What Is Group Health Insurance?

Everyone loves a good deal. And people who shop in bulk really love a good deal (a pack of 100 paper towels for $17.99!—yeah, we get it).

Well, most companies like to do their shopping in bulk too. Especially when it comes to health insurance plans.

This is what group health insurance is all about. We’ll explain what it is and whether it’s the best option for you and your family. Because you’re not going to let a little lack of knowledge stop you from protecting your health and finances.

What Is Group Health Insurance?

First, health insurance is simply an agreement between you and an insurance company. They agree to cover certain medical expenses. You agree to pay them a monthly premium.

Group health insurance is a type of health insurance plan that’s available to a specific group of people, like the health insurance plan a company offers its employees. It’s kind of like if your company bought organic fair-trade coffee at a discounted price and offered it to employees at $1 per cup instead of $3. By buying in bulk, everyone saves!

Since the Affordable Care Act (ACA) was passed in 2010, companies with over 50 full-time workers must offer a health insurance option. There’s also usually a requirement that at least 70% of employees use the plan.¹ In 2021, an estimated 155 million people checked the box to participate in their employer-based plan.²

If you think about it, it pays for companies to support the health of their employees. Sick days cost money. Healthier people can focus and do better work. We all know how hard it is to work when you can’t stop sneezing, coughing or reaching for the Kleenex, right? (And if you’re a business owner, check out these tips on how financial wellness can benefit your bottom line.)

Health Maintenance Organization (HMO) plans or Preferred Provider Organization (PPO) options are examples of the kinds of plans you’d find in your group medical insurance coverage. Professional organizations and unions can also offer group health insurance plans for their members.

How Group Health Insurance Works

So, how exactly does group health insurance work?

First, employers buy a group plan for their employees. This often saves money for the company and you, for a couple of reasons. First, companies take their time comparing health insurance options to find the plans that offer the most coverage for the best price. After all, health insurance is supposed to be a benefit—something that makes you want to stay at that company. So your employer wants you to participate in the plan!

The second reason group health insurance can be less expensive is that it spreads out the risk to the insurance company. Think about it: With a group of 50 or more employees, what are the chances every one of them will need $100,000 of medical care every year? Pretty low. Some people need a lot of heath care coverage, and some need hardly any. But everyone pays the same price for coverage, balancing out the risk to the insurance company. That’s a big reason why the price you pay in a group plan often ends up being lower than what you might pay buying a plan on your own.

Next, you can compare your employer’s options. Usually you have a couple different levels of care to choose from. You also have the option to add your spouse or children to your plan (dependents).

Once you choose your plan, you’ll pay a monthly premium and, once you hit your deductible, your insurance company will start helping you with those medical bills. Sweet!

Why Choose Group Health Insurance?

There are a couple benefits to going with a group insurance plan.

1. You might save money with lower premiums. Again, this is because there is lower risk within a larger group plan. It’s also because your employer will often help cover some (or even all) of the premium.
    
2. There are certain tax advantages. Employers can normally deduct the money they put toward monthly premiums for employees from their tax bill. And employees can pay their premiums with pretax dollars, saving you even more.
    
3. You can start a Health Savings Account (HSA) if your employer offers a high-deductible plan. HSAs are pretty powerful. They are tax-advantaged accounts that you can use to pay for medical expenses tax-free now and in the future.
    
4. If you run a small business, you might be eligible for a health care tax credit.

While there are a ton of benefits to group insurance plans, don’t assume your employer’s plan is your best option. It might not be. Sometimes you can find cheaper and better coverage by using the government-run marketplace (Healthcare.gov) or working with an independent insurance agent. Bottom line: It’s your hard-earned money and it never hurts to shop around a little. (If you feel like you’re overpaying for your health insurance coverage, check out these tips on how to save.)

Get the Right Coverage

Trying to find the right health insurance plan can be a little like trying to search your house for your lost car keys during a power outage. It’s hard!

You could spend a ton of time researching everything on your own—comparing quotes, companies, deductibles, ugh. Or you could let us do the heavy lifting for you!

By working with an independent health insurance agent, you’ll get an industry expert who can look at your needs and find you the best plan at the best price. And we know where to find them! Our friends at Health Trust Financial can connect you with an independent expert who'll help you sort through the complicated stuff and get the right plan for you.

Just think how good it’ll feel when you know you’re covered with the right amount of health insurance—and not paying thousands of dollars a month for it.

Frequently Asked Questions

What Is Group Health Insurance?

A group health insurance plan is just a health insurance plan that’s available to a specific group of people, like the health insurance plan a company offers its employees. Some professional organizations or unions also offer them. You and the company both save some money since the risk is spread out across a larger pool of people.

How Much Does Group Health Insurance Cost?

The average American worker paid $5,969 in 2021 for their employer-sponsored group health insurance.³ The total cost of annual premiums (employer and employee) in 2021 for employer-offered coverage rose 4% over 2020 to $22,221. And the average deductible people paid was $1,669 for single coverage in plans that had a general annual deductible.⁴ The pricing trend is moving in the wrong direction, though, for most American families. Over just the last five years, the average premium has gone up a whopping 22%.⁵

Does My Company Have to Be a Certain Size to Qualify for Group Health Insurance?

No. Even if you just have one employee, you can still find group health insurance plans. So you don’t have to have 1,000 employees just to get a group plan. An estimated 58% of small companies provide some kind of health coverage to employees, while 99% of large companies offer a health care package.⁶ And remember that the Affordable Care Act requires businesses with over 50 full-time employees to provide some kind of health insurance option.

Can I Opt Out of My Employer’s Group Health Insurance Plan?

Yes. Just because you work somewhere, doesn’t mean you have to use their health insurance plan. You always have options. And sometimes it’s best to get a second opinion from an independent health insurance agent.