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13.9 Small Employer Medical Expense Insurance

Definition of Small Employer​

Business Group of One: This refers to an individual, sole proprietor, or a single full-time employee of a business entity (such as an S corporation, C corporation, limited liability company, or partnership) who has been actively engaged in business operations for at least one year prior to applying for coverage. Additionally, the business must have reported taxable income in at least one of the two preceding years.

Small Employer: Any individual, firm, corporation, partnership, or association that is actively conducting business and employs 50 or fewer employees.

Eligible Employee: An individual who works a regular schedule of at least 30 hours per week and is not employed on a temporary or substitute basis. Any waiting period for eligibility may not exceed 90 days.

Small employers that provide group health coverage must make the plan available to all eligible employees. If dependent coverage is included, it must be offered uniformly to all employees who have eligible dependents.

Renewability of Coverage​

A health benefit plan must be renewable for all eligible employees and their dependents at the discretion of the small employer, except under the following conditions:

  • Failure to pay required premiums
  • Fraud or material misrepresentation by the employer in the application
  • Failure to comply with the insurer’s plan provisions
  • Inability to meet minimum participation requirements
  • An insurer may not refuse renewal based on the frequency or amount of claims

Example: If an insurer issues 100 policies and 80 are renewed, the persistency rate is 80%.

Quiz​

1. What qualifies an individual as a “Business Group of One”?

A. Any employee working part-time

B. A sole proprietor or single full-time employee with at least one year of business activity

C. A group of two or more employees

D. Any unemployed individual

Correct Answer: B

Rationale: A Business Group of One includes a sole proprietor or single full-time employee with at least one year of business activity and qualifying income.

2. How is a small employer defined for group health insurance purposes?

A. An employer with fewer than 10 employees

B. An employer with 100 or fewer employees

C. An employer with 50 or fewer employees

D. An employer with only full-time employees

Correct Answer: C

Rationale: A small employer is defined as one with 50 or fewer employees.

3. What is the minimum work requirement for an employee to be considered eligible for coverage?

A. 20 hours per week

B. 25 hours per week

C. 30 hours per week

D. 40 hours per week

Correct Answer: C

Rationale: An eligible employee must typically work at least 30 hours per week.

4. Which of the following is a valid reason an insurer may refuse to renew a small employer health plan?

A. High number of claims

B. Employee dissatisfaction

C. Failure to pay premiums

D. Increased medical costs

Correct Answer: C

Rationale: Nonpayment of premiums is a valid reason for nonrenewal, while claim frequency cannot be used.

5. If an insurer issues 100 policies and 80 are renewed, what is the persistency rate?

A. 60%

B. 70%

C. 80%

D. 90%

Correct Answer: C

Rationale: Persistency is calculated by dividing renewed policies (80) by total issued (100), resulting in 80%.