Small Group vs Large Group Health Insurance: Which Is Right for You?

Offering group health insurance is the best way to promote a healthy workforce, reduce absenteeism, and show employees how much you care about their well-being. But does the number of employees in your company matter when you shop for group health insurance coverage?

If you’re unsure about the main differences between small group vs large group health insurance or which one is a better fit for your organization, this post is just for you.

By the time you finish reading, you’ll have a clear understanding of:

• What are the differences between small group vs large group health insurance?
• How does group health insurance work?
• What does group health insurance cover?
• What factors affect the cost of group health insurance?
• How to choose the right group health insurance plan for your company?

What is large group health insurance?

Large group insurance, also known as large group health insurance, is designed for companies with more than 50 full-time employees. If your organization has a large number of employees, you can provide them with affordable health insurance that meets specific requirements under the Affordable Care Act (ACA) to avoid tax penalties.

What is small group health insurance?

Small group health insurance covers a smaller number of employees than a large group health insurance plan. Generally, a company with 25 to 50 full-time employees can choose this type of coverage. 

How does group health insurance work?

Whether you are looking for large group health insurance or small group health insurance, how it works is the same.

Group health insurance is a type of health insurance coverage purchased by a company and then offered to its permanent employees through a group health insurance policy. It is cheaper than personal health insurance because the risk to the insurance provider is distributed across multiple policyholders. The company pays part or all of the premiums. For a group health insurance plan to be valid, a certain percentage of employees (typically 70%) must participate in the program.

Once the company selects a group health insurance scheme, employees are given the option to join or not join the plan. Sometimes, coverage may also extend to employees’ dependents or immediate family members. Typically, group health insurance plans are not portable, meaning employees will lose coverage if they leave their jobs.

How do we determine group size?

When it comes to group health insurance, the size of the group matters; the number of full-time employees (loosely defined as employees who work 30 hours or more per week) in your company determines the size of your group. If you have between 2 and 50 full-time employees, a small group health insurance scheme is a good fit for you. If you have more than 50 full-time employees, you can opt for a large group health insurance plan. 

How do you get Group Health insurance for a large or small business?

Depending on your group size, you can apply for large-group or small-group health insurance. You can do so by directly approaching an insurer or working with insurance brokers. Once you select a plan and pay the premium, the coverage begins. The premium rate remains the same till the end of the plan year, but you can add or remove group members at any time. When the plan year ends, you can either renew the existing scheme or switch insurers. 

Differences between Small Group vs Large Group Health Insurance

There are two main differences between small-group health insurance and large-group health insurance: eligibility and price. Large group health insurance often benefits from lower premium costs due to the larger pool of participants and the company's health history.

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What does a small or large group health insurance cover?

Both large group health insurance and small group insurance can pay for everyday health costs and unexpected medical expenses that are not covered by the provincial or territorial health plan. Generally speaking, group health insurance includes the following:

• Prescription drugs
• Ambulatory services
• Hospitalization
• Pre and post-hospitalization charges
• Lab tests
• Preventive health care
• Newborn care and maternity

Since group health insurance plans vary from one insurance provider to the next, it’s best to speak with your insurance company to understand what the plan covers. Depending on your insurer, you may add additional large group or small group benefits, such as dental care, vision care, and travel insurance, to your plan to ensure your employees enjoy comprehensive coverage.

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Benefits of group health insurance

As a business owner, it is good to know the advantages of offering group health insurance as a benefit to your employees. 

• Tax benefits: Providing group health insurance to your employees (large group or small group) means that you can benefit from tax breaks while also offering them financial security against medical emergencies. 
• Improve hiring and recruiting: Offering a robust health benefits package is the key to attracting and retaining top talent.   
• Company Culture: With access to comprehensive health insurance through work, employees are likely to feel that the company cares for their and their families' well-being and doesn’t view them as just a resource. This can help you build a people-first culture, which is good for business internally and externally. 
• Improved Productivity: Ensuring your workers have access to high-quality healthcare can help improve their overall well-being and health. This will lead to greater productivity and fewer sick leaves, which benefits your business as a whole. 

How much does group health insurance cost?

There is no fixed cost for group health insurance since premiums are based on several factors, varying from one company to the next. As an employer, how much you’ll pay for a group health insurance plan largely depends on the following things: 

• Age: The average number of employees is one critical factor that affects premium costs. The higher the average age of the to-be-covered individuals, the greater the cost. This is because older individuals are at a higher risk of suffering from an illness than youngsters. 
• Location: Is the cost of living cost in the area where your company is located higher than the national average? Does your province or city have specific rules related to health insurance? Factors such as these will influence how much a group health insurance plan costs. 
• Benefits: The different types of benefits selected and any added extras included in the group health insurance plan also impact the premium rate per person. For example, a plan that provides for hospitalization, prescription drugs, vision care, dental care, and travel insurance cover will cost more than one that only covers hospitalization, vision care, and prescription drugs. 
• Number of employees covered by the plan: The more people included in a group health insurance scheme, the lower the premium rate. 
• Occupation: Insurance companies will look at the type of occupation your employees are engaged in while determining the premium rate. Occupations with a higher risk of work-related injury than regular are costlier to insure. For example, employees working in a factory or a construction site are more expensive to insure than, say, employees with desk jobs. 
• Claim history: The employer's claim history also impacts the cost of group health insurance. Insurance companies usually offer discounts if the loss ratio (claims/premium) is lower than 100%. A more than 100% loss ratio will definitely lead to higher premiums.  

Differences between group health insurance and personal health insurance

Here is a table that highlights the key differences between group health insurance and personal health insurance. 

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Ready to take the next step with securing your employee benefits plan? Book a call with a Dundas Life licensed insurance specialist today.

Frequently Asked Questions

Are small-group health insurance plans more expensive than large-group plans?

Yes, small-group health insurance plans are more expensive than large-group health plans. The cost of group health insurance depends on the number of members covered in the policy. The fewer employees you have in your organization, the higher the premium per person. 

Do small-group health insurance plans provide the same level of coverage as large-group plans?

Small group health insurance plans may offer coverage options similar to those of large group health insurance, but they are likely to be more expensive. Group health insurance plans vary by insurer, so speak with your provider to understand the coverage details. 

Can transitioning from a small group plan to a large group health insurance save you money?

Adding more people to your group health insurance plan can help you save money, as large group health insurance plans are more affordable than small plans. 

Does the age of employees impact the cost of a group health plan?

Yes, age is one of the critical factors that affect the cost of a group health insurance plan. The higher the average age of the insured group, the higher the annual premium per person.

Are part-time employees eligible for group health insurance? 

It is up to the employer whether part-time employees receive group health insurance or not. If you care about the well-being of your part-time employees, you can include them in your group size for group health insurance.