How Does Health Insurance Work Through an Employer?
Your salary isn’t the only benefit of working for a company. Many employers offer benefits, including health insurance coverage. While it might not seem like a large benefit, if your employer covers any portion of your health insurance premiums, or you can get a better policy because you’re covered with a group, it could be worth thousands of dollars to you in the long run.
No one can predict what will happen to them medically. If you had a heart attack, for example, the costs could be as high as $1 million for treatment, depending on the severity of the heart attack.
Insurance can protect you financially and help you focus on getting better, not your financial troubles.
What is Group Health Insurance?
Group health insurance is coverage for the entire organization and their dependents. When you have a group policy, you don’t have to be individually underwritten. In other words, to qualify for the insurance, you just have to be an employee of the company.
The insurance company won’t make you complete an application and undergo medical testing to see if you qualify for insurance like you would if you were getting a policy on your own.
However, you aren’t in control of the insurance company or insurance policies. The employer chooses the company and the policies. However, they may offer some options for employees and their dependents, such as a PPO and HMO option.
Insurance Options through an Employer: PPO vs. HMO
The two most common health insurance plans are PPO and HMO. PPO policies are more flexible. For example, you can see any provider in the network, and you don’t have to see your primary care physician before seeing a specialist. In addition, there aren’t any referrals required.
On the other hand, HMO policies have a smaller network and require all patients to have prior authorization before seeing a specialist. In addition, HMO plans have lower costs because the organization restricts what you can do. So the tradeoff is a smaller network and less freedom in your medical choices for a lower premium and deductible.
Understanding Open Enrollment
You can only enroll in employer-sponsored health insurance when you’re initially eligible and during open enrollment.
Your employer should tell you when you become eligible for health insurance when you’re hired. Some companies offer the benefit immediately, and others make you wait until you’ve been with the company for three to six months.
Pay close attention to when you’re eligible because you typically have a short window to opt into the insurance.
Each year, employers have an open enrollment period too. It usually occurs at the same time each year. During this time, anyone can change their insurance coverage or get it for the first time. Some companies require everyone to re-enroll in their insurance plan during open enrollment to confirm that everyone has the policy that works best for them.
What are the Benefits of Group Health Insurance?
Having group health insurance has many benefits, including:
- Lower premiums – Employers often cover a portion of an employee’s insurance. Some employers cover 100% of the cost. This usually doesn’t apply to coverage for dependents, though. However, any help with premiums lowers your cost.
- More coverage options – Most group health insurance plans offer coverage for things private insurance doesn’t cover, such as mental health or chiropractic costs.
- Less work – When your employer provides your health insurance, you don’t have to do a lot of research and compare plans. You typically have two options, a PPO and HMO, but with the same company, it’s a lot easier.
What are the Disadvantages of Group Health Insurance?
Like any insurance policy, there are downsides to group health insurance you should consider including:
- You only have coverage while employed – If you get fired or quit your job, you lose your health insurance. You may have the option to continue it under the COBRA Act, but you are responsible for 100% of the premiums, which increase with COBRA.
- The coverage isn’t personalized – Your employer decides which coverage options they’ll include in the coverage. You don’t have a say and could even pay for benefits you don’t need, such as maternity benefits.
Are Employers Required to Provide Health Insurance?
The passing of the Affordable Care Act made it mandatory that employers provide health insurance if they have over 50 employees. However, small companies that employ fewer than 50 people aren’t required to provide health insurance coverage.
You can get affordable group coverage through the marketplace if your employer doesn’t offer health care coverage.
If your employer offers health insurance, consider taking it. Even though the premiums reduce your pay, your employer takes the funds pre-tax. So paying health insurance through your employer reduces your taxable income, and most employers cover at least a portion of the premiums, saving you even more money.