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More than 54% of Americans with health insurance have employer-sponsored coverage through group health insurance, according to the U.S. Census Bureau.
Employers often offer health insurance as part of their benefits package. It’s also an avenue to cheaper coverage for employees since companies pay over half of health insurance premiums.
Key Takeaways
- Most Americans get health coverage through group insurance, including employer-sponsored health insurance.
- Employer-sponsored plans generally cost less than health insurance marketplace plans.
- Employees can buy group health insurance during open enrollment, when they first become eligible and during a special enrollment period if they qualify.
What Is Group Health Insurance?
Group health insurance is a type of health insurance that employers offer their workers as a benefit. It provides coverage to a group of people or members of an organization. Group health insurance is generally a more affordable option than buying individual coverage directly from the insurer or in the Affordable Care Act health insurance marketplace, sometimes called Obamacare.
Employers pay over half of employee health insurance premiums and may fund health savings accounts (HSAs) for the employees to use on their healthcare costs.
The Affordable Care Act requires that businesses with 50 or more full-time employees must provide health insurance to full-time employees and dependents under the age of 26 or pay a fee. Insurers are also required to provide group coverage to organizations with as few as two employees. Smaller businesses aren’t required to have health insurance but may qualify for tax credits by offering that coverage.
How Does Group Health Insurance Work?
Employers contract with health insurance companies to offer health plans. An employer may offer multiple options and contract with more than one insurer or an employee may wind up only having one option.
Employees choose their plan during open enrollment, when they first become eligible or during a special enrollment period, if they qualify.
You pay a health insurance premium to the health insurance company to have coverage and your employer pays its share of the premium. These plans typically have provider networks. Staying within the provider network saves you money.
Group plans usually have health insurance deductibles and coinsurance. You have to pay the annual deductible before the health plan begins paying for healthcare services. After reaching the deductible, you pay coinsurance, which is a percentage of healthcare bills.
How Much Does Group Health Insurance Cost?
Employer-sponsored health insurance costs an average of $8,435 annually for single coverage and $23,968 for family coverage, according to Kaiser Family Foundation. Employers pick up well over 50% of those costs.
Average Annual Premiums for Employer-Sponsored Health Insurance
Source: Kaiser Family Foundation, 2023 Employer Health Benefits Survey.
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Benefits of Group Health Insurance Plans
The main financial benefit of group health insurance for employees is that businesses generally pay most of the health insurance premiums. But there are other positives for both employees and employers.
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Eligibility and Coverage Criteria for Group Health Insurance
To be eligible for group health insurance, an employee must be on payroll and the employer must pay payroll taxes. Individuals usually not eligible for group coverage include independent contractors, retirees and seasonal or temporary employees. Employees who are on unpaid leave are often ineligible for group coverage until they return to work.
Companies can decide whether to offer coverage to spouses and dependent children. The ACA requires parents to keep their children on health insurance until they turn 26, but it’s up to employers whether to extend health benefits to spouses and children.
However, large employers that don’t extend health benefits to spouses and children may face a tax penalty.
How to Enroll in Group Health Insurance
To enroll in a group healthcare plan provided by your employer, ask about the deadline for enrollment once hired. If you miss this deadline, you might have to wait until the annual open enrollment period to join.
Some employers may have waiting periods of up to 90 days before new employee health insurance kicks in. You won’t have to pay premiums during this time, but you won’t have access to any healthcare coverage, either.
During open enrollment periods, companies let you sign up or change coverage, such as health insurance, dental insurance and vision insurance. You can’t generally make changes to coverage at other times unless you qualify for a special enrollment period.
Qualifying life events for a special enrollment period include:
- Death in the family.
- Divorce.
- Marriage.
- Moving to a new ZIP code or county.
- New child.
- Spouse loses health insurance.
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What Is Group Health Insurance? Frequently Asked Questions
Can self-employed individuals purchase group health insurance for their businesses?
Yes, self-employed people can buy health insurance for their company. Self-employed health insurance can be purchased through the Affordable Care Act (ACA) marketplace or directly from the insurer. You may also be able to buy coverage through a membership organization.
How do you get group health insurance if your employer doesn’t provide it?
If your employer doesn’t offer health insurance or if you’re unsatisfied with your employer’s coverage options, look into coverage through a membership organization. If you belong to a membership organization offering a group health plan, such as AARP, the National Association of Female Executives, the Writer’s Guild of America or the Freelancers Union, you may be able to get health insurance coverage through your membership.
Be wary of plans offered by some membership organizations, as many offer a “health services discount” plan, which may save you money on prescriptions but isn’t a true health insurance plan.
What do you do if you lose your group health benefits?
If you lose your group health insurance, you may qualify for COBRA insurance, which lets employees who lose their jobs extend the previous group coverage. COBRA coverage offers the same benefits found in the employer’s group plan but you usually have to pay the full cost of the premiums with no help from the employer. That can get expensive.
Alternatives to COBRA insurance may include an Affordable Care Act (ACA) health insurance marketplace plan, a plan purchased directly from an insurer, a limited-benefit short-term health insurance plan or Medicaid, if you qualify.
