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, how they differ, and how you can leverage a health reimbursement arrangement (HRA) to help your employees save on their healthcare costs regardless of which type of health benefit you choose.
Learn how an integrated HRA can supplement your group health plan
What is a group health plan?
A group health plan is an umbrella term for many types of employer-provided benefit plans that cover the cost of healthcare for employees and their families. The plan is established or maintained by an organization that offers a medical benefit to its participants directly through insurance, reimbursement, or otherwise.
The Employee Retirement Income Security Act1 (ERISA) covers most group health plans in private industries. 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 is terminated.
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 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, also known as employer-sponsored health insurance, offers coverage to a group of members, typically a company’s employees and their eligible dependents. These insurance plans can only be purchased by groups, making individuals ineligible to enroll in this type of medical coverage on their own.
Although all group health insurance plans differ due to factors like cost variations, health insurance companies, network types, and plan specifications, they 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
- Eligible employees receive insurance at a reduced cost because the insurance provider’s risk is spread across a large pool of people or policyholders
- Premium costs are shared between the company and its employees
- Due to the Affordable Care Act (ACA), participants can no longer be denied coverage or receive higher premium rates due to health status and pre-existing conditions
- Family members and dependents can be added to group plans at additional 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. Providers, covered services, and the cost of health insurance will vary based on plan type.
For example, HMO plans have the advantage of lower premiums due to fewer providers within a specific network, but they’re less flexible regarding how members can receive medical care.
PPO plans have greater flexibility because employees generally aren't required to select a primary care provider (PCP) and can see any doctors or specialists within their network without a referral. But they typically have higher premiums than other plans.
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 necessarily provide insurance directly. Employers should ensure their group health plan includes a group health insurance plan, self-insured health plan, or reimbursement plan so their employees have full health benefits.
Offering a health benefit, like a group health insurance policy, is an attractive perk in today’s competitive job market. They can come with many advantages, like tax benefits and coverage for medical care, which can be costly to receive if an employee is uninsured. And for employers, offering a health benefit is a great way to attract and retain employees.
If you decide against offering a group health plan, you can still offer a health benefit.
If you’re a small business owner with fewer than 50 full-time equivalent employees, a qualified small employer HRA (QSEHRA) is a great option to provide a personalized health benefit for your employees where they can be reimbursed for their individual health insurance premiums and other qualified out-of-pocket expenses.
The individual coverage HRA (ICHRA) works similarly but is available for employers of all sizes.
How you can use an integrated HRA to supplement your group health insurance plan
If you want to go with a group health insurance plan, consider supplementing it with an integrated HRA for even more 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 be used with group plans, not individual plans.
While employees can’t receive reimbursements for their group plan’s monthly premiums, they can use their HRA money on deductibles, coinsurance, copayments, and other qualified out-of-pocket medical 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.
For added flexibility, you can set employee classes according to specific job-based criteria, like full-time and part-time employees. This allows you to give different employees different allowance amounts for extra personalization.
A group health plan is an overarching term for many types of medical plans, including group health insurance plans and reimbursement plans like HRAs that can be used to reimburse individual health insurance plans.
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 benefits package, take some time to research your health benefit options to find out what will work best for your organization.
If you want to offer an HRA at 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 on May 1, 2023.