(By: B. Brooks)
What you’ll find:
I. What Is Group Health Insurance?
II. The Background of Group Health Insurance
III. How It Works
IV. The Benefits of Group Health Insurance
V. The Cost of These Plans
VI. How Many Employees It Takes To Qualify
Group Health Insurance:
Group health insurance provides medical coverage to a group of people under a single policy. Premium costs are lower than individual health insurance plans because the risk is based on the entire group versus the individual.
It is employer insurance offered to their employees as a core benefit.
The Background of Group Health Insurance
In 1942, the president during World War II received the authority to stabilize wages and salaries. Wage restrictions were imposed to control wartime inflation. Unfortunately, they stopped companies and organizations from paying their employees above the set wage ceiling.
To help employers attract new employees and retain their current ones they began to offer employee benefits for the first time. Group health insurance being a core benefit in the make-up of the compensation package.
Employee benefits were considered non-inflationary. Since they weren’t paid in cash, they didn’t violate the wage restriction either.
Throughout the 1940s employee benefit packages became a normal part of employment. Group health insurance would also become a popular benefit to include in these packages.
How It Works
Group health insurance policies are purchased by companies and organizations. It is then offered to their employees or a group of members within the company. These plans cannot be purchased individually or privately.
Employees are given the option to accept or decline coverage once they are eligible for employee benefits. Plans may be offered in tiers ranging from basic healthcare to a more robust plan with premium add-ons.
The most common group health insurance plans:
- HMO: Health Maintenance Organizations
HMOs provide health insurance through a network of healthcare providers under the HMO contract. Premium costs are lower because patients are sent directly to the healthcare provider. HMOs have more restrictions than PPOs.
- PPO: Preferred Provider Organization
Medical professionals and facilities provide medical care and services to covered individuals at reduced rates. PPOs offer greater accessibility to doctors, facilities, and services. Premium costs are higher than PPOs, but you get a more comprehensive plan.
Medical coverage can be extended to the employee’s legal spouse or children at an additional cost. The premium costs are split between the employer and the employees. Due to the risk being shared across a larger number of plan participants, premium costs are lower than plans bought individually.
Most plans do require at least a 70% participation rate to be validated.
The Benefits of Group Health Insurance
Group health insurance gives insurers a better view of everyone they’re covering. This also lowers the risks for covered individuals and the cost they pay.
Not all plans are created the same. They vary depending on insurers, plan types, costs, terms, and conditions. However, you’ll always get these advantages out of group health insurance:
- Low premium costs for both parties involved, employer and employee
- Generally, no medical exam required
- More coverage for pre-existing conditions
- Tax incentives for employers
The Cost of These Plans
The cost of group health insurance is based on many factors. Down below you’ll find the average cost for 2020 reported by the Kaiser Family Foundation.
Single: $7,470 per year
Family: $21,342 per year
Both have increased by 4% since 2019. Traditionally, the employer pays 80% of the premium cost and the remaining 20% is paid by the employee.
Supplemental health plans were not factored into the above costs. Dental, vision, and prescription coverage can be added. These employee benefits are offered at low rates as well. You can also bundle these benefits into a compensation package.
How Many Employees Does It Take To Qualify
Remember: Most plans require at least 70% of your employees to participate in order to be validated.
There are plans for companies with only one employee and there are plans for organizations with over a thousand employees. You have to find the group health insurance plan that fits your company size and needs.
Plans do vary by company size. Company size is divided into these three tiers:
- Small size business: 1-99 employees
- Medium size business: 100-2,999 employees
- Large size business: 3,000 or more employees
Group health insurance is a great option for the employer and their employees. Employees who struggle to afford or get access to proper health coverage can get it through you. Premium costs are kept low so this can be made possible.