Secure Financial Solutions

What is Illinois group health insurance?

A group health insurance policy is one that is purchased by an Illinois employer and is offered to eligible employees of the company and usually to the spouses and family members of the employee. Illinois Group health insurance is issued differently for various types of employers. Health insurance for groups is regulated at the state level of government.

The laws regarding group health insurance offered by employers can vary depending on which state you live in. The laws are different for small groups which are defined for health insurance purposes as groups in Illinois with 2 to 50 employees.

Many in Illinois obtain their group health insurance coverage through large groups, which are defined as groups with 51 or more employees. The laws about how coverage can be issued to large groups are different than those for small groups, and the way that premium rates are determined is also different.

The requirements for sole proprietors purchasing health insurance coverage in Illinois are also different than other states.

What are the rules for small group health insurance in Illinois?

Federal law mandates that no matter what pre-existing health conditions small employer group members may have, no small employer or an individual employee can be turned down by an insurance company for group coverage. This requirement is known in the insurance industry as "guaranteed issue." In Illinois, the HIPPA law of 1996 says that a small group of 2 to 50 employees must be issued on a guaranteed basis.

In addition, each insurance company must renew its small employer health plan contracts every year, at the employer's discretion, unless there is non-payment of premium, the employer has committed fraud or intentional misrepresentation, or the employer has not complied with the terms of the health insurance contract.

In Illinois, small employer health insurance companies are allowed to review individual group applicantions medical histories for pre-existing conditions and may decide not to cover certain conditions for a specified period of time. This is known as a pre-existing condition waiting period.

Federal law states that small group health insurance companies may impose no more than a six-month review and a 12-month exclusionary period for pre-existing conditions.

Small group insurance companies are also required to give employees credit for prior coverage against any pre-existing condition waiting period that may be imposed (referred to as creditable coverage), as long as the employee had other health insurance coverage within 63 days of the application for new coverage.

In Illinois, the law allows small group health insurance companies to determine their initial premium rates for each company using a process known as medical underwriting. Some states make small group health insurance companies use processes known as modified community rating or community rating to determine their initial rates.

When small group plans are medically underwritten, employees are asked to provide health information about themselves and their covered family members when they apply for coverage. When determining rates, insurance companies use the medical information on these applications. Sometimes they will request additional information from an applicant's physician or ask the applicants for clarification.

If a company is unable to obtain information necessary to accurately determine the risk of a particular applicant, it will underwrite more conservatively, meaning that the assumption relative to the missing information will be negative rather than positive.

Example: A person has a history of high blood pressure but it is controlled with medication and he is not overweight. If the company is unable to determine if that individual smokes or if he has normal cholesterol, it will assume that the missing information is negative and rate accordingly.

In the small group market in Illinois, private health insurance carriers can medically underwrite rates. The rates may vary by plus or minus 25 percent of the indexed rate based on the health status of the group.

With a rating band requirement of plus or minus 25%, a small group rate could vary no more than 25% above or below the average small group rate for that geographic area. So if the average premium was $100, a small employer's rate could be anywhere from $75-125, based on the overall health status of all of the group members.

Annual premium changes for small employer group plans are based in part on the plan participants' claims history and on the claims history of the company's overall small employer group pool. Small employer group plan renewal rates also include a component to account for overall increases in the cost of providing health insurance coverage by the company, such as changes in laws that may impact operating costs. These costs are known in the industry as “trend.” Many states cap renewal rate increases for small employer groups at a specified percentage, plus trend.

What are the rules for Illinois large group health insurance?

A large group (defined as 51 or more employees in Illinois) health insurance policy is medically underwritten at the time of purchase, with rates based on employee participation and prior claims experience. Employees are not generally asked to fill out a medical questionnaire prior to obtaining coverage.

Large group policies in Illinois do NOT have to be offered on a guarantee issue basis.

The health insurance company bases annual premium changes for large employer groups primarily on the claims experience of the group in past years, as well as any overall increases in the cost of providing health insurance coverage. An example of such costs would be changes in laws that may impact operating expenses.

Federal law mandates all large group contracts be renewed every year at the employer's discretion, unless there is non-payment of premium, the employer has committed fraud or intentional misrepresentation, or the employer has not complied with the terms of the health insurance contract.

The law also requires health insurance companies to give employees credit against any exclusionary period for pre-existing conditions if they have had prior health insurance coverage within 63 days of obtaining the group coverage from the large employer.

Many employer-based health insurance plans are fully insured by a health insurance company. This means the employer contracts with a health insurance company to provide its employees benefits, pays premiums for such coverage, and the insurance company assumes all claims risk.

All states regulate fully insured group plans. However, larger group health plans (usually for groups of 500 or more) may choose to either fully or partially self-insure their group benefit plans. This means that instead of paying health insurance premiums to a company, the employer sets a pool of funds in reserve and assumes its own risk for health benefit claims.

Companies that self-insure generally buy what is known as a stop-loss insurance policy to protect themselves against losses above a certain threshold and contract with either a third-party administrator or a health plan to administer benefits and handle claims. Many employees of companies that self-fund coverage do not even realize that their plan is self-funded by their employer.

Self-funded plans are regulated federally by the Department of Labor under the Employee Retirement Income Security Act of 1974 (ERISA), so they are sometimes known as ERISA plans. If employees are uncertain whether they are covered by a fully insured (and state-regulated) plan or a self-funded (and federally regulated) plan, they should ask their employer.

Is group health insurance available for a sole proprietor (1 person small group) In Illinois?

No, Illinois only recognizes businesses with at least 2 employees to be eligible for small group health insurance coverage. You must for apply for individual health insurance.

What if I no longer have group health insurance due to my job loss?

COBRA Continuation Coverage

If you purchase insurance coverage through your employer and your employer has 20 or more employees, you are entitled to continuation coverage by the federal Consolidated Omnibus Budget Reconciliation Act (COBRA). Your state may require continuation coverage to be offered by smaller employers – typically those with less than 20 employees. Under COBRA, if you leave your current job you have the option to continue your health care coverage for up to 18 months. You are required to pay the full premium yourself, even if your employer paid part of your premium while you were employed, and the employer may charge an additional, limited administrative fee.

To be eligible for COBRA coverage you must meet the following requirements:

You must have had 18 months of continuous creditable coverage; with at least the last day having been under a group health policy (coverage is considered continuous if it is not interrupted by a break of 63 or more consecutive days).

You must not be eligible for Medicare, Medicaid or a group health policy or have other major medical health insurance.

You must apply for health insurance for which you are deemed an eligible individual within 63 days of losing your prior coverage.

For more information on COBRA, please go to the federal Department of Labor Employee Benefits Security Administration website at: www.dol.gov/ebsa