Group health insurance coverage is a policy that is purchased by an employer and is offered to eligible employees of the company (and also to the employees' family members) as a benefit of working for that company. Eligibility is usually based on a waiting period for new employees as well as a minimum number of hours worked per week. Group health insurance plans are a vital component of many employee benefits packages employers provide to their employees. Most Americans have group health insurance coverage through their employer or the employer of a family member. There are a few distinct advantages for employees in a group health plan. One of the main advantages is the contribution most employers make toward the cost of the health coverage premiums. In most cases the employer pays at least 50% of the monthly premium for the employee. Another advantage, if the employer has established a Premium Only Plan (POP plan) employees can pay their required contribution on a pre-tax basis. Between the employer contributions, which aren’t taxable for employees, and the POP plan, employer-provided health insurance is significantly subsidized due to these tax breaks.
One of the main reasons an employer would offer group health insurance is employee retention. Employers that offer group health insurance have an easier time attracting and retaining quality employees. Offering group health insurance can also provide some tax advantages. Employers may experience reduced costs in areas such as workers’ compensation. Workers and families of workers who were previously uninsured may experience greater access to medical care services and better health outcomes.
There is value to offering and having health insurance. Believe it or not many people don’t properly understand the basic purpose of health insurance to include ow it works. Health insurance helps protect employers and employees in a variety of ways including but not limited to; Protecting your finances, discounted rates for medical care, protects you against unexpected medical costs, helps to protect your health, improves access to quality care, provides care for critical needs, encourages a healthier lifestyle, it helps to protect the business from employee medical costs by limiting your liability.
In today’s market there are several different types of health plans available. The top 4 different types are PPOs, HMOs, HSAs, and Indemnity Plans.
PPO or “Preferred Provider Organization” plans are among the most popular. Subscribers need to get their medical care from doctors or hospitals within the insurance companies preferred provider list to be able to have claims paid at the highest level. It is the subscriber’s responsibility to make sure their provider participates in the PPO. You are able to get medical care out of network though it may not be covered or may be paid at a lower level by the insurance company.
These are usually PPO plans with higher deductibles, designed specifically for use with Health Savings Accounts (“HSAs”). Similar to a flexible spending account (FSA) or 401(k), an HSA is a special bank account that allows participants to save money – pre-tax – to be used specifically for medical expenses in the future. Unlike FSAs, the money in an HSA rolls over every year and can also gain interest. By pairing a qualifying high-deductible health plan with an HSA, participants can save money on health care and earn a tax write-off.
HMO stands for “Health Maintenance Organization.” HMO plans offer a wide range of health care services through a network of providers that contract exclusively with the HMO, or who agree to provide services to members. Members of HMO plans will typically need to select a primary care physician (“PCP”) to provide most of their health care and refer them on to HMO specialists as needed. Health care services obtained outside of the HMO are typically not covered, though there may be exceptions in case of an emergency.
Indemnity plans allow members to direct their own health care and visit most any doctor or hospital they like. The insurance company then pays a set portion of the total charges. Members may be required to pay for some services up front and then apply to the insurance company for reimbursement. Because of the freedom they allow members, Indemnity plans are sometimes more expensive than other types of plans.
The cost of group health insurance is based on multiple factors. There is not a one size fits all approach when looking into group health insurance. The main factors that determine the cost are; the type of plan ie PPO, H.S.A., HMO etc, the deductible and the inner workings of the plan. Where the company is based is taken into account as well. The majority of rates in present day are based on age banded rates. Insurance companies establish these age banded rates on a quarterly basis. These rates are based on the age of the employee as well in some cases tobacco usage. Level Funded plans exist that still offer composite rates (where the rate is the same for employees based on their employee class i.e. single, family, etc.). With hundreds of plans available from a variety of insurance carriers costs can vary significantly. Using a systematic approach to determine the needs of the employer and the employees will help ensuring the best coverage and cost will be made available.
Presently small employers are not required to offer health insurance to employees. In most cases they still do so as the belief is health insurance is a valuable employee benefit helping with attracting and retaining quality employees. State and federal laws apply based on factors such as number of employees, type of business, and if an insurance company is providing the coverage. With the Affordable Care Act comes the requirement that small groups with coverage offer health plans meeting certain benchmarks. These benchmarks are represented by different metal level such as platinum, gold, silver, and bronze. They are designed to provide the same average level of benefit to an enrollee. The metal levels are broken down into tiers that are based on the percentage the plan pays of the average overall cost of providing essential health benefits to members. These tiers include:
It’s important to note that the metal tiers reflect what the plans will pay on average. These percentages are not the same as coinsurance, which calls for an individual to pay a specific percentage of the cost of a specific service.
Aside from Affordable Care Act requirements there are several other requirements that apply to group health insurance. Laws exist that address benefit communications (ERISA), claims appeals (ERISA) and portability of coverage (HIPAA) to name a few. It is mandated by the ACA and the federal HIPAA that pre-existing health conditions of small employer group members have to be covered. This is known as guaranteed issue. Insurance companies must renew small employer health plan contracts annually, at the employer’s discretion, unless there is non-payment or premium, the employer committed fraud or intentional misrepresentation, or the employer has not been in compliance with the terms of the health insurance contract.
Small employers may purchase insurance plans that are provided through the new SHOP markets operating in each state or in the market outside the SHOP. Health insurance plans that are offered in the SHOP exchange are generally also available in the market outside of the SHOP. It’s important to note that an employer that wishes to claim the Small Business Health Insurance Tax Credit must purchase a SHOP-based plan.
Premium rate determination with the advent of the ACA is significantly different than has been the norm in many states prior to the ACA law. Small group insurance plans are now rated as modified community rating.
Large group health insurance contracts also have to be offered on a guaranteed-issue basis, so a health insurance company cannot reject a large employer group based on its claims history. No individual employee who is eligible for benefits can be excluded from large group coverage based on medical history. Federal law mandates all group insurance contracts, including large group contracts, be renewed every year at the employer's discretion, unless there is non-payment of premium, the employer has committed fraud or intentional misrepresentation, or the employer has not complied with the terms of the health insurance contract.