small-group-insurance

Group health insurance

Appeal of employer-sponsored plans is obvious

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Of the U.S. citizens who have health coverage, the vast majority – nearly 60 percent – secure that coverage through group health insurance, and then – typically – through an employer-sponsored health plan. Even while employer-sponsored coverage has been declining – down from 64.2 percent in 2000 – millions continue to take advantage of the coverage for reasons that are easy to understand:

Costs

First, the employer typically takes responsibility for a significant portion of the health care expenses. A recent Kaiser Family Foundation survey of employers survey of employers found that in 2008, premiums for employer-sponsored health insurance climbed to $12,608 a year for family coverage. Of premium costs, employees paid less than a third – or about $3,354 – from their paychecks.

Ease of enrollment

And while cost is appealing, enrollment is perhaps even more appealing. Group health plans are guaranteed issue, meaning that the insurance company must cover all applicants whose employment qualifies them for coverage – and can’t rate up increase the cost for an applicant with a pre-existing condition.

Note: Nearly a dozen states have a provision for the self-employed to qualify as a “group-of-one,” meaning that they, too can purchase a guaranteed-issue plan.

The reason: In a group plan, the risk is spread across all the participants in the group. In smaller groups, where the risk is more thinly spread, a serious illness to one employee can make the entire group more expensive to insure.

Options

Because large groups can use their size to negotiate better benefits, employer-sponsored plans typically are able to include a range of plan options. In addition to an HMO or PPO plan, employees may have the option to purchase insurance for dental, life, short- and long-term disability.

To be enrolled or not to be enrolled

Do most employees enroll in available plans? As with any health plan, higher premiums result in lower enrollment. But before opting out of an employer-sponsored plan, remember that it’s essential that you have health insurance for you and your family. More than 60 percent of bankruptcies in the United States are the result of medical bills. In addition, over a recent six-year period, an estimated 137,000 Americans died due to a lack of health insurance. They either received too little care or received that care too late.

What happens if you lose your job?

If you lose your job, an obvious option will be COBRA. The Congressional Omnibus Budget Reconciliation Act of 1985 allows laid-off workers to continue to purchase the health coverage from their employer-sponsored plans for a defined period – typically 18 to 36 months – after they leave their employers.