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In the US, group health insurance plans are offered by many employers to their employees, and this is backed by the Affordable Care Act (ACA). Also, members of unions and various organizations can benefit from group health insurance.
A group plan is usually sponsored by monthly or annual health premiums paid to the insurance company offering the group coverage plan. Job seekers tend to lean towards companies that offer health insurance coverage and other employee benefits to their employees.
Group plans are widely favored by organizations and insurance companies because the risk pool is shared among group members or employees. This reduces the liability of the insurer and results in low premiums.
A group health insurance premium is a payment made to an insurance company to maintain an active health insurance policy. Health premiums fund coverage for employees or group members. Stopping premium payments will result in the policy being canceled by the insurer.
Group health insurance cost is calculated by how many employees a business has and the premium costs for each individual who has enrolled in the plan. Other factors such as having a spouse or dependents also count when coming up with the collective premium amount.
Health insurance plans are reviewed yearly, so the premium paid for health care coverage during a year could be different from the next year.
Individual health insurance coverage is purchased by an individual either for themselves alone or also including their family.
On the other hand, group health insurance coverage is purchased by an employer or head of an association for their employees or members of their association.
A group plan may be supported by supplemental health plans like dental, vision, and pharmaceutical coverage, either separately, or as a combined package.
Any business with a minimum of one full-time equivalent employee besides the employer can qualify for a group health insurance plan. This means that both large and small businesses can take advantage of group health insurance plans.
However, only businesses with over 50 full-time employees are mandated by the Affordable Care Act to buy group health insurance plans for their employees. Group plans only permit select members or employees of an organization to obtain healthcare insurance for themselves and their family members.
Employers can also be included in a group health insurance plan, but they need at least one other recipient that isn’t a family member or a spouse.
Freelancers registered under a freelancers union and self-employed individuals can qualify for group health insurance plans, depending on location.
The insurance premiums in a group health plan are paid by both the employer and the employees receiving health coverage. Depending on the insurance plan, health benefits can be extended to the family members of employees at an additional cost.
Group health plans are purchased by the business owner, usually with a minimum of 70% employee participation, and employee contribution is subsequently deducted from employees’ pay.
While health insurance premiums are split between employers and employees, the percentage paid by each party depends on the plan.
Generally, health insurance laws require employers to contribute at least 50% of the health insurance premiums for all employees receiving coverage. However, a lot of employers exceed the bare minimum required by the government.
According to a 2022 study by the Kaiser Family Foundation, employees in small firms (3 to 199 employees) contribute about 36% of the health premiums. On the other hand, people working with large employers (200+ workers) pay about 26% of the premium cost.
Also, the average premium percentage paid by employees is 28% for family coverage and 17% for individual coverage. These statistics mean that the average employer contribution to group health insurance premiums was 72% for family plans and 83% for single coverage.
So, in the US, group members pay lower premiums than their employers for most group health coverage plans.
Since the health premium is automatically deducted from the employee’s bank account or salary, the process of paying the premium is straightforward. The automatic deductions via payroll taxes also reduce the risk of failing to meet the premium payment deadline.
When it comes to funding group health benefits for their employees, employers have a number of health plan types to select from. These types of group health insurance plans offer health benefits in different ways and also have varying premium costs.
With a fully-insured plan, the insurance company will take on all of the risk related to paying out healthcare costs, as long as the premiums are paid.
With a self-funded plan, the employer bears the risk of insurance and pays out insurance claims to employees. With such plans, employees enjoy lower premiums and higher flexibility.
Under a Health Maintenance Organization (HMO) plan, health insurance is sponsored by either an annual or monthly premium. Insurers control access to health benefits, and the plan only covers employees when they use healthcare providers within the HMO’s network.
Also, some HMO plans require that an employee should live or work within the plan’s service area.
Preferred Provider Organizations (PPOs) are more flexible than HMO plans when it comes to selecting healthcare providers. A Primary Care Physician (PCP) does not need to refer an employee to a specialist, and they can choose whatever doctor they want.
However, PPO plans charge higher premiums, and when employees visit an out-of-network healthcare provider, they will typically face a higher copay or coinsurance rate.
A Health Reimbursement Arrangement (HRA) is not a typical group health insurance plan where an employer pays part of the premium cost. Rather, an employer will deposit a certain amount of money and this can be used to pay for any qualified medical expenses.
Depending on the type of HRA plan opted for, employees may also be able to use that money to pay the monthly premiums for a health insurance plan.
Cost-sharing is a system whereby part of the cost for medical services is paid by the policyholder, while the other portion is covered by their health insurance provider. This often includes out-of-pocket costs that group members pay for medical care or products that a group health insurance plan does not cover.
Health insurance companies do not always reimburse these medical expenses, however. There are several forms of cost-sharing and out-of-pocket costs, and it is essential to understand how they work, and how they can impact group coverage access.
Copayments or copays as a form of cost-sharing in health insurance are payments made by an individual for healthcare services. Copayments are usually a predetermined, fixed amount for services like a doctor’s appointment and prescription medication, among others.
Deductibles are the amount employees need to pay for all healthcare services before group health insurance kicks in. Many factors affect the value of deductibles including the specifics of the coverage plan and the location.
The healthcare expense that an insurer shares with policyholders after the deductible is paid is referred to as coinsurance.
Sometimes, the out-of-pocket cost for healthcare is split so the insurer covers 80% and the recipient takes care of the rest. This is known as 80/20 coinsurance.
Coinsurance rates being paid by the insurance recipient are usually between 0% to 30%, and sometimes more, depending on the healthcare service, insurer, and group health plan.
Medical insurance does not cover every expense, so if someone wants a treatment that is not covered by their plan, they’ll have to pay the full cost. Non-coverage often applies to many cosmetic procedures and non-prescription drugs.
The purpose of cost-sharing between insurance companies and their customers is to minimize the amount of money spent on medical costs by the policyholder every month.
If a health insurance policy is obtained for a small group, the group members are likely to pay a larger percentage for cost-sharing than employees of large businesses. Also, in many cases, the lower the cost of health premiums, the more a person might need to spend from their pocket for medical services.
Employers and employees should carefully consider the cost of health insurance benefits under a group health insurance policy before going ahead to subscribe.
Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.
Todd Taylor with Taylor Benefits gives our small business the kind of personal service we need. Insurance benefits are important to our employees and Todd helps us find a balance between benefits and value. Todd responds immediately to my phone calls & e-mails. He has even gotten in touch with me on a Sunday when we were in need of coverage answers immediately. We are very pleased with the hands-on service Todd and his staff provide.”
-Ken and Linda Orvick, Orvick Management Group, Inc.
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