Did you know group health insurance plans cover 50% of insured Americans? High salaries won’t ensure your employees stick around in your company. They look for companies with great benefits that allow them to work on a long-term basis. A group health plan is a significant benefit that businesses should offer.

What is a group health plan, and how will it affect you and your employees? If your company is considering a group health insurance plan, you should keep a few things in mind. After all, it’s critical to have all the facts before making a decision.

We outlined some of the essential points that employers need to know. You’ll better understand how group health plans work by the end of this article.

What does group health insurance mean?

Group health insurance is also known as employer-based coverage. As the name suggests, it is a type of health insurance plan provided by an employer. Because the risk spreads out across many members, coverage is more affordable.

A group health plan includes a variety of employer-based benefits. It provides medical coverage for both employees and their dependents. Dependents can also receive direct aid and have their names added to the plan. Or, dependents can receive reimbursement instead of direct aid.

How does group health insurance work?

Does your business need to provide group health insurance?

The U.S has a law called the Affordable Care Act (ACA). This law requires all large businesses to provide health insurance or pay the penalty. By definition, large companies are those with more than 50 full-time employees. 

How does this penalty work? First, suppose the employer does not provide coverage. Then at least one employee obtains a premium tax credit or cost-sharing reductions. In that case, the company must pay $2,000 per full-time employee, excluding the first 30.

But, small businesses are exempt from this law and don’t get penalized. By definition, small business owners are those with only 2 to 50 full-time workers. But suppose the employers do decide to buy coverage even though it’s not required. Then, the Federal Law guarantees them group coverage, regardless of the employees’ health status.

While small business owners are not legally required, many still choose to do so. Offering health benefits is a practical approach to increasing employee retention and recruitment.  

Who can be eligible for coverage?

An employee must be on the payroll, and the employer must pay payroll taxes. Employees on unpaid leave are usually ineligible until they return to work. Independent contractors, retirees, and seasonal or temporary employees get excluded.

According to Federal Law, suppose an employer provides coverage to any full-time employees. This law requires them to provide coverage to all full-time employees.

Part-time workers can also get coverage. By definition, these are employees working less than 30 hours a week. Suppose the employer provides coverage to any part-time employees. Then, the law requires they must extend coverage to all.

Self-employed people not belonging to any company can also still be eligible. Some states consider self-employed people to be “groups of one employee.” Thus, the state may require insurers to offer them coverage in the small group market.

These rules under Federal Law apply regardless of the employees’ medical conditions. This means that insurers cannot deny coverage because of pre-existing medical conditions.

Furthermore, any dependents of eligible employees get covered under a group plan. Dependents are usually the spouses and the children of the employee. Employers may also provide coverage for unmarried partners (the same or opposite sex). Group insurance plans must also cover adult dependents until they reach the age of 26. But, employers can choose to expand the age definition for dependents. Dependents are unable to enroll in coverage until the employee has done so. 

How many employees need to sign up for the group insurance plan?

You must have a group to buy group health insurance. In other words, a single person cannot join this type of plan. But, small businesses can have as few as two people in their group. Otherwise, group insurance requires a 70% participation rate. This is the case in most jurisdictions, but some states’ rates can be bigger or smaller. 

This rule prevents “adverse selection.” It usually occurs when only those who are regularly sick sign up for coverage—this rule results in a group of people at high risk. Insurance companies need to broaden the coverage pool and avoid high-risk groups. They avoid this by requiring a specific percentage of eligible employees to enroll.

Employers must enroll at least 70% of their full-time, uninsured employees. The 70% are not met if any of your employees have individual health insurance. 

Why should my company buy a group health insurance plan?

A good employer provides employees with better access to care. Insured employees are more likely to take better care of their health. Thus, you can help reduce absenteeism related to healthcare problems. Employees without health insurance are more likely to delay seeking treatment. This results in the need to miss work or go on disability. Suppose employees take fewer sick days and work more efficiently. This results in significant cost savings for your firm. Employees in good health are also less likely to get hurt and are more likely to do a good job.

Health insurance also helps improve morale among your employees. Insured employees get financially safeguarded from debts resulting from catastrophic illnesses or injuries. Medical services get needed without warning. The expenses usually surpass what most people can afford or want to pay.

The Society of Human Resource Management (SHRM) conducted a study among American businesses. 92% of employees believe benefits are critical to their job happiness. Another study from the Fractl survey also gleaned similar results. 84% of employees ranked health insurance as their most desired perk.

The majority of employers reported positive effects of offering health insurance. 

• It boosted loyalty and minimized turnover, according to 78% of respondents.
• In addition, it aided staff recruiting in 75% of cases.
• It enhanced production by keeping staff healthy, according to 64% of respondents.
• Employees demanded or expected health insurance, according to 62% of respondents.
• By keeping staff healthy, 58 percent indicated it reduced absenteeism.

