According to the Bureau of Labor Statistics, nearly 90 percent of employees in mid-size and large private companies are offered health benefits. Group health insurance provides employees with a range of benefits, including better access to care and manageable costs. Organizations can also reap the advantages of group health insurance, such as tax benefits and increased employee recruitment and retention. Health insurance is a sought-after benefit in the United States and is often used as a tool by businesses to attract top talent. Both small and large companies offer health insurance to their employees, and business leaders should carefully research the plans available to them and gain a solid understanding of how does group health insurance work.
What Is a Group Health Insurance Plan?
Group health insurance is a type of health coverage available through an employer or other entity that provides eligible individuals insurance coverage.
Both small groups, meaning up to 50 employees, and large groups of more than 50 employees can acquire group health insurance. However, small and large groups have different regulations that they must meet.
One of the biggest differences between small and large group health insurance is that smaller employers generally have less negotiating power than larger employers when setting prices for coverage.
Any business with at least one full-time equivalent employee (not including the business owner) can qualify for group health insurance. Individuals cannot purchase group health insurance.
Under a group health insurance plan, members can get health insurance coverage at a reduced rate as the insurance carrier’s risk is spread out across multiple policyholders.
How Does Group Health Insurance Work?
Group health insurance plans are purchased by employers and offered to eligible employees or members. Plans generally require at least a 70 percent participation rate by group members to be deemed valid. After choosing a health plan, group members have the option to accept or decline coverage.
Depending on the type of plan, employees may be offered the choice of different tiers, such as basic coverage or more comprehensive coverage with add-ons.
Health plan premiums are generally split between the business and its participating members. Many group health insurance plans allow coverage for immediate family members and dependents for additional costs.
However, the overall cost of group health insurance is usually much lower than an individual plan due to the lower amount of risk faced by the insurance company.
Under federal law, all qualifying small employers are eligible for group coverage if they choose to purchase it. With a small group insurance plan, the insurer determines rates based on the employer’s zip code and the age of the participants.
If an employer offers group health coverage to any full-time employee, the employer must offer health coverage to all full-time employees.
Although not required, employers also have the option to provide coverage for part-time employees who work fewer than 30 hours per week. If an employer offers group health coverage to one part-time employee, the employer must also offer all part-time employees coverage.
An eligible employee cannot be denied group health insurance coverage based on a pre-existing medical condition. In most cases, dependents of eligible employees also have the right to coverage under a group plan. Dependents generally include children, spouses, and in some cases, unmarried domestic partners.
However, a dependent cannot enroll for health coverage unless the employee has enrolled. The Affordable Care Act (ACA) requires group insurance plans to provide coverage for adult dependents up to age 26.
Employers can enjoy various benefits by offering group health insurance to employees, including eligibility for certain tax credits.
Businesses may be eligible for a tax credit of up to 50 percent of what they pay if they offer group health insurance to their employees. Group health insurance can be expensive, but this tax credit can significantly reduce its tax bill.
Work With New City Insurance
A group health insurance plan can help employers and their employees pay for health care expenses at a more affordable cost than individual health insurance. Premiums are usually paid with pre-tax dollars, which can help employees pay less in their annual taxes.
Also, businesses pay fewer payroll taxes and deduct any contributions made that year when completing taxes. To learn more about how group health insurance works or to speak with an insurance professional about acquiring group health insurance for a business, contact New City Insurance today.