What is employer group health insurance coverage?
Group health insurance coverage is a policy that is purchased by an employer and is offered to eligible employees of the company (and often to the employees' dependents) as a benefit of working for that company. The majority of Americans have group health insurance coverage through their employer or the employer of a family member. One of the advantages for employees in a group health plan is the contribution most employers make toward the cost of the health coverage premium, usually 50% or more.
Are all employer group health insurance policies the same?
Millions of Americans work for small employers, categorized as groups with 50 employees or less. Millions of other Americans get their health insurance coverage through large employers (50 employees or more). The laws about how coverage can be issued to large groups are different than those for small groups, and the way that premium rates are determined is also different. The requirements for sole proprietors purchasing health insurance coverage also vary.
What are the coverage requirements for small employer plans?
At this time, employers are not required to offer health insurance to employees. Many do so because health insurance coverage is a valued benefit and attracts top employees and retain them. Each insurance company applies their own set of underwriting rules based on the number of employees and other factors. State and federal laws apply to varying degrees. The federal HIPAA law mandates that no matter what pre-existing health conditions small employer group members may have, no small employer or an individual employee can be turned down by an insurance company for group coverage. In addition, each insurance company must renew its small employer health plan contracts every year, at the employer's discretion, unless there is non-payment of premium, the employer has committed fraud or intentional misrepresentation, or the employer has not complied with the terms of the health insurance contract.
How are premium rates determined for small group employers?
Many small group health insurance companies can determine their initial premium rates for each company using a process known as medical underwriting. Others are required to use processes known as community rating to determine their initial rates.
When small group plans are medically underwritten, employees are asked to provide health information about themselves and their covered family members when they apply for coverage. When determining rates, insurance companies use the medical information on these applications. If a company is unable to obtain information necessary to accurately determine the risk of a particular applicant, it will underwrite more conservatively, which results in a negative impact on the rates.
The alternative to medical underwriting is known as community rating. Community rating requires insurers to charge all individuals who live in the same geographical area the same premium regardless of their age or health status.
Annual premium changes for small employer group plans are based in part on the group’s claims history and on the claims history of the company's overall small group pool. Small employer group plan renewal rates also include a component to account for overall expected increases in the cost of providing health insurance coverage by the company, such as changes in laws that may impact operating costs.
What are the coverage requirements for large employer groups?
Large group health insurance contracts do not have to be offered on a guaranteed-issue basis, so a health insurance company could reject an entire large employer group based on its claims history. However, no individual employee who is eligible for benefits can be excluded from large group coverage based on medical history. If a company issues a policy to a large employer, then all of its eligible employees must be issued coverage if they choose to enroll.
Large group contracts must be renewed every year at the employer's discretion, unless there is non-payment of premium, the employer has committed fraud or intentional misrepresentation, or the employer has not complied with the terms of the health insurance contract.
How are premium rates determined for large employer groups?
Large group health insurance is medically underwritten at the time of purchase, with rates based on employee participation and prior claims. In a large group, employees are not generally asked to fill out a medical questionnaire prior to obtaining coverage. The employees may be asked some limited medical questions depending on the employer size and claim history. The health insurance company bases annual premium changes for large employer groups primarily on the claims experience of the group in the past, as well as any overall increases in the cost of providing health insurance coverage.
Is employer group health insurance available to sole proprietors?
Most companies require at least two employees to qualify for group coverage. Insurance companies and individual states often have specific and strict requirements for very small employer groups, in order to prove that they actually are legitimate businesses and have the appropriate number of eligible employees. Employers generally have to provide payroll tax documentation validating who is an employee.
If sole proprietors are allowed to purchase group coverage, they are often referred to as “business groups of one." In some of these states, business groups of one are treated in the same manner as larger employer groups. In others, they are treated as their own distinct pool and rated separately by the health insurance companies.
What rights do I have if I lose access to my employer group health insurance coverage?
People who lose their group health insurance coverage due to a job change, divorce, job loss or other reason are able to keep their group coverage, at least temporarily. Those who are able to continue their group health insurance benefits are eligible to do so according to the federal Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). However, COBRA does not apply to all employers, and many states have mandated other continuation-of-coverage options for people who are not covered by COBRA. The benefit summary booklet provided by the employer may provide details about continuation coverage or who to contact for additional information.
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