How Do Group Health Insurance Plans Work?

Small Business

How Do Group Health Insurance Plans Work?

Published on December 05, 2018

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If you’re considering a group health insurance plan for your company, there are some things about it that you’ll need to know. After all, it’s important to have all the information before you choose a plan. In some cases you may not qualify for the kind of group health insurance you want, so you need to know if there are other options. Here are some of the most significant issues to consider, so you can learn more about how group health plans work.

How Many People Do You Need for a Group Health Plan?

When you buy group health insurance, you have to have a group. In other words, a single individual can’t sign up for this kind of plan. But for small businesses there can be as few as two people in the group during the special enrollment period. Otherwise, you need 70% participation from your company’s employees in order to get group insurance. That doesn’t include owners or spouses, either, so make sure to do the math to know what you qualify for.

Why Is Group Health Insurance More Affordable?

Group health insurance is more affordable because there are more people participating in it. The larger the risk pool, the lower the rates. That’s why it can offer you a lot lower premiums than you would typically see when you look for individual insurance coverage. In other words:

  • few people mean higher risks for the insurance company
  • more people mean lower risks for the insurance company
  • higher risks cost more money to insure a group
  • lower risks cost less money to insure a group

As the pool of people in the group health insurance plan gets bigger, the cost of that group health insurance plan comes down. It’s one of the best ways to get affordable insurance for employees, and to help employers afford to properly cover the people who work for them. It can also help cover employees who may not be able to afford insurance otherwise.

What is Considered a “Small” Employer for Group Health Plans?

In the context of a group health plan, a small employer is one that has from two to 50 employees. Sole proprietorships with only one employee (the owner) aren’t eligible, and if you have more than 50 employees you’re not considered small anymore. While small businesses aren’t required to give their employees health insurance, many of them want to offer it if it’s affordable to them.

How Does the Shared Cost of a Group Health Plan Work?

The cost of a group health plan is shared by everyone in the group, and by the employer and employees. In other words, these plans cost less because there are more people in them. Also:

  • Employees pay a portion of their own health insurance premiums
  • The employer pays a portion of the employee health insurance premiums

Employers who own small businesses can put most or all of the cost of their group health insurance over onto their employees, but it’s better for getting and retaining talent if they pay a portion of the premiums. That shows the employees that their employers are truly offering them help with their group health insurance, and not just another option the employee has to pay for.

Can You Get a Tax Credit for Your Group Health Insurance?

If you offer group health insurance to your employees, you may be able to get a tax credit up to 50% of what you pay in. That’s a great way to be able to afford group health insurance, since it can be expensive. If you really want to give your employees group health insurance, but you’re not sure if you can afford it, tax breaks can really make a difference.

Can You Shop Off-Market for Your Group Health Insurance Plan?

When you shop off-market for your group health coverage you can work with a licensed insurance broker like eHealth. That gives you the option to get a policy you might not be able to get on the exchange, and opens up coverage that’s available without subsidies or tax credits. It’s important for you to know all your options so you can pick the best one for your company and its employees

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