Define Group Health Insurance

Health insurance is a type of policy that provides payment for a portion of major medical expenses. These policies can be purchased individually, but the National Association of Health Underwriters claims that, "the majority of Americans have group health insurance coverage through their employer or the employer of a family member." While the basic function of group health insurance is the same as individual health insurance, several differences clearly define a group policy.

Multiple Insured People

• The most basic defining feature of group health insurance is the fact that multiple unrelated people are insured under the same plan. Group health insurance is made available to an organization's employees, members, or owners and their families as well.

Required Participation

• Group health insurance plans have participation requirements. Every state has its own regulations regarding the level of participation required, and the percentage of enrolling employees typically ranges from 60 to 75 percent.

Required Contributions

• Cost-sharing requirements on the part of the sponsoring group is another defining feature of group health insurance. Employers who offer plans to workers are usually obligated to contribute a portion of the premium every month, yet the amount varies from state to state. The most common employer-required contribution is 10 percent of the employee's cost.

Lower Premiums

• Lower premiums, when compared to comparable individual plans, are a major defining characteristic of group health insurance policies. Because insurance companies can spread risk across a larger group of insured people and pool premiums to pay claims, the per-person premium is often significantly lower than an identical plan purchased individually.

More Comprehensive Coverage

• Group plans provide more comprehensive coverage than what is often available on an individual basis. Health insurance premiums, already expensive, would be dramatically higher if the same benefits were offered individually because the insurance carrier is unable to pool premiums and spread risk with individual policies. While more comprehensive coverage options are not necessarily a defining factor of group health plans, they are certainly a feature of group coverage that clearly separates the two types of policies.