What Is Group Health Insurance?

Group health insurance plans provide coverage to a group of members, typically company employees or members of a specific organization. Members of a group health plan usually receive insurance at a reduced premium because the risk to the insurer is spread across all policyholders and employers often pay a portion of it for their employees as an added benefit. 

How group health insurance began

The concept of group health coverage first began during World War I. Soldiers who fought in World War I received coverage through the War Risk Insurance Act, which Congress later extended to cover the dependents of servicemen.

Employer-sponsored group health insurance plans emerged in the 1940s. It initially began as a way for employers to attract employees after wartime legislation flattened wages. Insurance was a popular tax-free benefit that employers continued to offer after the war ended, but it didn't address the needs of retirees and the unemployed. This led to the Social Security Amendments of 1965, which later saw the introduction of both Medicare and Medicaid.

How does group health insurance work?

Companies and membership based organizations purchase group health insurance plans and offer these to their employees or members. However, groups can only buy these plans, so individuals don't have access to these specific plans.

Organizations can choose from many policies with different features and benefits. Once they select a plan, group members can accept or decline coverage. In addition, some plans are available in tiers allowing members to take out basic coverage or advanced insurance options with extra add-ons. 

Most group plans require a minimum of 70% participation in the plan to be valid. 

Key benefits of a group insurance plan

Here are some of the key benefits of a group health insurance plan:

Affordability

Group health insurance is usually more affordable than purchasing an individual health insurance plan because more people can buy into the plan, which spreads the risk for the insurance provider. Because the risk is spread, it helps to keep the premiums low.

Extension to family

Some plans allow you to extend coverage to add your immediate family and dependents for an additional premium or at no extra cost. 

Access to supplementary plans

Some group health insurance plans offer supplemental health plans, including dental, vision, and prescriptions. These can usually be purchased separately or as a bundle. 

Protection

Coverage as part of a group health plan helps ensure that you and your family are protected from any unexpected medical costs in the future.

Group health insurance providers

Some insurance providers establish health maintenance organizations (HMOs) where contracts are established between health care providers and insurance companies to provide care to their members. This means you need to see specific health care providers to access your plans' benefits. You'll likely incur additional medical costs if you choose outside the network.

Preferred provider organizations, otherwise known as PPOs, can offer you a greater choice of service providers and access to specialized services. However, this option usually charges higher premiums than an HMO model.

How much does group health insurance cost?

Various factors contribute to the price of your health insurance premium, such as state law, where you live, and the type of plan you choose.

An average group health insurance policy costs approximately $7,500 for an individual annually, with employers paying around 80% and employees paying the difference. Therefore, your group health plan will likely cost about $1,200 or $100 per month. In comparison, the cheapest average cost of a private health insurance plan in North Carolina is $178 per month for an individual for a major medical plan. 

Group health insurance for small businesses

Small business group health insurance plans are available in most states where a company has between 1 and 99 employees. Businesses with between 100 and 2,999 employees also have various options available, including different types of bundles. For large companies, which are organizations with over 3,000 employees, it's possible to customize plan offerings and access various services and healthcare features. 

Need help with your group health insurance?

If you're a small business or an individual wanting to find out more about a group or private health insurance, our locally based health insurance agents in North Carolina can help. Get in touch with our team in Raleigh, Charlotte, or Durham today to find out more.