This evidence shows that health benefits aid in recruiting and retaining top personnel. In addition, healthy employees are more loyal, productive, and satisfied with their jobs.

What are the health benefits covered in group insurance plans?

Health insurance plans cover ten essential health benefits under the Affordable Care Act. These include the following:

• patient ambulatory services
• emergency aid
• inpatient care or hospitalization
• maternity care
• mental health and substance abuse therapy, including behavioral health services
• Prescription medication
• rehabilitative and habilitative services
• laboratory services
• services for prevention and wellness, as well as chronic disease treatment
• pediatric services, such as dental and vision care

What is the difference between individual and group health insurance

Individuals or families buy individual health insurance unless their work provides coverage. These plans get based on certain individualized factors. These include age, medical conditions, family medical history, and other lifestyle factors. 

Small business owners may be able to assist employees in purchasing health insurance. But, the cost of individual insurance policies is still the employee’s responsibility.

Here are some of the main differences between individual and group health insurance.

Group health insurance plans are more affordable for the employee.

Because more people participate, group health plans are more affordable—the lower the rates, the larger the risk pool. As a result, it can provide you with much lower premiums compared to individual insurance. It’s also cheaper for the employee since the employer buys coverage. 

Employers can choose to cover or pay a part of the total monthly premium. Then the employees pay the remaining amount through pre-tax salaries. For example, some companies may pay 80% or 90% of the total premium. Others may pay much less or pass the entire cost on to their employees.

eHealth conducted research in 2018. The average monthly premium cost per individual in a group, health insurance plan was $409. This is lower compared to $440 for an average individual plan. For example, a small group health insurance would have an average deductible of $3,140 per year. But, it costs $4,578 for individual plans.

Group plans also help save money from taxes. For example, employer contributions to monthly insurance premiums are tax-deductible. Similarly, employee contributions can be made before taxes, lowering their total taxable income.

Besides, group plans allow employees to get benefits that they may not be able to afford. Many employers even provide supplemental health plans. This may include dental, vision, and pharmacy coverage.

But for individual plans, a single person pays the entire monthly premium. In addition, individual health insurance payments are often not deducted from pre-tax earnings. This means that your employees will have to pay a higher percentage of their overall income in taxes. But, they can apply for special government subsidies depending on their income level. 

Individual insurance plans also need the guidance of insurance agents. They’ll help review your options to ensure you select the most cost-effective one.

The employee can customize individual health insurance plans.

Unlike group health insurance, the policy coverage of individual plans can get personalized. 

When it comes to group plans, the employer has the most control over the coverage and add-ons. As a result, employees have fewer coverage options and less flexibility. But there are cases where larger companies offer extra insurance features and options.

But individual insurance is designed for a single person or family. Thus, policyholders can customize them to suit their own needs. They have the freedom to select the insurance company, plan, options, and add-ons. An agent can help them review plans one-on-one. This gives them access to opportunities with varying premium costs and coverage levels. They also have complete control to switch plans or insurance companies

Group health insurance plans do not deny coverage.

Insurance companies cannot deny group insurance coverage based on existing medical conditions. But, this is not the case with individual plans. The basis for the premium is age,

medical history, and lifestyle. As a result, you may need to provide medical documentation. There is even the possibility that they will deny coverage based on the medical evidence.

The insurance company may deny coverage for any pre-existing conditions. They can also deny coverage altogether. This usually happens with Individuals with prior health conditions. For example, those with diabetes or cancer may be able to obtain health insurance. But, it is unlikely that they will get covered for those specific conditions. Coverage and even coverage costs can get influenced by a person’s age and smoking status.

Regardless of pre-existing conditions, group insurance coverage gets offered to all employees. But, this does not mean that a group plan will cover all pre-existing health conditions. The group insurance plan may include specific terms for prior health conditions.

Group insurance coverage gets terminated if the employee leaves the job.

Insurance coverage for group insurance gets linked to the covered person’s employment. This means that coverage begins after a waiting time has passed. Coverage will end if that person leaves their work for whatever reason. This is also why they help with employee retention and loyalty.

There are also cases where coverage can get extended. For example, an employer can extend the coverage as part of the severance package for a limited time. In addition, employees who lose their group benefits can transfer their benefits to individual coverage. The medical proof that would usually be necessary gets waived in this circumstance. But, the employee still needs to pay the total cost. Continuation coverage can be more expensive than an individual plan in most cases.

On the other hand, employment does not affect individual health insurance policies. Policyholders can take their insurance with them even if they change jobs. It is also up to them when to continue the plan.

What is an example of group health insurance?

