If you’re considering a group health insurance plan for your company, there are some things about it that you’ll need to know. After all, it’s important to have all the information before you choose a plan. In some cases you may not qualify for the kind of group health insurance you want, so you need to know if there are other options. Here are some of the most significant issues to consider, so you can learn more about how group health plans work.

Understanding Group Health Insurance

What is Group Health Insurance?

Group health insurance plans refer to healthcare coverage that is purchased for a group, typically by employers, business owners, or association heads. As opposed to individual health insurance plans that allow anyone to enroll through a marketplace insurance provider, group medical insurance only permits select members or employees of the respective group to obtain healthcare coverage for themselves and their families.

Due to this group health plan definition, this type of coverage is also known as employer group health insurance or small business health insurance. When you purchase such a plan, you are able to share enrollment and premium costs with your employees or group members. Each of your employees or group members also has the right to accept or decline the enrollment offer. Those who enroll in group healthcare coverage can benefit from perks such as low premiums, affordable deductibles, and extensive health coverage.

How Group Health Insurance works

Group health insurance is a system where employers offer health benefits to their employees, encompassing a streamlined enrollment process and shared cost mechanism. Employers select plans from insurers, presenting these options to employees during an annual open enrollment period, or upon meeting eligibility criteria such as a waiting period from their hire date. Employees contribute to the premium typically through payroll deductions, which are often made pre-tax, reducing taxable income and making coverage more affordable.

The structure of group plans usually involves a network of healthcare providers. Employees are encouraged to use in-network services due to the higher level of coverage provided, which results in lower out-of-pocket costs compared to out-of-network services. This setup contrasts with individual health insurance, where plans are personally purchased and can be more tailored, but generally do not benefit from the cost efficiencies of group plans, such as risk pooling and tax advantages. Understanding these details helps employers and employees navigate their options and optimize their health care benefits effectively.

Benefits of Group Health Insurance

When you set out to buy group health insurance for your employees or group members, it is important to understand the perks of these coverage plans. Besides helping you properly appreciate the available offerings, it also enables you to explain the advantages of group health insurance to your employees or group members.

Accessible plans

In addition to potentially offering lower premiums from the start, group health insurance plans also enable group members and organization heads to share coverage costs. This tends to makes such plans more affordable than personal insurance, where all the burden is shared by a single person or their household.

Tax benefits

Employers can label the premiums they pay for employees as tax-deductible and also get small business health care tax credit wherever applicable. Whereas, employees pay for their premiums before their taxable income is calculated. This delivers tax advantages to both parties.

Flexible enrollment timing

Personal health insurance plans are available for enrollment within a certain period of the year. In contrast, group medical insurance lets you purchase your plans as an employer or association head any time during the year. This also makes enrollment times more flexible for group members throughout the year.

Affordability

Group health insurance is more affordable because there are more people participating in it. The larger the risk pool, the lower the rates. That’s why it can offer you a lot lower premiums than you would typically see when you look for individual insurance coverage. In other words:

• few people mean higher risks for the insurance company
• more people mean lower risks for the insurance company
• higher risks cost more money to insure a group
• lower risks cost less money to insure a group

As the pool of people in the group health insurance plan gets bigger, the cost of that group health insurance plan comes down. It’s one of the best ways to get affordable insurance for employees, and to help employers afford to properly cover the people who work for them. It can also help cover employees who may not be able to afford insurance otherwise.

How cost sharing works in a group health plan

The cost of a group health plan is shared by everyone in the group, and by the employer and employees. In other words, these plans cost less because there are more people in them. Also:

• Employees pay a portion of their own health insurance premiums
• The employer pays a portion of the employee health insurance premiums

Employers who own small businesses can put most or all of the cost of their group health insurance over onto their employees, but it’s better for getting and retaining talent if they pay a portion of the premiums. That shows the employees that their employers are truly offering them help with their group health insurance, and not just another option the employee has to pay for.

Group Health Insurance examples: HMO and PPO plans

Two major examples of group healthcare coverage are Health Maintenance Organization (HMO) plans and Preferred Provider Organization (PPO) plans.

• HMO Plans. These plans often offer low premiums, but limit the availability of medical care to a select network of providers.
• PPO Plans. These plans tend to deliver more flexibility to group members for seeing their preferred doctors, but they charge higher premiums for it.

Although these are two common types of group health insurance plans, there are other options and you should discuss with your options with your group health insurance provider, employer or with one of eHealth’s licensed agents.

What to do if you lose your group health benefits

If you lose your employer group health insurance, you can look for a major medical plan or an ACA-compliant health insurance plan that is available as a personal healthcare coverage option. Losing employer-sponsored health coverage should trigger a special enrollment period, which would give you an opportunity to enroll in an individual and family health plan outside of open enrollment. 

In case your loss of income does not allow you to purchase traditional healthcare coverage, you can turn towards temporary short-term insurance instead or apply for a government-backed option such as Medicaid.

FAQs about Group Health Insurance

How many people do you need for a group health plan?

In order to obtain group health insurance, you need to have at least one employee or group member. The employer or owner of the group health plan can be included in the group, but they will need at least 1 additional group member who is not a spouse or family member. To see other restrictions, check out our article on how many employees you need to get group health insurance.

What is considered a “small” employer for group health plans?

In the context of a group health plan, a small employer is one that has from two to 50 employees. Sole proprietorships with only one employee (the owner) aren’t eligible, and if you have more than 50 employees you’re not considered small anymore. While small businesses aren’t required to give their employees health insurance, many of them want to offer it if it’s affordable to them.

Can you get a tax credit for your Group Health Insurance?

If you offer group health insurance to your employees, you may be able to get a tax credit up to 50% of what you pay in. That’s a great way to be able to afford group health insurance, since it can be expensive. If you really want to give your employees group health insurance, but you’re not sure if you can afford it, tax breaks can really make a difference.

Can you shop off-market for your Group Health Insurance plan?

When you shop off-market for your group health coverage you can work with a licensed insurance broker like eHealth. That gives you the option to get a policy you might not be able to get on the exchange, and opens up coverage that’s available without subsidies or tax credits. It’s important for you to know all your options so you can pick the best one for your company and its employees.