The idea behind group health insurance is that you’re spreading the risk of medical claims throughout a pool of people. In theory, this would make it cheaper for everyone (until, of course, you get a bunch of government mandates, which makes it actually more expensive for most small businesses… but that’s another post for another time).
For their part, when it comes to group coverage (small groups, particularly), health insurance companies are sensitive to something called “adverse selection.” Simply put, this is the fact that the people most prone to have medical claims (the riskiest) are more apt to take coverage than are the healthy folks. For that reason, each health insurance company has “participation requirements” for small business health insurance plans. Typically, they require 50-75% (depending on the company) of the eligible full-time employees to be on the group plan, or else they don’t take the group.
Obviously, the dynamics of a company change over time as the company grows or shrinks and the makeup of the group changes. Periodically, usually at the time the plan is renewing, the health insurance company may do a “participation audit” to see if the group is still meeting those guidelines. If they’re not, the coverage can be canceled.
If you’re in this situation, contact AC Forrest and we’ll help you assess your options and hopefully find a solution.
