Colorado Small Business Health Plan & Health Reimbursement Arrangement (HRA) Laws
Nondiscrimination in Small Group Market
A small group is considered a business with 50 or fewer employees, and if they offer health insurance to their workers, they are subject to various state laws. The Small Employer Health Insurance Availability Program (CRS 10-16-105.2) was enacted in 1994 by the General Assembly in order to prevent an imbalance in state and private programs. This law states that the small group market must not insure only healthy workers and therefore flood the CoverColorado risk pool with more pre-existing conditions than it can handle. This law requires small group laws to apply to any health insurance plan offered by a small Colorado company if they meet any of the criteria below.
1. A percentage of the premium or benefits is covered by or on behalf of the small business;
2. A qualifying worker or dependent is reimbursed through payroll adjustments or other means, by or on behalf of the business for a percentage of the premium;
3. The health insurance policy is treated by the employer or any of the eligible employees or dependents as part of a plan or program for the purposes of Section 162, Section 125 or Section 106 of the United States Internal Revenue Code; or
4. The health insurance policy is offered by an employer to their workers.
The Colorado Department of Regulatory Agencies’ Division of Insurance continues to define small group coverage in the same way as CRS 10-16-105.2: “If a small employer gives each employee an allotment to buy his or her own coverage, such coverage is considered small group coverage.”
Health Reimbursement Arrangements (HRAs)
Offered through federal tax laws to businesses of all sizes, with the exception of one-man groups, health reimbursement arrangements (HRAs) are paid for by an employer, allowing workers to get reimbursed for certain medical costs. These plans are tax-advantaged liked a health savings account (HSA), being tax-deductible for both businesses and their employees.
Throughout Colorado, small companies are offering HRAs instead of a health insurance plan. These reimbursement plans are then used by employers to help employees pay premiums for individual health plans. Colorado individual insurers are discouraged from selling coverage to a member of a small group’s HRA when their premiums will be reimbursed. If the HRA is being used to help pay premiums for employees, it is then required to follow small group laws.
Individual Market & Small Group Market Differences
Individual health plans are permitted to deny coverage, exclude benefits for a pre-existing condition, and determine an applicant’s premium based on their current or past health problems, according to Colorado law. Some services are not required to be offered by an individual health plan, such as maternity and mental health care. However, the small group insurance market is different, bound by several laws to guarantee issue health plans, adjust premiums based on the whole group, and not discriminate premiums due to health.