How group health plans & group health insurance compare

The terms “group health plan” and “group health insurance” may seem the same. But they can mean different things. The term “group health plan” can refer to all kinds of health benefits for a group of people. In contrast, the term “group health insurance is a type of medical insurance policy that a company offers its group of employees.

In this article, we’ll dive deeper into what group health plans and group health insurance plans are, how they differ, and how one type of group health plan called a health reimbursement arrangement (HRA) can allow you to help your employees save on their healthcare costs.

Takeaways from this blog post:

• Group health insurance is an employer-sponsored policy, whereas group health plans can include insurance, health reimbursement arrangements (HRAs), and other benefits. They’re similar in that they require a participation rate, offer policies at a reduced cost, and provide coverage for pre-existing conditions.
• If you’re looking for a group health plan that’s not an employer-sponsored insurance policy, you can offer a qualified small employer HRA (QSEHRA) or an individual coverage HRA (ICHRA) and reimburse employees for individual insurance premiums and other out-of-pocket expenses.
• Employers can supplement their group health insurance coverage by providing an integrated HRA. This type of HRA reimburses employees enrolled in a group plan for medical costs not fully covered by their policy.

What is a group health plan?

A group health plan is an umbrella term for many types of employer-provided benefits that cover the cost of healthcare for employees and their families. An organization establishes or maintains a plan that offers a medical benefit to its participants directly through insurance, reimbursement, or otherwise.

The Employee Retirement Income Security Act (ERISA) defines and regulates most group health plans in private industries¹. It sets minimum standards for participant rights, requires employers to provide relevant plan information, and outlines the details of fiduciaries. The law also protects certain benefits if a plan ends.

Here are a few examples of ERISA plans that are considered group health plans:

• A group health insurance plan (including self-funded plans)
• A health FSA
• A medical reimbursement plan like an HRA

Next, we’ll talk about the most common type of group health plan: group health insurance.

What is group health insurance?

Group health insurance, or employer-sponsored health insurance, offers coverage to a group of members, typically a company’s employees and their eligible dependents. Only groups can purchase these insurance policies, meaning individuals are ineligible to enroll in this type of health plan on their own.

Although all group health insurance plans differ due to factors like cost variations, health insurance companies, network of doctors, and plan specifications, they have similarities.

Group health insurance plans typically share the following characteristics:

• Employer group health insurance often requires a 70% participation rate.
• Members have the choice of enrolling in or declining health coverage.
• Eligible employees receive insurance at a reduced cost because the insurance providers spread their risk across a large pool of people or policyholders.
• The company shares monthly premium payment costs with its employees.
• Due to the Affordable Care Act (ACA), insurers can no longer deny participants coverage or set higher premium rates due to health status or pre-existing conditions.
• Employees can add family members and dependents to group plans for an extra cost.

Popular types of group health insurance plans include health maintenance organization (HMO) plans, point of service (POS) plans, and preferred provider organization (PPO) plans. Network providers, covered health services, and the cost of the policy will vary based on plan type.

For example, HMO plans have the advantage of lower premium costs due to fewer providers within a specific network, but they’re less flexible regarding how members can receive medical care.

PPO plans offer greater flexibility because employees generally aren't required to select a primary care provider (PCP) and can see any doctor or specialist within their network without a referral. However, they typically have higher health insurance premiums than other plans.

What’s the difference between a group health plan and group health insurance?

Simply put, group health insurance coverage is a group health plan, but a group health plan is not always a group medical insurance plan.

A group health plan doesn’t necessarily provide insurance directly. Employers should ensure their group health plan provides full health benefits to their employees, whether that’s through a group policy, reimbursement plan, or other means.

Offering a health benefit, like a group health insurance policy, is an attractive perk in today’s competitive job market. These employee benefit plans come with many advantages, like tax benefits and coverage for medical care, which can be costly if a worker is uninsured. That’s why providing a health benefit is an excellent way for employers to attract and retain employees.

You can still offer a health benefit even if you don’t want to go with group medical coverage. If you’re a small business owner with fewer than 50 full-time equivalent employees (FTEs), a qualified small employer HRA (QSEHRA) is an excellent option to provide a personalized health benefit for your employees. With a QSEHRA, you can reimburse your employees for their individual health insurance premiums and other qualified out-of-pocket costs.

The individual coverage HRA (ICHRA) works similarly to the QSEHRA but is available for employers of all sizes. The ICHRA also allows business owners to vary their allowance amounts by job-based employee classes for greater customization.

How you can use an integrated HRA to supplement your group health insurance plan

If you choose group health insurance coverage, consider supplementing it with an integrated HRA for even greater impact.

With an integrated HRA, or a group coverage HRA (GCHRA), you can reimburse employees for medical costs their group health plan doesn’t fully cover. Integrated HRAs work similarly to other HRAs but can only work with group plans, not individual plans.

While employees can’t receive reimbursements for their group plan’s monthly insurance premiums, they can use their HRA money on health plan deductibles, coinsurance, copayments, and other qualified out-of-pocket medical expenses.

This makes a GCHRA an excellent option for organizations wanting to save money on premiums by offering a high deductible health plan (HDHP). Instead of leaving your employees with a high deductible, a GCHRA can help them pay for their out-of-pocket expenses.

To make your integrated HRA budget-friendly, you can set your own allowance amount, outline allowable expenses for reimbursement, require an explanation of benefits for reimbursement, and more.

Like the ICHRA, you can set employee classes according to specific job-based criteria, such as full-time and part-time employees. This gives you extra flexibility and allows you to provide more comprehensive coverage.

Conclusion

A group health plan is an overarching term for many types of medical plans, including group health insurance policies and reimbursement plans like HRAs, which allow employers to reimburse employees for a wide range of qualified medical expenses.

Not only does offering a health plan benefit your employees, but it’s a sure way to help your organization stand out as an employer of choice. But before you update your employee benefits package, take some time to research your health coverage options to find out what will work best for your organization.

If you want to offer an alternative to group health insurance, PeopleKeep can help. Our HRA administration software can help you set up and manage your health benefits in minutes.

This article was originally published on March 13, 2020. It was last updated on July 1, 2024.

1. https://www.dol.gov/general/topic/retirement/erisa