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Nearly 50% of insured Americans receive health insurance coverage through group plans provided by employers, according to 2019 Census data. However, many of them may not have thought much about how exactly this group health insurance works.
Group health insurance provides many benefits, but when your insurance plan is tied directly to your employment, you risk a sudden loss of health coverage should your job situation change. In 2017, 22% of uninsured Americans reported losing their health insurance due to job loss or change in employment status.
Whether you recently started a new job and want to learn more about how your new group coverage works, you already have group coverage and want to know more about it, or you just lost or quit your job and worry you’ve lost health insurance coverage, this guide can help you understand the ins and outs of group health insurance.
What Is Group Health Insurance and How Does It Work?
Group health insurance—sometimes called employer-based coverage—is a type of health insurance plan offered by an employer of a member organization. Members of a group health insurance plan usually receive coverage at a lower cost because the risk to the insurer is distributed across multiple members.
Under the Affordable Care Act (ACA), businesses with 50 or more full-time employees must provide health insurance to full-time employees and dependents under the age of 26 or pay a fee. Insurers are also required to provide group coverage to organizations with as few as two employees. Some states allow self-employed individuals to qualify for group coverage plans as well.
Group health insurance plans are selected and purchased by companies or organizations and then offered to employees. In most states, a group insurance plan is required to have a 70% participation rate, though some states’ minimum rate is higher or lower.
Benefits of Group Health Insurance Plans
Group health insurance policies have a number of advantages and benefits over individual plans. Many employers provide supplemental health plans, which include dental coverage, vision coverage and pharmacy coverage, either separately or as a bundle.
The main benefit group plans offer is lower premiums. According to 2018 research conducted by eHealth, a private online marketplace for health insurance, the average premium cost per individual in a group health insurance plan was $409 a month compared to $440 for an individual plan. In the same study, small group health plans had an average deductible of $3,140 a year compared to $4,578 for individual plans.
Additionally, family members and dependents can be added to group plans at an additional cost to members, which can assist families with sole providers or whose alternative or individual health plan options carry significantly higher prices.
Group health insurance plans provide numerous tax benefits to both the employer and employee. The money employers pay towards monthly premiums is tax-deductible, and employees’ premium payments can be made pre-tax, which may reduce their total taxable income.
Some smaller businesses may also qualify for the small business health care tax credit. The small business health care tax credit benefits an employer with fewer than 25 full-time employees who pays average wages of less than $50,000 a year, offers a qualified health plan through the Small Business Health Options Program (SHOP) Marketplace and pays at least 50% of the cost of health care coverage for each employee (but not for family or dependents).
Who Can Sign Up for Group Health Insurance?
To be eligible for group health insurance, an employee must be on payroll and the employer must pay payroll taxes. Individuals usually not eligible for group coverage include independent contractors, retirees and seasonal or temporary employees. Employees who are on unpaid leave are often ineligible for group coverage until they return to work.
Generally, group health insurance coverage must also be offered to an employee’s spouse and dependent children until age 26, though employers may choose to expand the age definition for child dependents. Employers may also opt to extend health benefits to unmarried partners of the same or opposite sex, and that coverage must mirror the coverage extended to spouses on the same plan.
How to Enroll in Group Health Insurance
To enroll in a group health care plan provided by your employer, ask about the deadline for enrollment once hired. If you miss this deadline, you might have to wait until the annual open enrollment period to join. Some employers may have waiting periods of up to 90 days before new employee health insurance kicks in. You won’t have to pay premiums during this time, but you won’t have access to any health care coverage, either.
Some group health insurance plans offer different tiers of coverage or supplemental coverage like dental, vision and/or pharmacy. During open enrollment periods, you can make decisions about these insurance choices your employer provides, as well as add or remove any dependents. If a major life event like marriage, the birth of a child or a spouse’s loss of employment changes your circumstances, you may be able to enroll these new dependents in your group health insurance plan outside the open enrollment period.
Where to Find Group Health Insurance Plans
The most common way to get group health insurance coverage is through an employer. If your employer doesn’t offer health insurance due to the small size of the company or if you’re unsatisfied with your employer’s coverage options, look into coverage through a membership organization. If you belong to a membership organization offering a group health plan, such as AARP, the National Association of Female Executives, the Writer’s Guild of America or the Freelancers Union, you may be able to get health insurance coverage through your membership.
Be wary of plans offered by some membership organizations, as many offer a “health services discount” plan, which may save you money on prescriptions but isn’t a true health insurance plan.
Group Health Insurance for the Self-Employed
Approximately 25.7 million small businesses in 2017 were considered “nonemployers,” or businesses with no paid employees, according to a 2020 report from the U.S. Small Business Administration Office of Advocacy. If your business doesn’t have any employees, you’re considered a small group of one.
Even though you’re self-employed, you may be able to buy group health insurance for your company in certain states. Check with your state’s insurance department to determine whether your state allows group policies to be sold to groups of one.
What to Do If You Lose Your Group Health Benefits
If you lose your job, you may also lose your employer-sponsored group health insurance. You and your dependents may be able to keep this coverage through what’s called continuation coverage.
In 1985, Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA), which allows employees who lose their jobs to buy group health coverage for themselves or for their families for a limited amount of time. Under COBRA, the same group insurance plan with the same benefits must be made available to the terminated worker; however, the former employee must pay the full cost—including whatever the employer has previously covered—of the plan.
Continuation coverage is often much more expensive than an individual health insurance plan, so consider the price, benefits and network of providers carefully before making the choice to keep your coverage through continuation coverage temporarily instead of moving to an individual plan.
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