Group Health Insurance Information

If you own or belong to a business or organization with less than 50 people group health insurance has lots of benefits for you. Besides providing medical care for yourself and your employees, a group health insurance plan helps spread the financial risk between all the members, which usually means lower premiums and more extensive coverage for everyone.But group health insurance has tax advantages too. Employer contributions to a group health insurance plan are generally 100% tax deductible, and employees save on payroll taxes. Small businesses (and certain organizations, like non-profits) are generally eligible for group health insurance so long as they can show two or more full-time taxable employees. 

What is group health insurance? How does it work?

Group health insurance is a form of healthcare coverage designed specifically for groups, purchased and administered by a group entity, such as an employer, union, or association.

Employers typically offer healthcare insurance to their employees as a benefit.They can choose to pay the full cost of the health insurance or pay a portion of the plan premium, requiring employees to pay the remainder. This is the most common arrangement.

Group health insurance is intrinsically risky for insurers because it requires carriers to cover all members of a group, regardless of their health or lifestyle. This risk factor increases the cost of group health insurance for employers.

Insurers offer employers a variety of group benefit plans and products to choose from. Generally, they are either classified as indemnity, fee-for-service plans or managed care plans. Employers can offer both kinds of group health plans, and let their employees choose between them, or just one. Both indemnity and managed care plans cover various medical, surgical, and hospital expenses. Many also offer a prescription-drug and dental-care benefit.

Indemnity: This is the most flexible, yet expensive group health option. Policyholders select a doctor of their choice and pay as they receive services. The patient or doctor then submits a claim to the group's insurer for reimbursement, typically 80 percent of the service's cost, minus a negotiated deductible.
 
Managed Care: These plans provide comprehensive health services at a lower cost, yet limit physician choice. The employer or employer/employee also pays coverage in advance through monthly premiums. Employees also will likely have to pay modest co-payments for office visits and prescriptions. There are three popular types of managed or prepaid care: HMO (Health Maintenance Organization), PPO (Preferred Provider Organization), and POS (Point of Service). The differences: HMOs are the least expensive, but most rigid. PPO/POS group health plans are more flexible, but more expensive for employees.

Benefits of group health insurance...

Every business wants to attract high quality employees who will contribute to the growth and success of the company. In order to recruit and retain these people, many business owners offer group health insurance as an employee benefit. That same strategy may be right for you.

Even if your company is small, you can still offer group health insurance. In most states, insurance companies who offer small group health insurance plans are required to accept any employer group of 2 to 50 employees provided the employer agrees to insure 100% of the eligible employees.

Group health insurance is a highly desirable employee benefit, enabling you to retain and attract the most qualified employees.

Employers can earn valuable tax breaks by providing their employees group health insurance.

Health insurance is expensive and who pays for it?
Most businesses that offer their employees Group Health insurance plans contribute towards the cost of the coverage. Some pay for all of the employees' premiums (for single coverage) and let the employees pay the premium if they need coverage for their families. Other businesses pay a percentage of the total cost.

The amount you choose to pay will depend on your own situation. First, think about how your contribution will affect your budget. Second, think about how it affects the desirability of your plan to your present and future employees.

Many businesses choose to have their employees make a contribution towards some of the cost, especially as health care costs and insurance premiums continue to increase.

Managed Care vs. Fee-for-Service.                                                                          

There are two major types of health plans; managed care and fee-for-service. The plan that's best for your business is determined largely by your business location, the physicians and hospitals available through the plan, the options offered by insurance companies, and the constraints of your budget.

Managed Care.                                                                                                        

These plans are agreements between certain doctors, hospitals, and health care providers, and are designed to offer a range of services to members at a reduced cost.

They go by many names, such as Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), Individual Practice Association (IPA), or Point of Service (POS) plan.

Most HMOs minimize the out-of-pocket expenses members pay for medical care, as long as members use the HMO's preferred providers and facilities. If members go outside of the network, they may be responsible for paying the entire bill.

In addition, members must choose a primary care physician, and see that person first, whenever they need medical attention. The primary care physician will make necessary referrals to specialists.

With HMOs, the per-visit or annual deductibles are usually lower than with other plans.

PPOs usually charge members slightly more than HMOs to use providers and facilities outside of the PPO network, and do not require referrals to see specialists.

PPOs are generally more flexible than HMOs but tend to cost members slightly more. The per-visit or annual deductibles are usually higher than with HMO plans.

POS plans are a combination of the features of HMOs and PPOs. With a POS, members choose whether they want to pay a flat fee for a network provider, or whether they want to pay a deductible and/or coinsurance charge to see an out-of-network provider.

Fee-for-service plans, also known as indemnity plans, allow your employees to choose health care providers themselves. This gives them a wide range of options that includes specialists such as cardiologists and surgeons.

The cost of group health insurance.

So what about the bottom line? Well, group health insurance is less expensive than a bunch of individual policies bound together, but it's not cheap. No health care in America is.

Depending (again) on the state and the insurer, you, as the employer, will be required to pay some percentage of an employee's individual premium (often 25% or 50%). If the employee wants to extend coverage to a spouse or dependant, you may choose to pay a percentage of that cost, but that's not required. You'll probably have a lot of policy and payment options to choose from. Getting right to that.

Finding the right group health plan for your business can be downright intimidating: sorting through lists of insurance companies and plans; checking and re-checking the dollars and totals for deductibles and co-pays; making sense of plan limitations and exclusions; deciphering a dictionary's worth of insurance-speak. It's enough to make anyone feel like a high school freshman again. 

You don't have the time for all this research and number crunching. But can you really afford to leave it on your maybe someday list? As the cost of medical care rises, the risks of not having health insurance are more apparent than ever. Today a single injury or illness -- if uninsured -- can leave a family in financial ruin. Moreover, group health coverage is a key benefit of employment. You may not be able to hire and keep the best employees without offering health coverage. The point is: don't procrastinate!

But take heart: a little, basic knowledge can help you shake off those freshman jitters. Here are three quick lessons to help you find high-quality insurance at a reasonable price:

Know the type of benefits you need.
Have a good understanding of your employees health care needs before you start shopping. Do they require frequent medical care or do they rarely see the doctor? Are they more concerned about preventive checkups or coverage in case of emergency? Are prescription or maternity benefits important to them? This is an essential first step. You want to purchase a plan that offers the medical benefits your employee's need, without a bunch of extras your employees won't take advantage of. You'll pay for these extras in the form of higher premiums.

Get multiple quotes from several insurance companies.
Comparison-shopping really pays off. Don't limit yourself to the options available through a single insurance company. And if the thought of calling all the insurers in your area sounds tedious, find a licensed agent to help you.An agent can discuss the pros and cons of the various insurance companies and plans in your area, provide you with quotes for each and offer valuable advice based on your group needs. Make sure that any agent you work with is licensed in your state.

Take full advantage of all available tax benefits.
There are significant tax benefits for employers who offer group health insurance to their employees.  For example, businesses can generally deduct 100 percent of the premiums they pay on qualifying group.