Most insurers impose a requirement that a certain percentage of eligible employees (often 75 percent) actually participate in the healthcare plan. Like contribution requirements, this requirement is designed to prevent what’s known as “adverse selection” in which only those prone to sickness sign up for coverage, creating a group with a much higher risk for the insurer. By requiring a certain percentage of eligible employees to sign up for the health plan, insurers aim to broaden the pool of covered employees and avoid high-risk groups.
These participation requirements may mean that smaller employers are often limited to offering a single health plan. If offering choice among plans is a high priority for you, consider purchasing alliances or talk to your broker about which plans have lower participation requirements. Also, the Affordable Care Act requires health insurance exchanges—a new way of shopping for health insurance—be made available by 2014. California has already passed legislation establishing the Small Business Health Options Program (SHOP) exchange and is in the process of setting it up. The exchanges will allow small employers to select among a number of health plans for their employees.