United Healthcare is one of the largest health insurers in the country. It provides a wide range of group health insurance options for businesses. This includes medical and specialty plans. But supplemental plans such as dental, vision, and pharmacy are also covered.

Most states offer small business plans for companies with 1 to 99 full-time employees. United Healthcare also provides small businesses with federally-sponsored marketplace options. These are a type of insurance plan called Small Business Health Options (SHOP). In addition, some employers may be eligible for a temporary Small Business Tax Credit of up to 50% in exchange.

Midsize businesses with 100 to 2,999 employees can choose from various options. National Accounts, which have more services and healthcare features, are also available. But, they usually get reserved for large businesses with 3,000 or more employees.

What are the different types of group health insurance?

While each of these health plans has its own set of benefits and drawbacks, it’s up to you to pick which one is best for you. You need to consider your company’s budget, employee profile, and size. Do you want more plan flexibility, lower costs, better coverage, HR relief, lower risk, or all the above? Each plan type has advantages and disadvantages. Make sure to weigh your options and pick the one that best suits your needs.

Here are eight of the most common forms of group health insurance plans.

Fully-insured plans

Fully-insured plans are one of the most traditional options. They entail the insurance company taking on the risks associated with healthcare expenditures. They also charge your firm a yearly fee for the insurance policy’s benefits. These plans are becoming less popular due to their high cost and lack of flexibility. Insurers charge small businesses more than larger companies with less risk. This is due to the number of employees, extra taxes, and administrative charges.

Self-funded plans

In a fully-insured plan, the insurance provider covers employee health costs. In a self-funded plan, the employer bears the cost. This can often result in lower rates and greater plan control. But in exchange, your company assumes the risk of paying for any catastrophic claims. Self-funded plans are often associated with giant corporations. But, small firms can also benefit from them.

The mainrisk it carries is that employers must pay for claims without limiting how much. The “pay-as-you-go” strategy is favorable when employees do not submit claims. But, it can be problematic when catastrophic claims occur. Fees could increase in this circumstance since the corporation absorbs policy risk. This will, in turn, blow your budget out of the water.

A self-funded plan with stop-loss insurance is an option for small enterprises. This option lowers your risk. However, it prevents you from shouldering the entire burden of catastrophic claims.

Level-funded plans

Level-funded plans are unlike the standard yearly premium plans. Instead, they get based on a monthly rate. Insurance companies will use census data to calculate the payment. This rate gets determined by claim allowances, fees, and stop-loss coverage. The insurer will alter the monthly amount based on the company’s performance.`

You pay as you go with this form of small company group health insurance plan. But it includes a cap on total possible expenses, making your costs “level.” Stop-loss insurance kicks in to cover any coverages when claims exceed the cap. Your firm will never have to pay more than your established cap. This holds even if employees file more or greater claims than expected.

Health Maintenance Organization (HMO)

An HMO is a type of plan in which members pay monthly premiums for specific health services. You’ll have access to a particular network of healthcare providers and locations if you join an HMO. But, it limits the benefits to those in that network. So, seeing any medical provider outside of the network can result in you paying the total cost. HMOs are less expensive than other types of health insurance because of this. 

Preferred Provider Organization (PPO)

PPO plans are like HMO plans, but they offer more flexibility. They do also have a network of healthcare providers and facilities. The difference is that members can visit any physician, medical provider, or location. Even if they do so, they can still avoid being responsible for the entire bill. Instead, higher co-pays and extra service costs will result from these visits.

Exclusive Provider Organization (EPO)

HMO and PPO plans get combined into EPO plans. It only allows you to use doctors, hospitals, and other care providers in your network. Your insurance does not cover any others costs incurred outside of that network. 

The only exception is emergency care, which is covered even if provided outside the network. Health insurance companies can’t charge as much for an out-of-network emergency. But, your insurance will only cover costs if they are considered an “emergency” by them.

Professional Employer Organization (PEO)

Small businesses often use PEOs without a human resources department. They handle HR-related tasks like payroll, recruiting, compensation management, benefits access, and compliance. A PEO usually serves a group of small businesses, addressing their HR needs.

A PEO can assist your company in researching insurance options for your employees. They can also help get insurance plan discounts often reserved for large corporations. They rely on their purchasing power to secure low-cost benefits and insurance coverage.

Small Business Health Options Program (SHOP)

The Affordable Care Act allowed business employers a new way to shop for the group health plan. Eligible employers must have 50 or fewer full-time equivalent employees in most states. In addition, employers must pay a portion of the premium. However, employees are not eligible for federal subsidies.

Need more help with group health insurance? 

Because there is a lot to consider, health insurance planning can be complex. Make sure to reach out to us here in Cosmo. Our brokers can help you determine what your health insurance needs are. Get a quote now and find the ideal group insurance health plan for your company.