What is Group Insurance?

Michael Pollick
Michael Pollick

Group insurance is a health care coverage plan in which individual employees or members are included under one master policy owned by their employers. Because the plan has so many contributors, the policy often provides coverage for more services at a much lower cost per participant. This type of insurance may be provided by other organizations besides for-profit companies. Labor unions, churches and other service groups can also obtain group insurance for recognized members and possibly their dependents.

In most cases, people in an HMO must see their primary care physician and see other specialists who are in the organization.
In most cases, people in an HMO must see their primary care physician and see other specialists who are in the organization.

Individual members of a group insurance plan receive insurance certificates which demonstrate their eligibility for benefits. If the master policy held by the employer requires participation in an Health Maintenance Organization (HMO), then individuals are also registered as members. Other group policies may be associated with major medical groups such as Blue Cross/Blue Shield. A major medical policy may or may not restrict an individual's choice of primary physician and specialists. HMO policies often require a patient to use a specified physician, who must approve any visits to eligible specialists.

Group insurance typically covers emergency medical treatment.
Group insurance typically covers emergency medical treatment.

Financing for a group insurance policy is commonly a flexible payroll deduction, although some companies will absorb the entire cost of the policy as a benefit for employees. As with many insurance policies, however, the cost of premiums can rise significantly without warning. If a few participants receive expensive treatments for serious medical conditions, the rest of the group may have to absorb the higher premium costs over time. Group insurers don't always require physical exams before issuing a master policy, so some participants may benefit from treatments for pre-existing conditions.

Almost all group policies cover routine doctor's appointments.
Almost all group policies cover routine doctor's appointments.

Benefits from group policies can vary widely from company to company. Almost all policies cover emergency and routine medical procedures such as regular doctor's appointments and hospital treatment for accidents. Most cover extended care in hospitals or rehabilitation centers. However, the insurance may or may not cover the employee's spouse or dependents. Some offer assistance for vision care or dental work, but coverage may be limited to specific procedures. Mental health needs may also be covered under group insurance. Prescription drug expenses often fall under group benefits, but most likely with a co-pay provision. Under a co-pay plan, the covered individual must pay an established price out-of-pocket for name brand and generic medications.

Most group insurance policies cover extended care in hospitals or rehabilitation centers.
Most group insurance policies cover extended care in hospitals or rehabilitation centers.

Group insurance is definitely more affordable than a similar number of individual policies, but there are a few drawbacks. Some members find their choices of physicians and treatments very limited under an HMO insurance plan. Even major medical plans can restrict the list of approved physicians, often called the PMD (preferred medical doctor) policy. Employers who fear large increases in premiums may take an unusual interest in their employees' private health issues. Companies may suddenly implement stringent 'no smoking' policies or strongly encourage other preventative health care programs. Some may find this interest in their personal health to be intrusive.

Many employees see group insurance coverage as a major perk for faithful company service.
Many employees see group insurance coverage as a major perk for faithful company service.

Many employees see group insurance coverage as a major perk for faithful company service. The premium payments are usually deducted automatically and pay for themselves after one typical trip to the emergency room. Extended coverage for spouses and dependents also bring peace of mind and a feeling of security.

Benefits from group policies can vary widely from company to company.
Benefits from group policies can vary widely from company to company.
Under a co-pay plan, a person must pay an established out-of-pocket for medications.
Under a co-pay plan, a person must pay an established out-of-pocket for medications.
Many group health insurance policies also offer prescription drug coverage.
Many group health insurance policies also offer prescription drug coverage.
Michael Pollick
Michael Pollick

A regular wiseGEEK contributor, Michael enjoys doing research in order to satisfy his wide-ranging curiosity about a variety of arcane topics. Before becoming a professional writer, Michael worked as an English tutor, poet, voice-over artist, and DJ.

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Discussion Comments

anon990688

So is group health insurance generally offered through businesses or can you get them privately? I think that this would be a good option for me since I have twelve kids. It would cost a lot of money to get individual policies for each one of them.

anon344220

What does the cost of underwriting mean?

anon100063

The above definition is not a definition of "Group Insurance", but rather a definition of only one type of group insurance, specifically, group health insurance.

anon6020

what is group insurance & its types?

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