how group health insurance works
group health insurance plans are purchased by companies and organizations and then offered to their members or employees plans can only be purchased by groups which means individuals cannot purchase coverage through these plans plans usually require at least 70 participation in the plan to be valid because of the many differences insurers plan types costs and terms and conditions between plans no two are ever the same group plans cannot be purchased by individuals and typically require at least 70 participation by group members once the organization chooses a plan group members are given the option to accept or decline coverage in certain areas plans may come in tiers where insured parties have the option of taking basic coverage or advanced insurance with add ons the premiums are split between the organization and its members based on the plan health insurance coverage may also be extended to the immediate family and or other dependents of group members for an extra cost the cost of group health insurance is usually much lower than individual plans because the risk is spread across a higher number of people simply put this type of insurance is cheaper and more affordable than individual plans available on the market because more people buy into the plan history of group health insurancethe earliest known example of group coverage for health services dates to 1798 when congress established the u s marine hospital for navy seamen participation was compulsory with deductions coming from salaries other examples include the mining lumber and railroad industries in the late 1800s which had a vested interest in ensuring the health of its workers montgomery ward is credited with establishing the nation s first group health insurance policy in 1910 the policy did not reimburse workers for medical expenses but provided cash payments to workers equal to half their wages in the event of injury or illness the progressive political movement of the early 1900s led to several proposals to establish compulsory national health insurance however these proposals failed to counter opposition from doctors who objected to uniform fee structures labor groups which felt their power would be weakened and insurance companies which feared encroachment on their business 1employer sponsored group health insurance grew rapidly in the 1940s as a way for employers to get around wage controls set during world war ii in 1943 the war labor board introduced wage caps but did not include insurance premiums as part of the cap as such employers were free to offer health insurance to attract and retain workers resulting in a tripling of health insurance coverage by the end of the war 2but this failed to address the needs of retirees and other non working adults federal efforts to provide coverage to those groups led to the social security amendments of 1965 which laid the foundation for medicare and medicaid 3benefits of a group health insurance planthe primary advantage of a group plan is that it spreads risk across a pool of insured individuals this benefits the group members by keeping premiums low and insurers can better manage risk when they have a clearer idea of who they are covering insurers can exert even greater control over costs through health maintenance organizations hmos in which providers contract with insurers to provide care to members the hmo model tends to keep costs low at the cost of restrictions on the flexibility of care afforded to individuals preferred provider organizations ppos offer the patient a greater choice of doctors and easier access to specialists but tend to charge higher premiums than hmos the percent of the u s population covered by employer provided group health insurance in 2021 4the vast majority of group health insurance plans are employer sponsored benefit plans it is possible however to purchase group coverage through an association or other organizations examples of such plans include those offered by the american association of retired persons aarp the freelancers union and wholesale membership clubs insurance options for uninsured individualsnot everyone is covered by a group health insurance plan for many decades these uninsured people were forced to bear the cost of healthcare on their own but that has changed government sponsored health plans are an option for those left out of employer sponsored group health insurance the affordable care act aca adopted in 2010 created a marketplace for health insurance that provides coverage to 16 3 million people as of the 2022 2023 open enrollment season 5after the passage of the aca taxpayers were required to show they had health insurance coverage or qualified for an exemption or else they were required to pay a penalty described as a shared responsibility payment this mandated payment was eliminated with the passage of the tax cuts and jobs act beginning in the 2019 tax year 6example of group health insuranceunited healthcare a division of unitedhealth group uhc is one of the nation s largest health insurers it offers a buffet of group health insurance options for all types of businesses include are medical plans and specialty supplemental plans such as dental vision and pharmacy united healthcare offers plans under the federally sponsored small business health options shop program a provision of the affordable care act in most states employers must have 50 or fewer full time employees although some states allow for as many as 100 employees businesses that pay at least 50 of the insurance premium qualify for a 50 tax credit 7midsize businesses with between 51 and 2 999 employees have various options available including bundles large businesses with 3 000 or more employees qualify as national accounts which have more services and healthcare features including the ability to customize plan offerings group health plans are employer or group sponsored plans that provide healthcare to members and their families the most common type of group health plan is group health insurance which is health insurance extended to members such as employees of a company or members of an organization a group health cooperative also known as mutual insurance is a health insurance plan owned by the insured members insurance is offered at a reduced cost and what they collect from members is based on claims paid the cost of care is spread out across the insured population many group health insurers offer plans to companies with one or more employees the type of plans available however may vary according to the size of the business for example united healthcare provides various plans for small businesses with 1 50 employees midsize businesses with 51 2 999 and large employers with 3 000 or more employees group health insurance plans offer medical coverage to members of an organization or employees of a company they may also provide supplemental health plans such as dental vision and pharmacy separately or as a bundle risk is spread across the insured population which allows the insurer to charge low premiums and members enjoy low cost insurance which protects them from unexpected costs arising from medical events the average group health insurance policy costs roughly 7 400 annually for an individual with the employee paying 17 of the premium for family coverage the average cost was about 21 000 per year with the employee paying 27 of the premium 8the bottom linegroup health insurance plans are one of the most affordable types of health insurance plans available because risk is spread among insured persons premiums are considerably lower than traditional individual health insurance plans this is possible because the insurer assumes less risk as more people participate in the plan for employees who ordinarily would not be able to afford individual health insurance it is an attractive benefit 