What Is a Group Health Insurance Plan?

What Is a Group Health Insurance Plan?

Let me explain what a group health insurance plan really is. It's a form of health insurance that covers a group of people, usually employees at a company or members of an organization. As someone looking into this, you should know that group members get this insurance at a lower cost because the insurer spreads the risk across everyone in the group. You'll find these plans in both the U.S. and Canada.

How Group Health Insurance Works

Here's how group health insurance operates in practice. Companies and organizations buy these plans and then offer them to their employees or members. Remember, you can't buy these as an individual; they're only available to groups. Most plans need at least 70% of the group to participate to stay valid. With so many variations in insurers, plan types, costs, and conditions, no two plans are identical.

Once the organization picks a plan, you as a member get to decide if you want to accept or decline the coverage. In some places, plans come in tiers, so you might choose basic coverage or add advanced options. The premiums get split between the organization and you, based on the plan details. You can also extend coverage to your immediate family or other dependents, but that'll cost extra.

The big draw is that group health insurance costs much less than individual plans. That's because the risk is distributed among more people, making it cheaper overall since more folks are buying in.

History of Group Health Insurance

Let's look back at where group health insurance started. The first known example goes to 1798, when Congress set up the U.S. Marine Hospital for Navy seamen—it was mandatory, with deductions from their pay. In the late 1800s, industries like mining, lumber, and railroads provided similar coverage to keep their workers healthy.

Montgomery Ward gets credit for the nation's first group policy in 1910. It didn't cover medical bills directly but paid workers half their wages if they got injured or sick. Early 1900s progressive movements pushed for national health insurance, but they failed due to opposition from doctors, labor groups, and insurance companies.

Things really took off in the 1940s during World War II. Employers used health insurance to bypass wage controls, leading to a huge increase in coverage by war's end. This didn't help retirees or non-workers, though, which is why the 1965 Social Security Amendments created Medicare and Medicaid.

Benefits of a Group Health Insurance Plan

The main benefit you get from a group plan is how it spreads risk across everyone insured, keeping your premiums low. Insurers manage risk better when they know exactly who's covered, and they can control costs even more through health maintenance organizations (HMOs), where providers agree to care for members at set rates.

HMOs keep costs down but limit your flexibility in choosing care. Preferred provider organizations (PPOs) give you more doctor choices and easier specialist access, though they charge higher premiums. In 2022, 48.7% of the U.S. population had employer-provided group coverage.

Most group plans are sponsored by employers, but you can also get them through associations like AARP, the Freelancers Union, or wholesale clubs.

Insurance Options for Uninsured Individuals

Not everyone has group coverage, and for years, uninsured folks had to pay for healthcare themselves. That's changed now. If you're left out of employer plans, government-sponsored options are available. The Affordable Care Act (ACA) from 2010 created a marketplace that covered 16.3 million people in the 2022-2023 enrollment period.

After the ACA, you had to prove you had insurance or an exemption, or pay a penalty—that ended with the 2019 Tax Cuts and Jobs Act.

Example of Group Health Insurance

Take United Healthcare, part of UnitedHealth Group—it's one of the biggest insurers out there. They provide a range of group options for businesses, including medical plans plus extras like dental, vision, and pharmacy.

They offer plans through the federal Small Business Health Options (SHOP) program under the ACA. In most states, this is for employers with 50 or fewer full-time employees, though some allow up to 100. If your business pays at least 50% of premiums, you qualify for a 50% tax credit. Larger businesses with 50+ employees get more customized options as national accounts.

What Is a Group Health Plan?

A group health plan is sponsored by an employer or group and provides healthcare to members and their families. The most common is group health insurance, offered to company employees or organization members.

What Is a Group Health Cooperative?

A group health cooperative is mutual insurance owned by the members themselves. It offers coverage at reduced costs, with premiums based on actual claims, spreading the care costs across everyone insured.

How Many Employees Do You Need to Qualify for Group Health Insurance?

Many insurers offer plans to companies with just one or more employees. The available plans can differ by business size—for instance, United Healthcare has options for small businesses with 1-49 employees and larger ones with 50+.

What Are Group Health Insurance Benefits?

These plans provide medical coverage to organization members or employees, often with add-ons like dental, vision, and pharmacy. Risk spreading means low premiums, protecting you from high unexpected medical costs.

How Much Does Group Health Insurance Cost?

In 2023, the average cost for individual coverage was about $8,435 per year, with employees paying 17% of the premium. For family coverage, it averaged $23,968, with employees covering 29%.

The Bottom Line

Group health insurance is one of the most affordable options out there. By spreading risk among many people, premiums stay low compared to individual plans. Insurers take on less risk with more participants, and for employees who couldn't afford individual coverage, it's a solid benefit.