Group health insurance is usually a group type of insurance policy for its employees or members of an organization or company. In a group health insurance policy, the premium is typically cheaper than individual insurance policies.
A group health insurance policy generally offers health insurance to its members at a reduced rate because the risk to insurance providers is dispersed among the various members of the group health policy.
In other words, when there is only one member in a group that is a member of the group, there is likely only one risk or threat to the insurance provider that has spread its risks to the rest of the group. This type of risk-sharing reduces the premiums for the group insurance policy and leaves the premium unchanged for the individual members of the group.
Group health insurance
Most often, the term “group health insurance” refers to a payroll benefit plan that provides a benefit to its employees that is computed based on the group’s membership or strength. The payroll advantage is usually the most attractive element for providing group health insurance benefits to employees. Unlike individual insurance plans that are typically less expensive and offer fewer choices, a payroll plan can offer a wide array of options. Additionally, because the employer implements it, employees have no choice but to accept the plan provided. Therefore, most employees eligible for a payroll benefit plan will usually choose to enroll in such a plan rather than look for other alternatives.
HMO or PPO health plan
Most large employers that offer a payroll to their employees usually include an HMO or PPO health plan. These are usually considered flexible spending accounts (FSA) or preferred provider organizations (PPO). Some employers may also provide an individual employee’s choice of traditional fee-for-service health care coverage. It should be noted that most FSA/PPO plans do not provide any coverage for pre-existing conditions.
Most companies that offer group members HMO or PPO plans also provide some financial assistance to selected employees who cannot afford the premiums required by the plan. For example, some companies pay a percentage of the premiums for selected members’ plans while the employer provides the remainder.
In return, the employer absorbs the cost of paying the premiums. Also, there are some employers that require a percentage of the employees’ premium about their income or assets. In addition, some employers offer guarantee issue provisions that require the employer to issue certain group-term or group-wide insurance policies if a specified percentage of the employees are unable to maintain the group-term policy. These particular policies are referred to as “guaranteed issue” plans.
Because HMO and PPO plans contain deductibles and premiums, most employees will pay more than the deductibles. Also, if a family member uses the Health Savings Account (HSA) within an HMO or PPO program, premiums for that coverage will be significantly lower. However, HMO and PPO coverage is mandatory for employees who work for firms that provide health benefits through their employer. An exception to this rule is the case of self-employed individuals who can choose to go with an HMO plan or a PPO.
Another difference between HMO and PPO plans is how they provide compensation for health-related expenses. HMO plans limit the number of deductibles employees must pay and do not cover co-pays or out-of-pocket expenses for preventive care. PPO plans typically allow the employee to choose any health-related expenses, including visits to an emergency room. The employee may also choose to have all costs that exceed a set limit, such as annual preventive care visits, covered by the PPO plan. However, PPO plans do not usually cover major catastrophes.
HMO and PPO plan usually require members to renew their policies every year. Most have lifetime coverage provisions and several plans to choose from. If an employee wants to get other medical services through group health insurance, they must first join the plan. There is usually a monthly cost, but small co-pays and deductibles are also associated with the plans. If a member stays within the primary HMO or PPO plan for a year, the member’s premium for the entire year will then be spread across all members in the same group.
In addition to medical care, members of HMO and PPO plans can be covered for prescription drugs. Depending on the type of plan, prescription drug costs may be limited. However, if an employee uses a Medicare Part D drug plan, the cost of prescription drugs may be partially or fully reimbursed. In addition, both HMO and PPO plans usually have options for short-term health plans, disability income protection, and other similar benefits. These benefits usually have a low premium and a long-term commitment.