Group Medical Plans

There are a variety of options in the group market for group health insurance, but all of the plans, including fully insured plans, generally cover the same items. Plans will have a deductible, co-insurance, co-pays, and rx co-pays. The deductible is the amount the employee is 100% responsible for, and this can range from $1,000 to $7,500 or higher. After the deductible comes co-insurance, which is a split between the carrier and the employee, usually a 70/30 or 80/20 split where the carrier pays the higher percentage. There are also 100% plans, meaning once the deductible is met, the employee only has to pay their co-pays for treatments. Co-pays are a fixed amount, typically $25-$55 for office visits and $50-$100 for specialists, which the employee is responsible for when they go to the doctor. The carrier pays the rest of the cost of the visit. Rx co-pays are paid to the pharmacy and depend on the type of drug prescribed. Generic drugs are the cheapest, followed by brand name/formulary, and then non-formulary drugs. Non-formulary drugs, often advertised on TV, are the most expensive on the market, leading to higher costs for participants. Additionally, options like group dental plans and group vision insurance can complement these health plans, while self-funded insurance can offer an alternative approach for some employers.

This coverage is what most small businesses utilize for their group health insurance benefits. The carrier (Blue Cross/Blue Shield, United Healthcare, Cigna, Aetna) charges the group a premium that is solely based on the average age of the group. This means that a healthy group pays the same as an unhealthy group, assuming they are the same average age. The reason for this is ACA. Part of the legislation puts a requirement on the carrier to accept all small group business without asking any health questions. Since the carrier is in the business of making money, their underwriters have assumed that everyone who wants small group coverage is unhealthy, overweight, and diabetic, and has set the rates accordingly. Since the carrier is taking all of the risk, they do pass on rate increases each year. A good renewal is 12-15% in this market. So, this is an option for groups that may have some health conditions in it, but need to have the coverage.

This self-funded insurance coverage allows a company to pay for their own claims as they are incurred. They utilize the services of a Third Party Administrator, who brings reinsurance, pharmacy benefit management, utilization review, and other pieces of the puzzle to ensure that the plan is run efficiently. There is protection for large claims, so the company is not risking their business by paying for their own claims. Additionally, this method has the potential to reduce costs by 30-40%, which can be significant compared to fully insured plans. Usually, the split between claims and administration is 80%/20%. This method of health coverage is particularly suited for larger businesses with the cash flow to handle the ebbs and flows of a plan year.

This coverage introduces a new twist to the group health insurance market, specifically designed for small groups with fewer than 50 employees. It combines the security of fully insured plans with elements of self-funded insurance. In this market, groups undergo underwriting, and pricing is determined based on that underwriting process. The plan includes reinsurance, similar to self-funded plans, but at a significantly lower level. The carrier charges a monthly premium to the group, ensuring that even if claims exceed the available claims pool of funds, the client will only be asked to pay the contracted amount. Therefore, it operates like fully insured plans for the client, providing a budgetable figure that remains consistent per employee each month throughout the year. At the end of the year, the renewal is influenced by the group's experience as well as that of similarly situated businesses. If the year has been favorable, the renewal could be flat or increase by less than 5%. Additionally, after the run-out period—which is the time following the end of the plan year used to finalize claims incurred before the plan year ended—the carrier will share the remaining claims pool with the client. This type of coverage is ideal for healthy groups that seek to avoid the pitfalls of the fully insured market.