The basics of group health insurance

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There is power in numbers, especially when it comes to finding affordable health insurance. If your health cinsurance coverage is offered through your employer, you are part of roughly 160 million Americans who have a group health insurance plan, according to the Center for Disease Control’s National Center for Health Statistics.

Generally, a key benefit to group health plans is cost. When you are part of a group health plan, “risk” is spread among coworkers. In other words, the healthy individuals in the group subsidize those who have health-related problems. If your workplace is mostly young, healthy individuals, your company could be getting great insurance rates no matter what your own health is like. If you happen to belong to a small group with several people who visit the doctor frequently, that pushes up the price for everyone.

The Kaiser Family Foundation has found premiums for employer-sponsored health plans increased by 5 percent in 2008, and that the number of workers in plans with very high deductibles increased from 16 to 40 percent from 2006 to 2009. On the other hand, a report by Consumer Watchdog, a nonprofit consumer advocacy group, found that prices for individual health insurance policies (meaning insurance you buy on your own) increased 10 to 50 percent.

Another key benefit of group health insurance is that insurers cannot reject you for health reasons.

Employers that have two or more employees are eligible to buy group coverage. In some states, the self-employed can buy group coverage as a “group of one.” Employers select the specific benefits they want to include in the plan (and some benefits are mandated by the state where you live) and their choices then determine the group’s final premiums.

According to the Kaiser Family Foundation’s 2009 summary of employer health benefits, workers paid 17 percent of the premium for single coverage and 27 percent for family coverage. In dollar amounts, the average annual worker contributions were $779 for single coverage and $3,515 for family. But those amounts can vary depending on the size of the company and the type coverage, whether they are health maintenance organizations or point of service plans.

Pros of group health plans

Employer pays most of the cost.
Even if you have pre-existing conditions, the plan cannot deny you.
Simple enrollment.
Customized plan designs (employers can select numerous benefits such as maternity coverage and infertility treatment).

Cons of group health plans

Even if you are healthy and never make a claim, you could pay a higher premium the next year if your co-workers have made a lot of claims.
Loss of benefits if you are downgraded, laid-off or terminated.
Employer makes all the decisions.
Your employer may decide to change insurance companies and/or reduce plan options in an attempt to lower costs.

But don’t assume that a group plan’s price is the best you’re going to get. Compare prices for an individual health insurance plan, too. For example, if your group plan is loaded up with numerous health benefits mandated by your state or selected by your employer — benefits you don’t want or need — you could save substantial money in the individual market by selecting a plan with only the coverages you want.

If you lose your group medical insurance due to a lay-off, the federal COBRA law lets you continue buying the same health plan for up to 18 months. Know your COBRA rights.

Here are some steps that will help you continue your group health plan through COBRA:

You should be sent a COBRA Continuation Coverage Election Notice with your final documents. The documents should provide an explanation of your health insurance and how much your monthly cost will be to continue the plan under COBRA.
Review the information including your “Certificate of Credible Coverage” and make sure the information is correct, including your name, current address and phone numbers. Fill out the enrollment form and submit it to your HR director. You can also register through the Web site mentioned on the forms or contact your insurance provider’s COBRA customer hotline.
You will receive a notice in the mail explaining the terms and conditions of your plan and you will be asked to start your monthly COBRA payments.
You may also qualify for a federal COBRA insurance subsidy. But because the subsidy program ended at the end of May 2010 and was not renewed, only people who lost their jobs on or before May 31, 2010, may qualify for this assistance. The subsidy applies to all employers that have group health insurance plans. The subsidy covers 65 percent of monthly COBRA premiums for employees and their eligible dependents up to 15 months as long as they are not eligible for medicare or other group health plans. However, the COBRA insurance subsidy is not retroactive for previously paid premiums before Feb. 17, 2009. See additional information from the government about the COBRA subsidy.

Large vs. small health insurance groups

Large and small group health plans are subject to different laws. Most states define a “small group” as one to 50 or two to 50 employees; large groups are defined as those over 50 people.

When Congress passed the Health Insurance Portability and Accountability Act (HIPAA) in 1996, the law mandated that all policies sold in the small group market must be guaranteed issue.

Guaranteed issue for group health insurance means that insurance companies must offer a policy to an employer, employee or dependent of the employee, regardless of claims history, pre-existing conditions or health status, according to National Association of Health Underwriters (NAHU). Although group insurers cannot refuse coverage due to a member’s pre-existing condition, they can screen the medical history of group applicants and impose a waiting period before covering those conditions.

The plan must also be “guaranteed-renewable” unless there is nonpayment of premium or the employer has committed fraud or intentional misrepresentation or has not followed the terms of the contract.

In addition, a health insurer cannot impose more than a six-month look-back period or a 12-month exclusionary period for preexisting conditions on enrollees who do not have prior “credible coverage.” The insurer must also cover an employee’s pre-existing conditions as long as the employee did not have more than a 63-day break in health coverage.

Also, many people leaving group insurance for the individual market have federally mandated group-to-individual health insurance portability benefits. Read more about the HIPAA law.

More about health insurance mandates

Group health insurance plans that are fully insured are subject to state benefit mandates. (Self-insured employers are subject only to federal law; they pay claims themselves but often health insurers administer the plans.)

Most states such as California and New York mandate diabetic supplies and emergency services, and coverage for mammograms is mandated in all states. Coverage for such things as long-term care, morbid obesity and ovarian cancer screenings are not mandated in most states. This doesn’t necessarily mean that your health insurance plan won’t cover these services in states without a mandate. For a list of state health insurance mandates, go to the Council for Affordable Health Insurance.

Most workplaces use an open enrollment period each year, which is the period of time in which employees can enroll in the plan or change coverage.

Michelle Megna

Contributor

Michelle, the former editorial director, insurance, at QuinStreet, is a writer, editor and expert on car insurance and personal finance. Prior to joining QuinStreet, she reported and edited articles on technology, lifestyle, education and government for magazines, websites and major newspapers, including the New York Daily News.

The basics of group health insurance

Pros of group health plans

Cons of group health plans

Large vs. small health insurance groups

More about health insurance mandates

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