What is Group Health Insurance And How Does It Work?
Nearly 54% or approximately 155 million American workers participate in an employer sponsored health plan most widely known as group health insurance. It is the largest share of insurance coverage in the Country. This insurance coverage is so popular because members or employees usually receive their coverage at a lower cost due to the shared risk factor of a group of large numbers or members.
What Is Group Health Insurance and How Does It Work?
Group health insurance is a plan sponsored by a company or an employer, where the plan covers all employees and possibly their families. Group health insurance eliminates the necessity for each member to take separate insurance plans for themselves. This type of plan is most suitable for small and large businesses. These health plans make for a significant part of the employer’s benefits for employees and their dependents.
Since the Affordable Care Act of 2010, the Federal Government has established the process for regulating employer-sponsored insurance plans. As per the Act, companies employing 50+ employees must offer health insurance coverage to their employees mandatory. In the event they fail to do so, the companies can be penalized. However, for small businesses that employ about 30 employees, it is not mandatory for the employer to offer group insurance. Still, most companies these days provide health coverage to their workers so that they can attract and retain talent.
Employer-sponsored group health insurance has been on the rise since World War II. Back then, too, it was used as a means to attract quality workers even though, due to Federal-imposed wage controls, the benefit could be passed only as a fringe benefit.
How Does Group Health Insurance Work?
There are two categories mainly under Group Health Insurance:
1. Employer-Employee Groups – in this category, all insured people work for the same organization or business entity.
2. Affinity Groups – In this case, a group of people with certain similarities, be it their profession, banking account, fraternal organization, etc., are insured.
Under Group Health Insurance plans, individuals do not enroll as it applies only to groups. The end beneficiary, of course, is an individual, an employee, the spouses, family members, etc.
Some of the characteristics of these insurance plans are:
-The premium cost is shared between the organization/group and the insured.
-The insured person can have their dependents and family members added but needs to bear the additional cost.
-Members of the group, company, or affinity group have the freedom to accept the coverage or decline.
There are numerous types of group insurance health plans available to small businesses. In addition, there are different health insurance companies offering different health plans. Some insurance companies require participation – maybe 60% in some instances, for a business to qualify for the group health plan.
Group Health Insurance for New York Small Business – How Does It Work?
Small Group Employer:
In New York, if you employ 2 to 99 employees, you are considered a small group employer. To qualify for a group health plan, you must have at least 1 W-2 employee participate in the plan. Health plans in New York are known as “community rated” which means, every employee pays the same rate regardless of their age or gender. This makes New York a unique state for group health insurance because in most other states, health rates are based on the age and gender of your employees.
If you have less than 30 full time employees, The Affordable Care Act (ACA), does not require you to offer health insurance – but you might want to offer a plan anyway because a company health insurance plan attracts and retains quality employees.
Large Group Employer
Also referred to as the “large group market” (100+ employees) encompassing large and mid-size companies, can offer more plan choices than those offered to small groups.
Each health insurance company may have their own terms and requirements for the number of employees required to fall into large size group health insurance, but large sized classification is usually offered to companies with more than 100 employees.
A larger selection of health plans are also available and based on claim history or experience in your industry. This often results in better plan designs and lower rates for large groups.
If you have more than 50 full time employees, you are required by ACA to provide health insurance. There are steep penalties for not doing so. For more info regarding this, check out our free resource, the ACA Compliance Center.
How Much Does Group Health Insurance Cost?
According to The Kaiser Family Foundations (KFF) in 2021, the average annual premiums for employer-sponsored health insurance are $7,739 for single coverage and for family coverage the cost was $22,221. The average single and family premiums increased 4% over the past year. During this period, workers’ wages increased 5% and inflation increased 1.9%.
The average premium for family coverage has increased 22% over the last five years and 47% over the last ten years.
However, employees paid only a fraction of that cost – or about $5,588 annually. Employers covered nearly 74% of total family health insurance cost. Premiums paid by the employer and employee are paid with pre-tax dollars, so they are not considered taxable compensation. This is a huge advantage of group health insurance compared to individual health insurance, including those who are self-employed.
Benefits Of Group Health Insurance
Group Health Insurance Benefits
The main benefit of a group health plan is lower premiums to the employee or the member. Additionally, family members and dependents can be added to group plans at an additional cost to members at a lower cost than if they purchased an individual health plans. Not only is medical coverage provided to cover illness or sickness, also dental and vision, disability and etc., can be bundled together as a package program.
Since risk, in this case, is distributed across all insured members, insurers can charge lower premiums for group health benefits. Thus, all members get to pay low premiums, making it a low-cost insurance proposition. This helps them stay protected from unexpected medical expenses.
Types of Group Health Insurance Plans for Small Businesses
There are different types of group health insurance policies and plans for small businesses, including:
HMO or Health Maintenance Organization – is a plan with healthcare service providers, like hospitals, clinics, etc., enrolled in their network. All insured people need to use these providers only to get coverage benefits. A primary care physician needs to be selected from the HMO network. This is a good option for people wanting low monthly premiums.
PPO or Preferred Provider Organization – comes with greater flexibility, with the PPO networks much larger than HMO networks. Even though the premiums are higher than HMOs, a bigger portion of the healthcare costs are covered by the plans.
EPO, or Exclusive Provider Organization – is similar to HMOs, where the insured can choose from covered services within the network. The only difference between the two is that members do not have to select a primary care physician in this case. In other words, no referrals are needed.
POS, or the Point of Service plan – is similar to the HMO plan. In this case, the employees must consult a primary care physician, who will then provide referrals to specialists. Members can also self-choose specialists, but they must pay a larger portion of the care costs.
HSA or Health Savings Account – is like a savings account where members contribute pre-tax money. The money is deposited for future and emergency needs. Unused money in the account is rolled over to the next year. Members also enjoy a tax free withdrawals for qualified medical expenses and medicare premiums.
Group health insurance works out as one of the most affordable health plans in New York. In addition, premiums are typically lower than taking individual health insurance plans. It is, therefore, an attractive proposition for employers and employees who are unable to afford individual medical insurance.
HealthplansNY.com helps small business owners take control of the spiraling cost of group health insurance and supplemental group benefits.
We provide you with everything you need to find affordable group health insurance coverage for your small business. You can get a free NY health insurance quote in less than 1 minute. To get started, just go to our free quote engine and provide simple census information about your company.