The majority of Americans have group health insurance through their employer or the employer of a family member. Group health insurance coverage is a policy that is purchased by an employer and is subsidized to eligible employees of the company (and often to the employees' family members) as a benefit of working for that company.
Are all employer group health insurance policies the same?
Health insurance is regulated at the state level of government, therefore is issued differently for different types of employers depending on size of the company, and can vary significantly from state to state. The laws about how coverage can be issued to large groups (which are generally more than 50 employees) are different than those for small groups, and the way that premium rates are determined is also different. The requirements for sole proprietors purchasing health insurance coverage also vary on a state-by-state basis.
Coverage requirements for small employer plans
No matter what pre-existing health conditions small employer group members may have, federal law mandates that no individual employee can be turned down by an insurance company for group coverage. This requirement is known in the insurance industry as "guaranteed issue."
In most states, small employer health insurance companies are allowed to look back at individual group applicants medical histories for pre-existing conditions and may decide not to cover certain conditions for a specified period of time. This is known as an exclusionary, or a pre-existing condition, waiting period; usually lasting no more than six months. Small group insurance companies are also required to give employees credit for prior coverage against any pre-existing condition waiting period that might have been imposed, as long as the employee had other health insurance coverage within 63 days of the application for a new coverage plan.
Coverage requirements for large employer groups
Large group health insurance contracts, unlike small group health insurance contracts, do not have to be offered on a guaranteed-issue basis, so a health insurance company could reject an entire large employer group based on its claims history. However, no individual employee who is eligible for benefits can be excluded from large group coverage based on medical history. If a company issues a policy to a large employer, then all of its eligible employees must be issued coverage. Federal law also requires health insurance companies to give employees credit against any exclusionary period for pre-existing conditions if they have had prior health insurance coverage within 63 days of obtaining the group coverage from the large employer.
Is employer group health insurance available to sole proprietors?
Some states define a small employer group as those that have 1-50 employees, but most require companies to have at least two employees to qualify for group coverage. Insurance companies and the individual states often have specific and strict requirements for very small employer groups to document that they actually are legitimate businesses and have the appropriate number of eligible employees to prevent fraud.
The states that allow sole proprietors to purchase group coverage are often referred to as states that guarantee coverage for "business groups of one." In some of these states, business groups of one are treated in the same manner as larger employer groups. In others, they are treated as their own distinct pool and rated separately by the health insurance companies. In the states that do not allow for sole proprietors to purchase group coverage, these business owners often purchase individual health insurance coverage.
What rights do I have if I lose access to my employer group health insurance coverage?
Millions of people who lose their group health insurance coverage due to a job change, divorce, job loss or other reason are able to keep their group coverage, at least temporarily. Most people who are able to continue their group health insurance benefits are eligible to do so according to the federal Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). However, COBRA does not apply to all employers, and many states have mandated other continuation-of-coverage options for people who are not covered by COBRA.
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