Group Health Insurance Basics

Many companies choose to offer health insurance coverage as a benefit to employees. If you are a business owner, or an employee of a business that offers group medical insurance, it's essential to understand the basics of how these plans work, who is eligible to participate, how premium contributions get addressed and what happens when you leave your job. Many facets of group health insurance differ from state to state, as the majority of regulation of the insurance industry occurs at the state level with minimal oversight by the federal government.

Eligibility

• Most states use the number of hours worked each week as the primary method of determining eligibility for participation in a group health insurance program. Only those employees whose average work week consists of at least the minimum number of required hours are eligible for the plan. Each state defines its own minimum number of work hours, and in most states the number is between 20 and 30. Any employee who works more than the required number of hours is eligible for coverage under the employer's group medical insurance policy, regardless of whether or not that employee is considered "full-time" or "part-time" by the company's definition.

Contributions

• Most states require employers offering group health insurance to share in at least a small portion of the premium. While every state's mandatory minimum employer contribution differs, the most common amount is 10 percent. For every worker participating in the group medical policy, the company must share some of the cost. Employers are free to contribute more than the minimum percentage and may discover advantages to doing so, but are not obligated to pay amounts above the state-mandated minimum contribution.

Participation

• Employers cannot institute or offer group health insurance programs unless a high enough percentage of the eligible employee population participates in the plan. The participation requirement ensures that an appropriate portion of the entire group enrolls in the plan, rather than only those employees in need of expensive medical treatment. In most states, the minimum number of employees required to deem a group eligible is 75 percent. If less than 75 percent of all eligible employees choose not to participate in the employer's health plan, and do not already have coverage elsewhere, then the entire group is prohibited from obtaining coverage.

Continuing Coverage

• Employees who lose their group medical coverage can usually arrange for those benefits to continue for a limited period of time. Depending on the specific laws of the state and the size of the group, health insurance continuation falls under federal COBRA legislation or similar state regulations. In either case, employees are permitted to maintain their health insurance plan until new coverage arrangements are made. Usually, continued coverage may remain in force for a maximum of 18 months, however, the entire cost of coverage falls on the terminated employee.