Understanding Small Group Health Insurance

When it comes to health insurance, you will either have “group” health insurance or “individual” health insurance.  Group insurance is what you have if you or your spouse are fortunate enough to work for an employer that offers group health insurance.  If not, you will need to purchase it on your own, and that is what is referred to as “individual health insurance” regardless of whether you are covering just yourself, or yourself, spouse, and sixteen children.  

Q: Can I make up my own group of my family and my neighbors family to form a group?

A: No.   Small groups can only be formed from businesses and can only insure eligible employees.   Note there the words eligible employee. 

Q: What is an “eligible employee”?

A: An ‘eligible employee’ is someone working 25 or more hours per week on a regular basis.  If you are not an employee of the company you are not an eligible employee.  Even if your father does own the company – if you do not work there you are not an eligible employee.

Q: Are you a  “small employer”?

A: A small employer is defined as a company that employs an average of at least two, but not more than 50 eligible employees on business days during the proceeding calendar year; it employs at least two employees on the first day of the plan year; and a majority of its employees work at a location in New Jersey.

Q: Does the law require you provide health benefits for your employees?

A: No.   However, if you do provide group health insurance coverage you must comply with the requirements of the law.  You must meet the 75 percent participation requirements based on the total number of eligible employees working more than 25 hours per week or an employee working more than 25 hours a week but is covered under a spousal health insurance plan.   For example, if you have 10 employees, 8 employees must be either covered under the plan or waiving benefits because they are covered under a plan sponsored by their spouse’s employer.

Q: May a self-employed husband and wife obtain group coverage under the small employer Health Benefits program?

A: Only if both are eligible employees of the business.  A carrier may ask for tax records for both you and your spouse as proof that you are both bona fide employees.  If only one spouse is working full-time and there are no other eligible employees, the couple may obtain only individual health coverage.

Q: If I offer my employees a health benefits plan, may I impose a waiting period before they can enroll?

A: You have the option of requiring a service waiting period of up to six months. 

Q: Under what circumstances may an insurance carrier impose a waiting period for pre-existing conditions?

A: If your group contains six or more employees, the carrier is prohibited from imposing a pre-existing condition exclusion, except in the case of late enrollees.  If you have less than six employees, there is a six month waiting period for pre-existing conditions for any employee who has had a gap in health insurance of more than 30 or 63 days, depending on which type of insurance he had.  A pre-existing condition is a medical condition, which was diagnosed and/or treated in the preceding six months. 

Q: How does the insurance company determine the premium for group health insurance?

A: Insurance carriers may consider the age, gender and family status of employees in the group and the location of the business in New Jersey in determining the premium.  The insurance carrier cannot consider the health status, nature of business, or past claims experience of a group in determining premium.

In 1992, the New Jersey legislature enacted two laws that give individual and New Jersey small employer guaranteed access to health insurance coverage.  If you would like additional information about small group health insurance, you should call your insurance agent, or you may contact the New Jersey Small Employer Health Benefits Program, P.O. Box 325, Trenton, NJ  08625 for more information.   Some of the information in this column was taken from the “New Jersey Small Employer Health Benefits Plans Buyer’s Guide.”   Their phone number is 1-800-838-0935.

Irene Card & Betsy Chandler share the responsibilities of running Medical Insurance Claims, Inc. a health insurance services company.  If you have questions relative to this column or other related topics, we invite you to call (973) 492-2828, or visit our contact page. 

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