Group Health Insurance Rules

Group health insurance rules vary slightly from state to state, although there are basic national standards that provide some uniformity. Self-insured group health plans differ in that they are not regulated by the state. This type of group health insurance is regulated at the federal level. Self-insured is also referred to as non-insured since it is not insurance purchased through an insurance company.

Small Group

• Small group health insurance rules apply when there are between two and 50 employees. Employers that fall into this category cannot be turned down by health insurance companies for group coverage regardless of the medical history of the employees. Small group employers who offer health insurance must also offer the insurance to all employees. There can be no discrimination based on preexisting conditions.

Large Group

• Large group health insurance rules apply when there are more than 50 employees. Health insurance coverage eligibility for the group is determined through medical underwriting based on the group's medical claims. A health insurance company may accept or deny coverage for the group. Large group employers may not, however, deny insurance coverage to an individual employee based on that employee’s medical history.

Self-Insured Group

• Self-insured group health plans are offered by large group employers who choose to manage and pay their employee’s health care claims rather than purchasing group coverage through an insurance company. Health care costs are paid from a pool of funds that are set aside for this purpose.

  The coverage offered is at the discretion of the employer. The same benefit package must be offered uniformly to all similar employees without discrimination. Employers are required to give each enrollee a summary plan description which outlines the coverage, the rights of the enrollee and any other pertinent information about the plan including instructions for disputing a claim denial.

Preexisting Condition

• Any condition that the employee was diagnosed with, received treatment for or should have received treatment for prior to the new coverage application date is considered a preexisting condition. The insurance company providing group insurance may enforce a wait period on coverage for treatment related to any preexisting conditions.

  Federal law limits how far back an insurance company can look into the employee’s medical history to six months and the wait period to 12 months. However, individual states may impose shorter limits. Group insurance companies must reduce the waiting period for enrollees who had health insurance within 63 days prior to the date of new coverage application.

COBRA

• COBRA (Consolidated Omnibus Budget Reconciliation Act of 1986) requires employers to offer continuation of health insurance coverage when an employee covered by the employer’s group health plan quits or is terminated for any reason except in the case of gross misconduct. This law applies to employers with more than 20 employees who offer group health insurance benefits. The premiums for COBRA coverage are paid in full by the insured. The extended term of coverage is 18 months but may be extended under certain circumstances such as a disabling event.