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Rights and Rules for Small Employers
Employers in California have rights under state law AB1672. This law says that if you are a small employer in California with 2 to 50 employees, an insurer cannot deny you group medical coverage based on the health status of your employees, and premiums can only be slightly higher than average if employees have health problems. The law's key provisions are:
Guaranteed Issue. Every small employer has the right to buy any health insurance "product" sold by a health plan to small employers. Think of a "product" as a package containing a list of benefits (what's covered) and a type of service delivery (e.g., HMO or PPO).
Guaranteed Renewal. A health plan may not cancel a small group's coverage just because one or more enrollees got very sick and generated high health plan costs. A plan may cancel coverage for fraud or failure to pay premiums only.
Rating Protections. No law sets rates, nor requires rates to be approved by state regulators. California law does limit a health plan's ability to charge low rates to groups whose members are all in good health and high rates to groups that include some sick individuals. These rating protections operate by basing premium calculations on a "standard" rate that every health plan develops according to certain allowable factors. Plans must set actual premiums no more than 10 percent above or below the standard rate. This creates a "rate band" that allows the health plan to adjust employer rates for risk factors such as previous use of health services or industry type.
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