Group Health Information
What is Group Health Insurance?
Group health insurance is a single policy issued to a group of people, offering uniform healthcare benefits to all members.
What Are Group Health Plans?
Group health insurance plans are employer-based plans that offer coverage to a pool of employees. In contrast, an individual plan is purchased to cover only one person or family. The difference between how group and individual plans are designed affects your costs.
Why Chose a Group Health Plan?
Group health insurance plans hold several advantages over individually purchased health insurance, including lower costs and convenience.
o Shared risk. Because a group plan covers multiple people, the risk is spread out over what is likely a fairly healthy group of participants. This helps keep your premium rates lower than individual plans whose rates are based on individual risk.
o Shared costs. With group coverage, your monthly premium is even lower because the cost is shared between you and your employer. Employers will pay varying percentages of coverage, but whatever amount they choose, it reduces the amount you owe. Depending on your employer’s benefits, you may be responsible for the full cost of the premium for your enrolled family members, or your company may choose to contribute to those premiums as well.
o Tax advantages. If you pay health insurance premiums for an employer-sponsored group health plan, you can pay your premium with pre-tax dollars, which means you are not taxed on the money that is spent on your premium. This lowers your taxable income, giving you another financial benefit from group health coverage. If you are enrolled in an individual health plan, your premium will typically be paid with taxed dollars.
o Easy enrollment. A huge advantage of group health coverage through your employer is the ease of enrolling and paying. Your employer will handle the administrative burden of facilitating coverage, and typically your premiums will be automatically deducted from your paychecks.
o COBRA. Under certain circumstances, such as voluntary or involuntary job loss, you have the option to keep your group insurance plan for a certain length of time under the Consolidated Omnibus Budget Reconciliation Act (COBRA). You will have to pay more for the premium because your employer is no longer paying a share of the cost, but it is an option available to you while you work on acquiring new medical coverage after a job loss or other qualifying circumstance. For more information on COBRA, visitwww.dol.gov/general/topic/health-plans/cobra.
Types of Group Health Plans:
o The carrier assumes the financial risk of providing health insurance, and the employer is charged a flat monthly fee.
o The employer typically knows the costs ahead of time since it pays a flat fee every month.
o Fully insured plans are subject to state rules and regulations.
o With this type of payment model, costs are unlikely to decrease, even with a low previous-year utilization.
o The employer assumes the financial risk of providing health insurance and pays for medical claims out of pocket.
o These models can be more easily customized to fit the specific needs of an employer’s workforce.
o The employer can contract with providers, or a particular provider network, that will best meet the needs of its employees.
o The employer will typically work with a third-party administrator (TPA), which assumes claims administration duties.
o Self-insured health plans are not subject to state health laws, but rather federal laws. These plans are not subject to state health insurance premium taxes
o Level funding models are sometimes thought of as a hybrid of fully insured and self-insured payment models.
o In this type of model, the employer pays a set amount each month to a carrier, and the carrier then pays employees’ claims throughout the year.
o If the employer’s monthly payments exceeded the amount of claims filed, the employer will receive a refund from the excess they paid in monthly claim allotments. If the employer’s monthly payments did not exceed the amount of claims filed, stop-loss insurance will typically cover the overage amount, if allowed by state law.
o Typically, an employer will be assisted or advised by a TPA on the previous two bullet points.
o Companies with smaller numbers of employees may benefit differently than those with larger numbers.