At first glance, the terms “group health plan” and “group health insurance” seem the same. But in fact, they mean different things. Generally speaking, a group health plan is a broad term for all kinds of healthcare coverage, whereas group health insurance is a type of medical insurance policy for employees within a company or organization.
In this article, we’ll dive deeper into what group health plans and group health insurance plans are and how they differ.
In a rush? Skip ahead to a section below:
- What is a group health plan?
- What is group health insurance?
- What’s the difference between a group health plan and group health insurance?
What is a group health plan?
A group health plan is an umbrella term, encompassing a number of different kinds of employer-provided benefit plans that provide healthcare to members and their families. The plan is established or maintained by an organization that offers medical care to the participants directly through insurance, reimbursement, or otherwise.
Most private-sector group health plans are covered by the Employee Retirement Income Security Act (ERISA). Among other things, ERISA provides protections for participants and beneficiaries in employee benefit plans, known as participant rights, including providing access to plan information. Also, those individuals who manage the plans and other fiduciaries must meet certain standards of conduct under the responsibilities specified under the law.
Here are a few examples of ERISA plans that are considered group health plans:
- A group health insurance plan
- A self-insured health plan
- A self-insured medical reimbursement plan like a health reimbursement arrangement (HRA)
The most common type of group health plan is group health insurance, which is a type of medical insurance policy for employees or members of a company or organization.
What is group health insurance?
Group health insurance is also known as employer-sponsored health insurance. Group insurance health plans provide coverage to a group of members, usually a company or organization’s employees. Employees usually receive insurance at a reduced cost because the insurer’s risk is spread across a large group of policyholders.
These kinds of insurance plans can only be purchased by groups, making individuals ineligible for this type of coverage.
Although all group health insurance plans are different due to variations in costs, health insurance companies, group plan types, and plan specifications, they do have similarities.
Group health insurance plans typically share the following characteristics:
- Group medical insurance plans often require a 70% participation rate
- Members have the choice of enrolling in or declining health coverage
- Premiums are shared between the company and its employees
- Family members and dependents can be added to group plans at additional cost
Typical group health plans include health maintenance organization (HMO) plans and preferred provider organization (PPO) plans. While HMO plans have the advantage of lower premiums due to fewer providers within a specific network, they provide less flexibility in terms of how members can receive medical care.
PPO plans have greater flexibility and options for seeing doctors and specialists at the expense of higher premiums.
What’s the difference between a group health plan and group health insurance?
Simply put, a group health insurance plan is a group health plan, but a group health plan is not always a group health insurance plan.
A group health plan doesn’t provide insurance directly. Employers should make sure your group health plan includes either a group health insurance plan, self-insured health plan, or reimbursement plan so your employees have access to full health benefits. For employees who ordinarily would not be able to afford individual health insurance, a group health plan is an attractive benefit.
A group health plan is an overarching term for many types of healthcare plans, including group health insurance plans and account-based plans like HRAs that can be used to reimburse individual health insurance.
Getting a group health plan of any kind is beneficial for both you and your employees. Take some time to research your health insurance options to find out what will work best for your organization.
If you’re interested in an HRA for your organization, PeopleKeep can help! Schedule a call with a personalized benefits advisor today.
This article was originally published on March 13, 2020. It was last updated December 6, 2021.