Group Insurance

Group Coverage Basics

Buying insurance for your small business (group coverage) has different rules than buying just for yourself or your family (individual coverage). The good news is that coverage for small businesses provides advantages not offered to individuals.

What Is Group Coverage?

Group medical coverage refers to a single policy issued to a group (typically, a business with employees, though there are other kinds of groups that can get coverage) that covers all eligible employees and, sometimes, their dependents. Individual medical coverage, on the other hand, is a single policy issued to a single person or family.

The rules are quite different for group coverage versus individual coverage, in large part because the insurer's risk is calculated differently. With individual coverage, the insurer will base its premium rates (or deny coverage) based on the detailed medical history of the person or family. A medical exam is often required.

With groups such as small businesses, on the other hand, the insurer determines a premium price based on risk factors balanced over the entire group, using general information on members of the group, such as age or gender. Perhaps most importantly, insurers are required by law to offer coverage to small groups. In contrast, there is no such guarantee of coverage for individuals.

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Is Insurance Required?

There is no law requiring employers to offer employees or their dependents medical insurance. If you do offer coverage, however, you will be subject to many rules and regulations.

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Who Is Eligible for Coverage?

The general rule is that if an employer offers group health coverage to any full-time employees, the employer must offer coverage to all full-time employees.

As for part-time employees, the employer has the option of whether to offer coverage to them. If the employer offers coverage to any part-time employees, all of them must be offered the coverage.

These rules apply regardless of the medical condition of the employees. In other words, any eligible employee can't be denied coverage based on previous medical problems, otherwise known as pre-existing conditions.

In addition, any dependents of eligible employees are also generally eligible for coverage under a group plan. Dependents include spouses, children, and in some cases, unmarried domestic partners. Dependents cannot enroll for coverage unless the employee has enrolled.

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What Do Employers Have to Pay?

Most insurers and health plans require employers to cover at least half of the premium cost for covered employees. This requirement is meant to encourage more employees to join the plan, and prevent what's known as "adverse selection" where only those prone to sickness are motivated to sign up, creating a much higher-risk group for the insurer. Some employers choose to pay all of the premium; others require employees to pay a portion. Talk with our brokerage or agents to find out about all your options.

On the other hand, employers have no obligation to pay for premiums for dependents. In other words, employers may contribute towards premiums for dependents, but are free to require employees to pay for the full premium cost for covered dependents.

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