In the U.S., most adults get insurance through their jobs. As a result of the Affordable Care Act, employers with 50 or more full-time employees must provide health insurance to full-time workers. In 2021, 59% of employers offered health benefits to some of their employees, and among large employers of more than 1000 employees, virtually all offer health benefits.
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What Is Group Health Insurance?
Employer-based coverage, or group health insurance, is coverage purchased by a business or association and offered to employees or members. Typically, group insurance costs less than individual insurance because the insurer’s risk is spread across a larger number of policyholders.
Employers pay part of the premiums so employee costs are lower. Most group insurance plans include dental, vision, and pharmacy coverage either offered separately or included as a bundle. In addition, employees can pay to add coverage for spouses and dependents.
There are also tax advantages to group insurance coverage. Employers earn a tax deduction for money paid toward monthly premiums. Employees’ premiums are paid pre-tax, which reduces the taxable income.
How Does Group Health Insurance Work?
Companies and organizations purchase group health insurance plans and offer the insurance to employees or members. Insurers generally require a 70% participation rate among the employees of a business. Only groups are allowed to purchase these plans, individuals cannot enroll in them.
Employees or group members can choose to accept or decline coverage after they are hired. If an employee does not sign up for coverage as a new employee, they will have to wait until the open enrollment period to sign up, usually between November 1 and January 15.
In some states, plans come in tiers that allow employees to choose packages based on pricing and the benefits offered. Because employers pay part of the premium, group insurance is less expensive than individual insurance.
Normally, group health insurance is also offered to an employee’s spouse and dependent children through age 26. Employers may choose to extend benefits to unmarried partners, offering the same coverage available for spouses.
Who Is Eligible for Group Health Insurance?
An employee must be on the company’s payroll to be eligible for group insurance and the business must pay payroll taxes. If an employer offers coverage to any full-time employee, it must offer it to all full-time employees. The IRS defines full-time employees as those who work 30 or more hours per week. Similarly, if an employer chooses to offer coverage to part-time employees, it must be offered to all part-time employees.
Dependents of the employee are eligible for coverage at an extra cost but only if the employee enrolls. Spouses, children, and possibly domestic partners are defined as dependents.
Workers who are not eligible for group health insurance include independent contractors, seasonal or temporary employees, part-time workers, and retirees.
How Much Does Group Health Insurance Cost?
In the 2021 annual Employer Health Benefits Survey, employers reported average annual premiums of $7,739 for single coverage and $22,221 for family coverage. Employers paid the majority of the premium cost for employees. Covered workers with single coverage contributed 17% of the premium. Workers with family coverage contributed 28% of the premium.
Advantages of Group Health Insurance
Group health insurance plans have several advantages over individual insurance.
- Lower premiums – The cost to the policyholder is lower because the employer pays part of the premium cost.
- Supplemental coverage – Companies often provide supplemental health plans, such as vision, dental, and pharmacy coverage as a bundle or separately.
- Tax benefits – Employees pay premiums with pre-tax dollars. This lowers their taxable income. For employers, the money paid toward employees’ premiums is usually tax-deductible. Small businesses with fewer than 25 employees may be eligible for a Small Business Health Care Tax Credit.
- Family benefits – When an employee enrolls in group health insurance, their spouse and dependents are also eligible for coverage at an additional cost.
Disadvantages of Group Health Insurance
For all of the benefits of group health insurance, there are also a few disadvantages. Because it is linked to employment, people worry about losing their health care coverage if they lose their job. Group plans have coverage levels determined by the employer. If an individual has unique circumstances that require higher benefits, a group plan might not cover all of their treatment.
Employees may find they have fewer choices of care providers or networks with group coverage. A person who sees specialists for a specific medical issue might find that their employer-based coverage doesn’t cover that treatment or the specialist is out of network.
How To Enroll in Group Health Insurance
Enrollment in an employer-sponsored health plan is usually available when you are hired or after a waiting period such as 90 days.
During the enrollment period, you’ll receive plan materials and have a chance to ask questions and select a plan by the enrollment deadline. Check with your HR department to be sure. If you miss the deadline, you’ll have to wait until the company’s open enrollment period, usually at the end of the year.
Outside of the open enrollment periods, the only time you can enroll in health insurance is after a qualifying life event. This triggers a special enrollment period at any time of year. Qualifying events include marriage, birth or adoption of a child, and loss of other health coverage.
What Happens If You Lose Group Health Insurance Coverage?
Your employer-sponsored health coverage ends when you leave your job. But you can keep your coverage in place. Through the Consolidated Omnibus Budget Reconciliation Act (COBRA), employers with more than 20 employees must offer employees and families continuation coverage, a temporary extension of health coverage. The former employee pays the full premium for the plan. This coverage is very expensive and likely costs more than finding an individual plan.
You can also shop for new individual health coverage on Healthcare.gov. Plans on the healthcare marketplace come in three tiers with different levels of benefits and affordability. To find the best plan, compare prices and benefits of a marketplace plan to the cost of extending your group coverage.