What Is Group Health Insurance?
Group Health Insurance is either offered by an employer for their employees and their families or is offered by an employee organization. The plan is normally offered to all eligible employees and each of these employees is able to add dependents as participants under the ‘Subscriber’ which, in this case, would be an employee. There are various types of group insurance plans to choose from (see ‘Types of Health Insurance Plans’ below for more information) when concerning Group Health Insurance. In addition, these plans are designed to be more cost-efficient because, when a company spreads out insurable risk among a larger number of people, then the premiums are overall lower. In general, Group Health Insurance premiums are going to be lower than Individual Health Insurance premiums. Another benefit of Group Health Insurance is that employers are able to deduct their contributions on their tax returns, making these plans a good option for both employers and employees.
Health Insurance Definitions
This section contains some insurance definitions in order to help you while navigating the various health insurance products:
Premium: The amount you need to pay (usually per month) for an insurance plan to stay active. Premiums vary based on a variety of different factors including your plan deductible, your age, etc.
Deductible: The amount of money you need to pay each year before your plan starts paying for medical services. Deductibles vary between plans and some plans could have no deductibles. Deductibles normally reset at the beginning of the plan year. In general, the higher your deductible is, the lower the cost of the policy and vice versa. This is because, if you select a higher deductible, you are paying more of the medical costs up front rather than the insurance company paying for them. And so, if the insurance company needs to pay less overtime, then the premium will be less.
Copayment: Is a level fee that you need to pay when receiving a certain medical service. The plan decides what services they will offer to members as copayments and if these copayments are to be paid before or after you meet your plan deductible. For example, on one plan, you might go to the doctor’s office and, if you’ve already met your plan deductible for the year, then you would just pay the copayment amount for that doctor visit. Copayments also vary depending on what type of service you are receiving whether it be going to your primary care doctor, going to a specialist, getting blood work done, etc.
Coinsurance: Is a certain percentage you need to pay when receiving a medical service. For example, say your doctor visit was $100, and you have already met your plan deductible for the year. Your plan’s coinsurance for this service is 30%, and so you would pay 30% of $100 ($30) and then the plan would pay the other 70%. Coinsurances are vary depending on what type of service you are receiving and each plan has different coinsurance amounts for different services.
Out of Pocket Maximum: The maximum amount that you would need to pay for services that are covered by the plan over the course of the plan year. Each plan could have a different out-of-pocket maximum and, after one meets this out-of-pocket maximum amount, then the plan covers 100% of covered services for the rest of the plan year. There are certain things that do not contribute to your out-of-pocket maximum amount, including monthly premiums, out-of-network services and expenses for services that your plan does not cover. Out-of-pocket maximums are different for individual and family plans.
Types of Health Insurance Plans
Health Maintenance Organization (HMO): Type of health plan that has a limited amount of doctors that have contracted with the HMO. In this type of plan, you need to obtain care from doctors or hospitals that have contracted with the plan (are in-network) in order for the plan to cover services. The HMO generally will not cover out-of-network care or expenses except in the case of an emergency. When enrolling in the HMO plan, it is important to check to see if your doctors are in-network to be eligible for certain benefits. You can check which providers are in-network by going to the insurance company website.
Preferred Provider Organization (PPO): Type of health plan that contracts with doctors and hospitals in order to create a network. In this type of plan, you have the option of either going to providers who are in-network or out-of-network. Going to in-network providers will cost less overall, but you can go to out-of-network providers at an additional cost. Just like HMO’s, be sure to check to see if your doctors are in-network as going to in-network providers is a reduced expense for covered services.
Point of Service (POS): Type of health plan where you will pay less if using the doctors or hospitals within that network. This type of health plan combines characteristics of an HMO and a PPO plan. You can also use doctors or hospitals out-of-network at an additional cost. POS plans require you to obtain a referral from your primary care doctor (PCP) in order to visit a specialist.
Health Savings Account (HSA): Type of health plan in which you are able to set money aside on a pre-tax basis towards qualified medical expenses. This money that is set aside can be used to pay for deductibles, copayments, coinsurance, and some other expenses but cannot (in general) be used to pay your premiums. In order to use an HSA, you must be enrolled in a High Deductible Health Plan (HDHP), which is a type of policy that only covers preventive services prior to paying your deductible. There are certain limits as to how much one can contribute to an HSA per year and these limits change each year. If you do not spend your HSA funds in one year, they can rollover to the next year.
Employee Acceptance & Eligibility
In general, in order to meet eligibility requirements, a group must meet two criteria:
- Must have at least one full-time employee or full-time equivalent employee other than the business owner of the spouse of the business owner.
- The company must be a legal business entity.
A full time employee is normally someone who is considered to work at least 30 hours a week, but this definition of a full-time employee can vary from state to state. If an employer decides to offer health insurance coverage for one employee, then they must offer it for all employees. Even though group coverage is offered to all employees, if an employee does not want to be on the group insurance policy, then they can sign a form to waive the group insurance benefits and they will not be on the group policy. An employee might not want to be on the group insurance policy if they are already covered by a spouse.
A Waiting Period is defined as a period of time that needs to pass before an employee is eligible to join the group health insurance plan. Waiting periods can begin either when an employee is hired or a when an employee is rehired. The waiting periods for when a new employee or a rehire is eligible for benefits under the group health insurance plan are designated by the group. Waiting periods cannot be longer than 90 days.
COBRA Health Insurance
The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a health insurance program that allows employees and their families to continue health insurance coverage offered by the employer when either 1) the employee loses their job or 2) the employee experiences a reduction in hours. Under this continuation coverage, the employee must, for a specified period of time (can be between 18 to 36 months depending on the situation) be offered to continue coverage under the group plan if the employer offers COBRA to their employees. But, if the employee chooses to go with the COBRA option, then the employee will be paying the entire cost of the premium and the employer will not contribute any amount towards that premium. Since premiums will be higher with COBRA, some employees do not want to continue having that coverage and instead decide to enroll in another health insurance plan. An employee needs to decide if they want to elect for COBRA coverage within 60 days of their termination date with their employer.
Evaluating Your Options
We can help you to see what plans are available for your business! We work with many employers and find plans that compliment your business budget. In addition, we work with many insurance companies and evaluate group plans each year. For more information, please contact our office and we’d be happy to find a great plan for your business!