How Does Group Health Insurance Work?
To gain a better understanding of how group health insurance works, we should first explain what it is.
Group health insurance is an agreement between an insurer and a sponsor of the plan to provide health insurance coverage for members of the plan. The sponsor may be an employer, providing coverage for its employees or an organization, providing insurance for its members.
Essentially, group policies can allow for lower rates to each individual, by factoring in probabilities. There is a probability that all policyholders will not have costly illnesses or injuries during the same time-frame. Thus, the premium for each insured can be somewhat lower when the insurer is pricing the policy as a group.
Who is it for?
Many companies make group health coverage available for the employees by entering into an agreement with an insurance company to provide uniform coverage against injury or illness for all employees of a common class. That is to say, all labor personnel would have the same coverage available to them, although all managers might share a different plan, common to them all.
Because of the high costs of medical care, having healthcare insurance that covers at least the majority of the expense in case of injury or illness is very desirable. This is true for younger workers that might be starting a family as well as for older workers that might be experiencing more health problems than their younger counterparts.
Most group policies will offer coverage for the insured individual's family, as well, although there is an extra cost for this extension of coverage. In most cases, that additional premium must be paid by the employee, although as a recruiting and retention incentive, some companies may share that cost as well.
How are they Structured?
Most aspects of what can be offered and how it is priced are regulated by the individual states. For instance in one state, it might be required that all laborers pay the same rate for the same coverage, while in another, the rate might vary according to age.
Some states regulate health insurance very tightly, including setting the factors which are allowable in calculating policy cost, while others are more lax. Usually, for an individual policy, the factors entering into pricing will include location, the insured's age, gender, pre-existing conditions, familial history and general health.
With a group policy, however, there are often many limitations. These may include such things as mandatory common pricing between all similarly sized sponsors, a prohibition against refusing coverage to a sponsor because of the health of its employees and limitations on using past claims in setting the rate. In some states, the age of an employee may also be considered in pricing the premium, as can general health.
Then, there are various types of insurance, providing different coverage, which can vary significantly in cost.
HMO (Health Maintenance Organization)
In an HMO, physicians and medical personnel can work directly for the HMO or they can work under contract. Normally, it's required that the insured select a primary care provider to provide and coordinate care. HMOs normally focus heavily on programs to improve the patient's general health and prevent disease.
PPO (Preferred Provider Organization)
In a PPO, the policyholder can choose to use any provider in the network and will pay a co-payment for each service. If the insured decides to see a doctor outside the network, he must pay the doctor directly and seek reimbursement (typically, partial).
POS (Point of Service)
A POS policy is a hybrid of an HMO and a PPO. There will normally still be a primary provider, but the insured may see other providers in the network without a referral. Providers outside the network can also be used, but with only partial reimbursement..
HDHP (High-Deductible Health Plan)
An HDHP policy normally pays no benefits until a high annual deductible is reached. These are often referred to as major medical policies. Some will allow the use of out-of-network providers, but at a higher cost. Some will also have a maximum dollar amount set to limit the insured's out of pocket expenses.
QHDHP (Health Savings Account Qualified High-Deductible Health Plan)
A QHDHP is a policy which incorporates a Health Savings Account with a high deductible policy. These have rather strict guidelines set by the IRS for qualification.
How to Select your Group Health Insurance Coverage
As stated the premiums for the above plans can vary a great deal, so it's important for the insured to consider many of the same factors that apply to an individual policy, before choosing the desired coverage.
1. Monthly premium -can you afford the monthly premium?
2. Deductible - at what point will the insurance begin to cover costs?
3. Co-pay - what fixed amount of each expense will you be required to pay?
4. Co-insurance - what percentage of all expenses will you be required to pay?
5. Maximum amount - is there a maximum out of pocket amount for you, beyond which the insurer will cover all costs?
6. Availability of network providers - are there providers within the network close enough to your home and/or employment to be convenient? Are they providers you're comfortable with?
Summary
With the high costs of quality healthcare today, a group health insurance policy can be of tremendous benefit. It will nearly always be a great deal less expensive than an individual or family policy, and can be just as flexible, depending upon the type of plan you choose.
While many people may not see the monthly cost nearly as acceptable when they are healthy, most that have had occasion to seek treatment for a serious injury or illness will readily admit that it's a worthwhile investment.
Careful consideration of the above points, prior to selecting the type of coverage you want from your group health insurance will help you control your expenditures and protect your future.
