A group health insurance plan is a key component of many employee benefit packages. In fact, most Americans obtain their health insurance coverage through their employers. Health insurance is a prized benefit that employers use to secure and keep high achievers.
A group is defined by state law, but generally at least two people who have a common association may form a group. However, the group may not be formed for the sole purpose of securing insurance.
Under an employer sponsored plan, the employer is the group sponsor who contracts with a commercial insurer. The group policy is sold to the employer as a master policy. The employer is the policyholder, and each member of the group is called a “certificate holder.”
Small and large groups are subject to different laws. Most states define a small group as 2 to 50 people, although some states permit a “group of one.” Large groups are those with more than 50 members.
Even though state law may define group status as at least two people, insurance companies may use different standards to establish and underwrite groups. Different standards may be used for groups of 2 to 10 members, 11 to 50 members, and so on. The best premium rates are available to the largest groups. This is because no health questionnaires or physical exams are required of individual members. Members of small groups, on the other hand, may have to complete medical questionnaires, and the results can be used to rate the group.
All group coverage is “guaranteed issue.” This means that no single member of the group can be declined coverage. Furthermore, insurers must offer to renew employer health plans each year, except for nonpayment of premium, fraud or intentional misrepresentation, or if the employer has not complied with the terms or conditions of the contract.
Benefit packages are determined by the employer. The most common benefits offered are medical and prescription drug coverage, accidental death and dismemberment coverage, disability income insurance, small amounts of life insurance, and vision and dental coverage. Many employers offer Section 125 cafeteria plans which allow members to choose, and pay for, the benefits they want most. Cafeteria plans are a cost effective way to maximize benefit offerings.
If you are a small business providing health insurance for your employees, you will be able to purchase coverage through marketplace exchanges in January of 2014. You will still be able to purchase coverage through an insurance agent or broker, too. If you purchase coverage through an exchange, a tax credit will be available to help you pay for coverage. A credit of up to 50 percent of your contribution toward employees’ health insurance premiums is available if you contribute at least 50 percent of their total premium cost. This credit will be available January 1, 2014, and continue for two years.
Businesses with fewer than 50 employees are exempt from this coverage mandate.
Whether you are small or large employer, let us to help you manage your benefit plan and save you money on your health care costs.