Guided Reading Groups

My CT has my partner and I leading guided reading groups each day.  She has the class divided up into 4 different groups and they are put into color groups based on the students reading level.  She classifies the two higher level reading groups as the "readers" in the class.  This is something I am not sure that I agree with.  By doing this, the students in the class know if they are the higher readers or not and it might discourage them into doing their best.  When leading the guided reading groups we usually have the students read with a partner in the group, then read the book together as a group.  This way my partner and I can lead discussion and look to see who may need some extra help.  After reading the story the students have booklets that they fill out depending on if it was a fictional book or an informational book.  They draw pictures that go along with the story and also talk about the setting and the plot of the book that they just read.