Group health benefits

Common questions about group health insurance

What is group health insurance?

Group health insurance is an employee benefit provided by an employer that offers medical coverage to employees and sometimes their spouses, partners and/or legal dependents.

What's the difference between group health insurance and individual coverage?

If you have a business that employs two or more people, you're eligible to purchase group health insurance for your business. By pooling employees together, premiums for group health insurance plans can be less expensive than buying individual plans for your employees.

In addition, employer-paid premiums are generally tax-deductible. Your employees' contributions to their premiums can be paid with pre-tax dollars, which lowers your employees' taxable income as well as your payroll taxes.

Individual plan premiums are determined by individual risk (and may result in a higher cost) and individuals must reach 7.5% of their adjusted gross income in medical expenses in order to deduct any excess from their taxes.

What percentage of the group health insurance premium does an employer usually pay?

According to a Kaiser Family Foundation survey, small employers (3-199 employees) typically pay 86% of premiums for single-employee coverage and 66% of premiums for family coverage. Midsized firms (200-999 employees) pay 88% of single-employee premiums and 82% of family premiums. Large firms (1,000-4,999 workers) pay 89% of single employee premiums and 77% of family premiums.

What is the typical waiting period before employees become eligible for a new employer's group health insurance plan?

According to ACA, waiting time cannot exceed 90 days and some states have adopted a 60-day maximum waiting period.

How does the carrier determine a group's premium?

Health insurance companies use one of three methods to calculate your group health insurance premium: medical underwriting, adjusted or modified community rating, or rating bands. The process used depends on the rules in your state. Please contact a licensed ADPIA agent for more detailed information.

What coverage is included in group health insurance?

Employers have a choice to select the coverage and plans that are best suited for their business and employees. Group insurance plans can include a range of coverage, including but not limited to: medical, dental, vision, life, short-term and long-term disability, etc.

How does group health insurance benefit a small business owner?

Health insurance helps protect the personal health of the business owner and its employees, as well as the financial health of the business. Group health coverage can relieve some of the financial fears of getting sick and help employees to stay health. Today, health insurance can also be a top benefit factor in attracting and retaining talented workers.

What will happen if the employee has a pre-existing condition?

A carrier cannot deny coverage on the grounds of a pre-existing medical condition, depending on circumstances.

What group health insurance plan is right for my business?

Finding the plan that works best for both you and your employees is a matter of balancing your coverage and budget needs.

Some insurance plans provide copayment coverage for most routine needs: annual physicals or monitoring a health condition. Plans of this type cover doctors' visits and prescriptions with a known copayment. The premiums for these plans reflect this level of coverage.

Other insurance plans offer a higher deductible, which results in a lower premium, but have higher out-of-pocket costs until the deductible and any coinsurance requirements are met. This type of plan provides coverage for significant medical expenses and can work for people who don't anticipate frequent trips to the doctor.

What are the typical features of a group health insurance plan and how do they affect its price?

Plan deductible - The expenses a member must cover before the insurer covers expenses. The lower the plan deductible, the higher the premium.

Out-of-pocket limit - The maximum annual amount the insurer will require a member to contribute toward the cost of care. The lower the out-of-pocket limit, the higher the premium.

Coinsurance level - The percent of the allowed amounts for covered services that the insurer will pay after the deductible is met. Plans range 50% to 100%.

Copayment for services - The fixed dollar amount that's due when the covered service is provided. In most cases, this is the only cost that the member is responsible for paying – the plan covers the majority of the cost of services.

What is the minimum participation requirement necessary to offer group health insurance?

For a small business owner, it's important to understand the minimum participation requirements necessary for group plan eligibility. Though requirements vary by state, the following generally serve as an industry-standard regarding group health insurance plan participation:

A minimum of at least 75% of "net eligible" or 50% of "total eligible" employees participate in the health plan.

"Total eligible" employees are the sum of all eligible employees (full-time working>30hr/week).

"Net eligible" employees are the total eligible employees minus those eligible employees who have credible coverage through elsewhere (i.e., through a spouse, Medicare, etc.)