A group health insurance plan is generally defined as “a health plan offered by an employer or employee organization that provides health coverage to employees and their families”. Group health insurance is only able to be purchased in groups. In order to be valid, group health insurance plans will typically require around 70% or more of the group to participate in that plan.
Because group health insurance is offered through a variety of insurance providers, each with different tiers and mixes of premiums, deductibles, co-pays and coverage, every group health plan is unique. Therefore, being able to compare different health insurance offerings in an accurate and knowledgeable manner is critical to obtaining the most comprehensive and cost-effective plan available.
How Group Health Insurance Works
Group health insurance plans operate by sharing insurance costs among the entire group. The vast majority of group health insurance plans are employer-sponsored benefit plans, although certain associations and organizations such as the AARP offer their own group insurance plans.
In employer-sponsored group plans, both employers and employees are typically responsible for paying a percentage of the employee’s premiums. This helps to lessen the cost burden on the employee, and can be a powerful incentive for recruiting or retaining employees.
Group vs. Individual Plans
Today, most Americans receive their health insurance through an employer-provided group health plan. However, in instances where a person loses an existing plan due to job loss, or works for a business that is too small to require a group health plan, they still need health insurance. The most frequently available alternative for most will be to purchase an individual health insurance plan.
Unlike in a group plan, under an individual plan you are required to compare and select a plan for you (and your family) on your own. Individual plans generally lose many of the cost- and risk-sharing advantages associated with group health plans.
Group Health Plan Advantages
Group plans are built to leverage the large number of people on the plan into cost-savings for the group. Premiums offered through group plans are typically some of the least expensive plans on the market. Many group plans will incorporate options that allow premiums to be paid pre-tax, helping employees to save money when tax season rolls around.
Employers also benefit from lower payroll taxes and can mark contributions as deductibles on their filing forms. Much like health insurance in general, group plans benefit from distributing risk across a large selection of people, helping to lower the individual risk to each person on the plan. Lowering risk also allows insurance companies to offer lower premiums.
Group Health Insurance & Compliance
Compliance is integral to a well-run business and employee benefits department. If you fail to meet government-mandated requirements, which vary depending on company size and change as you grow, you could be at risk of significant penalties. The Affordable Care Act’s (ACA) employer mandate requires business owners and employees to provide their employees with health care coverage according to various requirements. The ACA sets health care coverage requirements for employers based upon the size and structure of the company.
Companies with 50 or more full time equivalent employees are required to provide benefits to 95% or more of their full-time employees. Companies with fewer than 50 full time equivalent employees still have to observe ACA compliance regulations, but do not have the same filing or reporting requirements. Employers offering group health insurance that utilizes pre-tax dollars will also be subject to IRS requirements. These pre-tax benefits are subject to regulations from Section 125 of the Internal Revenue Code.
Evaluating Group Health Insurance Plans
If you want to attract and retain high-quality talent, you need to make them the best offer possible — and that includes knowing what other options are out there. Benchmarking provides insight into industry-specific standard plan designs and average employer contribution amounts. This allows group health plan providers to make data-backed decisions about how to customize their plans to achieve the best possible benefit-to-cost ratio.
While there are widely available benchmarking tools that utilize public data, it can be hard to narrow in with specificity by relying on these data sets alone. Professional benchmarking tools offer deeper insight and granularity, allowing businesses or organizations that provide employee benefits the ability to compare apples to apples based on plan type, geographic region, business size and industry vertical.
Speak To An Experienced Employee Benefits Firm
Deliver industry-leading health benefits your employees expect and deserve, without breaking the bank. Providing quality, affordable health benefits to your employees within a company budget is a unique challenge and a fine balancing act. An employee benefits package that falls short of employee expectations can lead to recruitment and retention issues, holding your company back from success.
At New City, we recognize that no one solution fits all. That’s why our expert advisors are dedicated to finding customized health benefit solutions for your business. We’ll help you deliver packages you can be confident in — and that your employees will appreciate. For more information give us a call at 888.210.2759 or by requesting a consultation online.