Group Health Insurance

If you have held a job of long standing, you are probably comfortable with the concept of group health insurance from an employee perspective. In general, this term refers to a health coverage policy that is purchased by the employer and assists workers and often their families with health care coverage. For many businesses, this insurance policy is one of the primary benefits that it provides to everyone it employs. Even in today’s changing work climate, a majority of Americans continue to count on this type of insurance that is either provided by their employer or that of a family member.

With a group policy, the employer chips in an average of 50 or more percent of the total cost, thus making medical care affordable for millions of people for whom it would otherwise be unavailable. Also, many businesses have set up Premium Only Plans (often called POP plans) that give workers the ability to pay their group health insurance premiums on a pre-tax basis.

Are All Group Health Plans Created Equal?

Until the Affordable Care Act was approved, states usually regulated their own group insurances, resulting in a wide variety of coverage types depending on where you lived. Since the recent changes in affordable care were implemented, the federal government has much more of a say in regulating health coverage, particularly when it comes to group policies for small businesses with fewer than 50 employees as well as for individuals purchasing coverage on their own.

What Are The Coverage Rules For Smaller Employers?

At least for the time being, small employers with less than 50 workers are not required to provide health insurance benefits. However, that does not mean that many of these companies do not provide these benefits, often as a way to attract and retain quality workers. Even today, these smaller companies must comply with state and federal laws based on the size of the company, the kind of business it is and whether an insurance company is furnishing the coverage.

The Affordable Care Act And Small Employer Health Coverage

Think of the Affordable Care Act as a watchdog that sets the rules for the insurance companies providing coverage. To that end, four tiers of coverage have been established: platinum, gold, silver and bronze. The tiers represent the percentage the employer’s plan pays off the average cost of providing essential healthcare:

• As the name implies, platinum plans are the most expensive and generous. They can cover as much as 90 percent of medical costs.
• Gold plans cover 80 percent of medical expenses
• Silver plans must pay 70 percent of medical expenses
• Bronze plans must pay 60 percent of medical costs.

In addition to the regulations set forth by the Affordable Care Act, group health insurance is subject to many other requirements. There are laws that pertain to communications about benefits, regulations stipulating how to appeal a claim and portability of coverage issues. It is particularly important to note that, by law, no small employer or individual can be turned down for group health insurance coverage on the basis of a pre-existing medical condition. All insurance companies are expected to renew their contracts every year at the employer’s discretion. The only exceptions are if the premium has not been paid, if the terms of the contract were not followed by the employer or if fraud or misrepresentation occurred.

Determining Healthcare Premium Costs For Small Employers

Subsequent to passage of the Affordable Care Act, small group health insurance has been placed in the modified community rating status. This gives health plans the ability to vary the rate that those in the community of beneficiaries must pay. Factors such as age, geography and smoking status can now be factored in. Depending on the rules of your state, employers might be able to give their workers a choice among several insurance companies as well as a variety of tiers and plans within each tier.

Coverage For Large Employer Groups

Because large group health insurance contracts must also be issued on a guaranteed basis, large employers cannot be rejected based in their claims histories. No individual within the group can be rejected because of medical history either. All large group employer contracts are renewed every year at the employer’s discretion unless there is fraud or deliberate misrepresentation by the employer, the premium has not been paid or the employer has violated the terms of the contract.

How Are Large Employer Group Health Insurance Rates Determined?

The rates for this type of insurance depend on employee participation and prior claims experience. The cost is underwritten at the time of purchase. Although employers may be asked a few limited medical questions, they will not be expected to provide comprehensive facts. Premiums are based on the group’s claims experience in past years and any overall changes in providing healthcare coverage in the industry.

Who Regulates Large Group Health Insurance?

In many cases, employers contract with a single insurance company, which provides all of the coverage for the employee group. The employer pays its portion of the premium, with workers furnishing the remainder. In return, the insurer assumes all insurance risks. The states regulate these plans, whereas the federal government oversees the kinds of preventive services that insurance companies must provide as well as the terms of waiting periods that workers must endure before being covered.

It should be noted that there are instances when employers decide to self-insure. Instead of contracting with an insurance company, the employer sets funds in reserve and takes the responsibility to cover claimants’ health expenses. Generally, they contract with a health plan or an administrator to handle claims and benefits. All of these employer-provided plans are regulated by the Department of Labor under the Employee Retirement Income Security Act of 1974 and are known as ERISA plans.

Employer Options For Sole Proprietors

Most states require that a company have at least two employees in order to qualify for group health insurance. To protect against fraud, the government and the insurance companies require significant documentation of a business’s legitimacy and employee status.