Who Can Take Group Health Insurance?

A health insurance plan can be crucial to the well-being and productivity of an employee, and by extension, the organization they work for.

The recent advancement of health insurance in the US is largely due to the Patient Protection and Affordable Care Act (PPACA) or (ACA), through which more than 30 million people have gained health insurance coverage.

While Americans can choose between individual or group health insurance plans, data from the 2021 Census showed that 54.3% of insured Americans obtain health benefits through group coverage plans.

What Is A Group Health Insurance Plan?

A group health insurance plan offers coverage to a group of people, usually the eligible employees of a company or the members of an association.

Large or small employers and association leaders can buy group health insurance plans and then offer them to their employees or group members who can decide whether or not to accept group health plans.

A group health plan is sponsored by health insurance premiums which are split between the employer and the employee. Most times, employers are required to pay at least 50% of the employee premiums, which might be yearly or monthly premiums.

Some group health insurance plans might include supplemental health plans like vision, dental, and pharmacy coverage.

Group coverage has lower premiums when compared to individual health insurance, making it a popular choice among businesses. With group plans, the insurer’s risk is shared among multiple people, leading to low premiums.

Under an individual health insurance plan, the insurer’s risk is carried by just one person, and hence, higher premiums.

Who Can Take Advantage of Group Health Insurance Plans?

By federal law, any business with at least one employee (full-time or full-time equivalent) can take advantage of group health insurance plans. An eligible employee does not include the employer’s partner, the employer’s family member, or independent contractors.

Group health insurance coverage is mandatory for large organizations, according to the Affordable Care Act. Businesses with 50 or more full-time employees are required to provide coverage to their employees and their families, especially dependent children under the age of 26.

Small businesses (fewer than 50 full-time or equivalent full-time employees) are not obligated by the Affordable Care Act to provide health insurance coverage to their employees.

A small business owner can still decide to offer group medical coverage, as small business health insurance plans provide a lot of advantages, and allow employees to experience a superior quality of life.

In certain states, insurance companies offering group health insurance can provide medical coverage to self-employed individuals with no paid employees. Also, you can be eligible for a group plan if you are part of a membership organization such as a trade or freelancers union.

Employers can decide to extend health benefits to the domestic partners of their employees to whom they are not married. However, the coverage extended must be identical to that offered to a married employee’s spouse.

Requirements For A Group Health Plan

The primary requirement for a group health insurance plan is that the group being insured was not established mainly or solely to acquire insurance. The organization must also be recognized as a legal business entity by the laws of the state where it is located.

To enjoy group health benefits, an employee must be on an employer’s payroll and the employer needs to pay payroll taxes.

The insurance premiums paid by employers that offer health insurance are tax-deductible while employee premiums are paid before calculating their taxable income, offering tax advantages to both employers and employees.

The insurance company providing the group health insurance plan might also have specific requirements to be fulfilled for the group health plan to be valid. Insurance companies often require an employee participation rate of around 70%.

Other requirements are based on state law and federal law, particularly the Affordable Care Act.

When choosing group health plans for your business or your large/small group, you should consider the financial situation of your business, the needs of your employees, and the size of your business.

Determine which health plans have; the best benefits, more adaptability, less expensive options, superior coverage, HR relief, set payments, and fewer risks.

Types of Group Health Insurance Plans

There are several types of group health insurance plans available to the owners of both large and small businesses and associations in the US, each with its advantages and disadvantages.

As a large or small business owner, you need to assess each type of group health coverage to determine which one works best for your organization.

Fully-Insured Plans

A fully-insured group health plan is the most common option for employers of any size, as it comes with a low-risk guarantee. The annual premiums are set to provide coverage at a full level, with employers and employees both contributing to the insurance premiums.

The yearly premium is determined by several factors including how many employees are in an organization, the average age of the employees, the employer’s claims history, the organization’s industry, and any additional employee coverage or benefits that are needed.

Self-Funded Plans

While a fully-insured plan makes the insurance company foot the medical expenses for the employees’ healthcare, if a business chooses a self-funded plan, that cost is taken on by the employer.

This can make group coverage cheaper and give you more control over your health plan as an organization, though it also entails an employer accepting the risk of paying out for any substantial claims.

Self-funding is mostly regarded as a health insurance option for larger companies, but small businesses can also take advantage of this plan.

A small business owner can opt for a partially self-funded plan with stop-loss insurance, allowing you to benefit from self-funding without assuming the entire risk in the event of any costly medical expenses.

Level-Funded Plans

Unlike the plans above which require yearly payments, level-funded plans are paid on a monthly basis. Insurance companies use census data to calculate the amount that a business should pay.

The rates for such plans are based on considerations such as claim allowances, charges, and stop-loss coverage premiums.

After each year is complete, the insurer will modify the monthly amount depending on how your group did. This type of group health coverage might be most suitable if you own a small group.

Health Maintenance Organization Plans (HMOs)

An HMO is a form of medical coverage where employees or members of a group pay a monthly fee for certain medical services. Access to healthcare is restricted to specific healthcare providers that are part of the network, making them more cost-effective than other plans.

If an employee seeks healthcare outside the HMO network, they may have to pay the whole cost of the service.

Preferred Provider Organization Plans (PPOs)

PPO plans offer more flexibility to group members than HMO plans. Although PPOs also have a network of qualified healthcare providers and facilities, members are allowed to get healthcare from outside the network without having to foot the entire medical expense.

However, this would result in higher co-pays and extra medical costs.

High-Deductible Health Plan (HDHP) with a Savings Option (HDHP/SO)

The HDHP/SO plan offers convenient and economical health coverage at a reduced monthly premium. Employees will pay for qualified medical expenses from their funds and be refunded by the insurance organization.

Additionally, members have the option of sending money tax-free to a Health Savings Account (HSA) and then using those funds to pay for health-related costs.

Small Business Health Options Program (SHOP)

The Affordable Care Act provides the Small Business Health Options Program (SHOP) for companies with 50 full-time employees or less. As a small business, SHOP affords your business flexible options, such as:

• The freedom to decide whether to include dental insurance in your coverage.
• Buying the plans personally or hiring a broker to do it for you.
• Providing a single plan or allowing employees to choose from several options.
• Choosing how long new employees have to wait before enrolling.
• Deciding how much of the premiums to pay and if coverage is extended to employee dependents.

Some small employers qualify for the Small Business Health Care Tax Credit, which can cover up to 50% of the premiums paid by employers. The eligibility requirements are:

• The business must have less than 25 full-time equivalent employees.
• An employer must be offering a qualified health plan through SHOP to all full-time employees.
• The average employee salary must be less than $56,000 per year.
• The employer must be paying at least 50% of the full-time employees’ premiums.