Group health insurance is offered and provided by a company to its employees. A majority of businesses provide group health insurance for their employees to help them cover medical costs. Often times, insurance through an employer is more affordable compared to individual plans available on the market, since the cost of group health insurance is shared by all employees.
How It Works:
There might be some differences in health insurance companies, costs, group type plans and other specification but all group plans share these common characteristics:
- Group health premiums are based on the group rather than the individual. Pooled risk versus age banded individual policies.
- Family members and dependents can be added to group plans for an additional cost.
- Group health plans usually require a 50% participation rate.
To enroll, a business is required to have at least one eligible common law W2 non-owner, full time equivalent employee (FTE). Small businesses, with less than 50 FTEs, are not required to offer health insurance. Larger employers, with more than 50 full time employees, there is a requirement to provide their workforce with group medical insurance.
Major Kinds of Group Health Insurances:
Similar to individual and family health insurance plans, group health insurance has a variety of options and can be broken down by plan:
- Health Maintenance Organization (HMO)
A plan wherein the employees pay for specific health services through monthly premiums. It gives access to a network of healthcare providers but only towards those who are available in the service area. It is commonly more much more affordable than the other plans, however, consultations outside the provided network results in out of pocket costs for the employee.
- Preferred Provider Organization (PPO)
This type of plan is similar to HMOs. Here, the employees are given the choice to choose their doctor and specialists without restrictions. . It basically gives more freedom compared to HMO’s since consultations within and outside the provided network are allowed but with varying out-of-pocket costs.
- High-Deductible Health Plan (HDHP) with Health Savings Account (HSA)
It encompasses lower premium and higher deductibles for the group member or employee. Deductible is the term used to call the fund that comes out form your own pocket that are used in medical expenses right before the insurance itself kicks in.
Let’s say for example, employee A suffers a sprained ankle on her way to work. She was rushed to the hospital to received medical care. Her bill came out to a total of $6,000 dollars. Her deductible is $1,200 meaning she has to pay $1,200 from her own pocket before the insurance coverage chips in. However, having a financial account such as Health Savings Account (HSA) helps the employee in paying for their deductibles, co-payments and other qualified medical expenses. With an HSA, both employer and employee will be able to contribute tax-free and it even allows tax savings.
- Fully Insured
This type of plan is one of the traditional options. The employee pays a partial part to premium to the insurance carrier and in return, the carrier becomes responsible for paying medical costs that are covered by the insurance company. Some factors considered by the insurer in calculating group health insurance premiums are size and health of the group, average age of the group, types of occupations and the level of coverage and add-on credits.
- Self-funded
It is the opposite of Fully Insured. In this aspect, the employer or company shoulders the funds to pay for the expected employee healthcare claims. It may save the monthly premiums of a Fully Insured plan, but it then leaves most of the risk and expenses to the employer.
- Level-Funding
This aids the employee in their self-funded budgeting efforts and helps in mitigating risks. In this aspect, both worlds are combined and are less risky. It works by having the company pay an insurance carrier a fixed of level monthly costs that is associated with the funding of its members’ health coverage.
Advantages of Offering Group Health Insurance to Employees:
Group health insurance plans are proven to be cost-effective for businesses. Usually, employee premiums are less expensive than those of individual health plans. Not only that, premiums can be paid with pre tax dollars which helps employees pay less in annual taxes. Employers on the other hand will pay lower payroll taxes and can deduct their annual contributions when calculating income taxes while providing an incentive for top talent and improving employee morale.
- Happy and Healthy Employees
Not only does group health insurance provides coverage in emergency cases but also provides preventative care. This leads to happier and healthier employees.
- Provides Tax Benefits for Businesses
For the expenses an employer incurs that is related to health insurance is fully tax deductible. Employees on the other hand, can choose to use pre–tax money for health care coverage.
- Better Employee Recruitment and Retention
Benefits attract top talent and keep it. An attractive group insurance plan is a competitive edge in recruiting top notch talent.
Choosing a health group insurance for your business is a task on its own. It is helpful to book some time with experienced insurance brokers and go over the need of your business. A good discussion should have the breakdown of business costs, options of different plans, tiers of coverage, needs and the cost to employees. Call us now for more information.
Eduardo Perez
