What Is a Group Health Plan?

A health plan is a type of health insurance that insurers offer to cover the costs of individual health care. Like other types of insurance, group health plans require a monthly fee, or premium, that allows the insurance company to profit. These plans have deductibles and limits like other policies, but tend to offer policyholders fewer choices than many types of insurance. This is partly because group plans are designed to be administered to a number of different people equally.

Definition

• A group health care plan is known as a welfare benefit plan. This means that it is a type of incentive designed to help care for employees. Incentives are used to attract employees to a business and provide for their basic needs. Health care plans cover employees that work for an organization, and many extend coverage benefits to spouses and dependents, such as children, allowing employee families to save money on health and related expenses. These plans do not cover vision or dental costs, which are separate incentives.

Sources

• Group health plans are typically offered by two different organizations. The first organization is the employer company, which choose a health care plan to apply to its workers. The second is a union, which often provides worker benefits like health insurance in highly unionized industries. In both cases the insurance company and provider organization work out a contract to determine what kind of health insurance to offer. Organizations must pay fees for group health care, but insurance companies often offer discounts or cost-effective programs for large corporations. Smaller businesses may struggle to afford group health plans.

Rights

• Employees have a number of protected rights under group health plans. Some are clear -- for instance, employees have the right to all the information regarding the health plan and its specifics. Others ensure that the business offers health care to all employees equally, although some businesses can legally manage two types of health care plans that apply to different sets of employees, such as executives and lower-rung employees. Employees also have the right to a fair process for claims and the right to temporary continuance of health insurance if they lose their jobs.

Features

• Through competition, insurance companies and employers have developed several additional features for health plans that offer more flexible choices for employees. A common addition is a health savings or a flexible savings account, which allows the employee to store money in the account for medical expenses while receiving a tax benefit for all money stored. Sometimes businesses will even contribute to such accounts themselves.