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Easy to Understand Group Health Plans

Group Health Plans

Group Health Plans are insurance plans that are provided by an organization for multiple people. These plans are traditionally more cost effective for those in the group and provide an array of benefits for said group. Many health insurance providers prescribe these plans because there less risks associated for the company or organization purchasing the group health plan.

The most common purchasers of group health plans are employers. These plans ensure that workers remain healthy and can continue to perform their assigned tasks while also giving an incentive to the employee to remain with that employer. Other organizations may also purchase group health plans such as unions, fraternities and sororities, and other social groups. When employers, such as a company, provide a group health plan to their employees, the employers and employees often share the cost of the health premiums. Group health plans also provide those employees, or group members, with tax exemptions.

The benefits attributed to group health plans relate to cost and acceptance for coverage. If an employer purchases a group health plan, the insurance company must cover all employees based on their employment qualification. This is known a "guaranteed policy". These plans also have rates that cost much less for each group member than if that member had purchased health coverage on their own.

Also, an employee that has a pre-existing medical condition is more likely to receive coverage under a group health plan. Pre-existing medical conditions are defined as any medical ailment or disability that presents at least six months prior to receiving coverage. However, some plans have provisions regarding pre-existing conditions that may delay, or deny, coverage for a period time.

The typical period of delayed coverage is anywhere from six months to a year. Another benefit of group health plans is that they are typically not underwritten by insurance companies as with individual health plans. Underwritten policies may affect an individual, but group health plans prevent this by encompassing larger number of people in different conditions of health.

Group health plans are regulated on state and federal levels. However, due to legislation such as the McCarran-Ferguson Act of 1945, federal strictures on insurance companies are less stringent. On the state level, the state government can choose accept or reject federal regulations as listed by the National Association of Insurance Commissioners (NAIC).

While regulations exist, they do not affect insurance companies and policies unless they are accepted by that state. Some states also consider the self-employed as a "group of one" and allow them to purchase a group health plan at a reduced rate under guaranteed policy.

Depending on the size of the group, additional benefits can be negotiated for by that group at cheaper rates. In smaller groups, benefits become more costly if an employee falls ill or is injured. This is due to the rates lying more heavily on each person in that group.

On average, 60 percent of United States citizens, that are employed, receive health coverage under a group health plan through an employer.

NEXT: Guide to Supplemental Health Insurance

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