California tax credit subsidy.
• There is the added expense to the company for the employee’s health insurance contribution and administration of the small group health insurance plan.

Choosing A Carrier And Plans

There is no shortage or carriers or small group health plans in California. There are essentially two options for selecting a combination or carriers and plans.

Option A: select a single carrier that will offer a variety of plans to you and your employees. In some instances, you can have two carriers such as Blue Shield and Kaiser under certain conditions.

Option B: select one of the two small group exchanges that offer multiple carriers and plans with the added benefit of receiving only one invoice every month.

Single Carrier

Each of the major health insurance carriers has a variety of health plans that can be offered to you and your employees. Sometimes there are too many options. Some of the carriers like Blue Cross, Blue Shield, and Health Net will offer EPO, HMO, PPO, and HDHP plans. Then there are carriers such as Kaiser and Western Health Advantage who only offer HMO plans.

If all of the employees reside in a general geographic region, everyone should be able to participate in the small group plan. But if you have employees scattered around California, some of the regional health plans may not offer coverage for certain employees, which would necessitate having another carrier to provide coverage.

With a single carrier, you are limited to the network of providers they have built for their different plans. While small group networks are larger than the individual and family plans, there may still be doctors and hospitals who are not part of the carrier’s network.

Small Group Exchange

California has two small group health plan exchanges. California Choice has eight different carriers for employees to choose from, subject to regional availability. Covered California for Small Business has five different carriers in their portfolio. Employees can pick and choose which carrier is best for them. One employee might select Kaiser while another employee enrolls in Anthem Blue Cross.

California Choice has more plan options than Covered California for Small Business, but they tend to be heavy on HMO plans. Covered California for Small Business has a simpler set of plan offerings based on a standard benefit design for the Bronze, Silver, Gold, and Platinum metal tiers. Both small group exchange platforms offer dental and vision insurance that can be offered to employees.

Comparing Single Carrier To Exchange

Between the single carrier option or the small group exchanges, it doesn’t appear that one has better rates over the other. In general, HMO plans will always be less expensive than PPO plans. For example, with Covered California for Small Business, Kaiser will usually be less expensive than a Blue Shield or Health Net PPO plan. With the single carrier option, if the carrier offers a narrow network PPO or EPO, those will be less expensive than a full network plan.

With the exception of the provider network, the rates will be a driving factor for the owners and employees when it comes to selecting a health plan. Don’t be shy when requesting multiple quotes. You should get quotes for plans from a single carrier as well as the small group exchanges. Even though the information can seem overwhelming, that’s where your insurance agent can help filter out carriers and plans that don’t fit your needs.

To get a quote for you small group from Kevin Knauss, send me an email requesting the Small Group Census Form.

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