Group health insurance is a type of medical insurance policy for employees or members of a company or organization. A group health insurance plan usually provides health insurance coverage to its members at low cost because the risk of health insurers spreads among the members of the group health plan.
How group health insurance works?
Businesses and organizations purchase group health insurance plans to provide medical coverage to their employees or members. Only groups, and not individuals, can be listed in the group medical insurance plan. Although all groups differ due to health insurance plan costs, health insurance companies, group plan types and plan features, they generally share the following features:
- Group medical insurance plans often require a 70 percent participation rate
- Group members have a choice of enrollment or reduction in health coverage
- Group health premiums are shared between the company and its employees
- Family members and dependents can be added to the group plan at an additional cost
To be listed in a group health insurance plan, a business needs at least one full-time or full-time equivalent employee. Under the Affordable Care Act (ACA), health insurance is not required for small businesses with less than 50 full-time or full-time equivalent employees, while larger employers with more than 50 full-time employees are required to provide group medical insurance to their employees.
Group health insurance benefits
The main advantage of group medical insurance is that group plans have relatively low premiums. Because of the benefits of larger risk pools, group health insurance plans are often more affordable than individual health plans. When more people are enrolled in a group medical insurance plan, it spreads the risk to a wider number of plan members in the group pool, so that the higher insurance cost of any individual can be balanced with the premiums paid by other members of the plan.
- Big advantage of group medical insurance is the possibility of getting tax benefits.
- For an employer, the amount paid for the monthly employee premium is usually tax-deductible
- For employees, the premium is paid in pre-tax dollars, which can reduce their taxable income
- Eligible small businesses may be able to qualify for a small business healthcare tax credit
Businesses and firms can enroll in group medical insurance plans at any time of the year. Most group health plans are employer-sponsored group health insurance, although medical insurance can also be purchased through professional organizations or associations.
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