What Is Group Health Insurance? (And How Does It Work?)

If you’re searching for new health insurance, you may have the option to join a group health insurance plan. Whether or not this type of employee benefit plan is right for you depends on a variety of factors. This page provides an overview of what you need to know about group health insurance plans and helps you decide if one is right for you. 

Regardless of the type of health insurance plan you end up choosing, selecting a trustworthy health insurance company is important to prioritize your health and wellness. Choosing a company with a streamlined and transparent approach to helping patients gives you assurance that you’re getting the healthcare services you need, when you need them, without dealing with hassles or delays.

  •  What Is a Group Health Insurance Plan?
  •  How Does Group Health Insurance Work?
  •  What’s the Difference Between Group and Individual Coverage?
  •  Advantages of a Group Health Insurance Plan
  •  Who Is Eligible for Coverage?
  •  Example of Group Health Insurance
  •  What to Do if You Are at Risk of Losing Your Group Health Benefits

What Is a Group Health Insurance Plan?

A group health insurance plan is exactly what it sounds like—an insurance plan where many individuals are covered through the same policy. Group health insurance plans are most frequently offered by employers. Certain other organizations, such as trade organizations, sometimes offer group health insurance enrollment options to their members as well.

How Does Group Health Insurance Work?

Group health insurance works by combining coverage for many individuals under the same plan. This approach spreads the risk for the insurance company across many individuals. As a result, costs are lower. An individual often pays less under a group health insurance plan than they would if they were to buy an individual health insurance plan with identical coverage.

If a group health insurance plan is not offered by your employer, you may still be covered if your spouse is on a group health insurance plan.

What’s the Difference Between Group and Individual Coverage?

Outside of the differences already explained, individual plans are usually purchased through the Marketplace on healthcare.gov. The Marketplace is a government-run service for health insurance created by the Affordable Care Act in 2010. On the other hand, group health insurance plans are usually directly managed by private companies. 

Advantages of a Group Health Insurance Plan

If your employer or another organization offers a group health insurance plan, you will enjoy a number of benefits that aren’t always available through individual plans.

Low Premiums

The cost of the monthly premium for a group health insurance plan is usually split between the individuals and the employer, with the employer picking up most of the tab. In 2020, The Kaiser Family Foundation found that 90% of employees who had an employer-sponsored group health insurance plan paid for less than 50% of their premiums.

Tax-Deductible

Under an employer-sponsored group health insurance plan, your monthly premium is often tax-deductible because it is paid for via a payroll deduction plan, which uses pre-tax dollars. Premiums and other medical expenses are still deductible in a general sense, but only up to 7.5% of your adjusted gross income.

Who Is Eligible for Coverage?

Group health insurance plans often have restrictions on eligibility regarding who can and cannot receive medical coverage through them.

Full-Time Employees

Full-time employees almost always have the ability to join a group health insurance plan if one is offered by their employer. Large employers are often required to offer large group health coverage to full-time employees. Small employers also sometimes offer small group health insurance plans to full-time employees in order to take advantage of certain tax credits. Small business health insurance plans are frequently offered through SHOP (Small Business Health Options Program).

Part-Time Employees 

Employers are not required to offer group health insurance coverage to part-time employees. The Affordable Care Act (ACA) states that an employee is considered part-time if they work, on average, less than 30 hours per week or 130 hours per month.

Dependents

If an employer offers group health insurance policies to employees, they are also required to offer coverage to the dependent family members age 26 or younger of the employees who are eligible for coverage. 

Employers are not required to offer coverage to the spouses of employees.

Example of Group Health Insurance

Various types of group health insurance plans exist. Each has its pros and cons to consider. Below, we’ll cover the two most popular types of group health insurance plans that individuals often have to choose between.

HMO

A Health Maintenance Network (HMO) is the most restricted type of group health insurance plan. If you are on an HMO plan, you must stay within the network of approved doctors, specialists and hospitals (emergency care exempt). If you venture outside of the approved network, you often have to pay for all costs out of pocket. Additionally, in an HMO, you must usually see your primary care physician (PCP) before you go to a specialist. If you see a specialist without a recommendation from your PCP, you will usually have to pay for all costs out of pocket, even if the specialist is within the approved network.

Overall, HMOs are somewhat limiting, but if you rarely use healthcare services or your preferred healthcare professionals are included in the approved network already, the lower cost of HMOs can be ideal. 

PPO 

A PPO (Preferred Provider Organization) is similar to an HMO in that you have a network of approved doctors, specialists and hospitals. However, a PPO allows for more freedom. You can venture outside of the approved network and your insurance company will usually still help out with at least some of the associated costs, sometimes in the form of reimbursement. And, you may go to an in-network specialist without a referral from your PCP.

PPOs offer you more flexibility, but they also cost more. They are generally ideal for individuals who make somewhat frequent use of healthcare services and want to be able to visit specific specialists as they please.

Other alternatives outside of HMOs and PPOs, such as health savings accounts (HSAs) and high-deductible health plans (HDHPs), are ideal for individuals who very rarely make use of healthcare services. Be sure to understand all types of plans offered by your employer so you can get all of the coverage you need (or don’t need) at the lowest possible price.

What to Do if You Are at Risk of Losing Your Group Health Benefits

When you leave your job, whether voluntarily or involuntarily, you are no longer eligible to be on the same group health insurance plan as you were when you were employed. Luckily, a solution exists that lets you keep the same coverage you had while you were working at your old job. 

Cobra

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a government-sponsored program that allows you to maintain identical coverage to what you had with your old employer for up to 18 months. Your dependents may also maintain their coverage in the same way. However, with a COBRA plan, your prior employer is not required to help out with insurance costs or medical expenses in any way, which means you usually get the same coverage at a higher price. To learn more about COBRA and read key FAQs, visit the Department of Labor.

Takeaway

Group health insurance plans, which are usually offered by employers, are an attractive alternative to individual plans thanks to the lower costs that are usually associated with them. If you work enough hours to be eligible for your employer’s group health insurance plan and you feel it’s the right choice for you, be sure to pick the right type of group health insurance plan (HMO, PPO, or other) based on your needs in particular. Should you lose your access to a group health insurance plan, COBRA allows you to maintain coverage for up to 18 months, albeit at a higher cost.

In your search for the right health coverage, be sure to also think about the insurance company you end up going with. The right company will understand your medical care needs as a unique individual and allow you to conveniently visit the healthcare specialists you need to see. Rather than dealing with outdated systems, be sure to look for a digital-first approach that lets you access and manage healthcare services with ease.

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