- A group of fewer than 50 workers or individuals seeking coverage may contract with an insurance company to provide coverage. The members pay premiums to the insurer, which then pays the group members' medical claims as agreed upon in the contract. In employer-sponsored group health coverage, the employer generally agrees to pay all or most of the insurance premiums for their workers.
- While federal law prohibits health insurers from refusing to extend group health coverage to a small employer, an insurance company can reject an entire large employer group based on its claims history. Health insurance companies must allow both small and large employer groups to renew their contracts each year as long as the employer group adheres to the contract terms. Larger group health plans serving several hundred employees may create self-insured plans. Rather than paying premiums to an insurer, they instead may reserve a pool of funds to cover their employees' health care costs.
- In a process called medical underwriting, insurers determine premiums for small group health plans by evaluating each applicant's health risk factors. Healthier individuals generally subsidize medical expenses for those with greater risk of becoming ill. Some states require insurers to determine premiums by community rating, in which they charge all individuals who live in the same geographical area the same amount. For large employers, a health insurer may use the employer group's claims data from prior years to determine the annual premium for each employee.
- All eligible workers can participate in group health coverage sponsored by their employers regardless of their health status or claims history. Companies generally require employees to work a certain number of hours per year to participate in the the employee group health plan. The health plan generally will provide coverage for preventative care and emergencies for the employee and his immediate family. In addition to premiums deducted from their paychecks, members often are responsible for a portion of the cost of each doctor visit, which the industry refers to as a "copay."
- Insurers can impose a waiting period for providing benefits for certain medical conditions new members already may have upon enrolling. The Health Insurance Portability and Accountability Act of 1996 limits the waiting period for these preexisting conditions to 12 months and require insurers to offset it by the length of any health coverage the group member had two months prior to enrollment. Laws that reduce the length of the exclusion period vary by state.
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