Group health insurance is an agreement between an insurer and a sponsor of the plan to provide health insurance coverage for members of the plan. The sponsor may be an employer, providing coverage for its employees or an organization, providing insurance for its members.
Essentially, group policies can allow for lower rates to each individual, by factoring in probabilities. There is a probability that all policyholders will not have costly illnesses or injuries during the same time-frame. Thus, the premium for each insured can be somewhat lower when the insurer is pricing the policy as a group.
Who is it for?
Many companies make group health coverage available for the employees by entering into an agreement with an insurance company to provide uniform coverage against injury or illness for all employees of a common class. That is to say, all labor personnel would have the same coverage available to them, although all managers might share a different plan, common to them all.
Because of the high costs of medical care, having healthcare insurance that covers at least the majority of the expense in case of injury or illness is very desirable. This is true for younger workers that might be starting a family as well as for older workers that might be experiencing more health problems than their younger counterparts.
Most group policies will offer coverage for the insured individual's family, as well, although there is an extra cost for this extension of coverage. In most cases, that additional premium must be paid by the employee, although as a recruiting and retention incentive, some companies may share that cost as well.
How are they Structured?
Most aspects of what can be offered and how it is priced are regulated by the individual states. For instance in one state, it might be required that all laborers pay the same rate for the same coverage, while in another, the rate might vary according to age.
Some states regulate health insurance very tightly, including setting the factors which are allowable in calculating policy cost, while others are more lax. Usually, for an individual policy, the factors entering into pricing will include location, the insured's age, gender, pre-existing conditions, familial history and general health.
With a group policy, however, there are often many limitations. These may include such things as mandatory common pricing between all similarly sized sponsors, a prohibition against refusing coverage to a sponsor because of the health of its employees and limitations on using past claims in setting the rate. In some states, the age of an employee may also be considered in pricing the premium, as can general health.
Then, there are various types of insurance, providing different coverage, which can vary significantly in cost.
HMO (Health Maintenance Organization)
In an HMO, physicians and medical personnel can work directly for the HMO or they can work under contract. Normally, it's required that the insured select a primary care provider to provide and coordinate care. HMOs normally focus heavily on programs to improve the patient's general health and prevent disease.
PPO (Preferred Provider Organization)
In a PPO, the policyholder can choose to use any provider in the network and will pay a co-payment for each service. If the insured decides to see a doctor outside the network, he must pay the doctor directly and seek reimbursement (typically, partial).
POS (Point of Service)
A POS policy is a hybrid of an HMO and a PPO. There will normally still be a primary provider, but the insured may see other providers in the network without a referral. Providers outside the network can also be used, but with only partial reimbursement..
HDHP (High-Deductible Health Plan)
An HDHP policy normally pays no benefits until a high annual deductible is reached. These are often referred to as major medical policies. Some will allow the use of out-of-network providers, but at a higher cost. Some will also have a maximum dollar amount set to limit the insured's out of pocket expenses.
QHDHP (Health Savings Account Qualified High-Deductible Health Plan)
A QHDHP is a policy which incorporates a Health Savings Account with a high deductible policy. These have rather strict guidelines set by the IRS for qualification.
How to Select your Group Health Insurance Coverage
As stated the premiums for the above plans can vary a great deal, so it's important for the insured to consider many of the same factors that apply to an individual policy, before choosing the desired coverage.
1. Monthly premium -can you afford the monthly premium?
2. Deductible - at what point will the insurance begin to cover costs?
3. Co-pay - what fixed amount of each expense will you be required to pay?
4. Co-insurance - what percentage of all expenses will you be required to pay?
5. Maximum amount - is there a maximum out of pocket amount for you, beyond which the insurer will cover all costs?
6. Availability of network providers - are there providers within the network close enough to your home and/or employment to be convenient? Are they providers you're comfortable with?
Summary
With the high costs of quality healthcare today, a group health insurance policy can be of tremendous benefit. It will nearly always be a great deal less expensive than an individual or family policy, and can be just as flexible, depending upon the type of plan you choose.
While many people may not see the monthly cost nearly as acceptable when they are healthy, most that have had occasion to seek treatment for a serious injury or illness will readily admit that it's a worthwhile investment.
Careful consideration of the above points, prior to selecting the type of coverage you want from your group health insurance will help you control your expenditures and protect your future.
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