What is a Group Health Insurance Plan?

A group health insurance plan is one that provides discounted premiums and increased benefits based on the volume of people registering for the plan together. It differs from private insurance plans, which are those purchased by individuals for themselves and their immediate families. In countries that do not have government-sponsored health care plans, group plans are commonly sponsored by companies as part of an employee's benefit package.

Group health insurance plan premiums are usually less expensive than premiums for private insurance plans. The co-pay amount that the subscriber must pay for services is usually lower in group plans than in private plans as well. In addition, the amount covered by insurance is usually higher in group plans than in private plans. Patients with group plans may also have access to a larger network of medical providers.

The difference in price and coverage is due largely to agreements that the insurance company can make with healthcare providers based on volume enrollment. Another factor is that it costs the insurer less to administer one plan with many subscribers than it does to administer several plans with one subscriber each. Further, insurers often discount their portion of the fees because group plans provide them with a larger revenue base than do private plans.

When an employer company is the sponsor for a group health insurance plan, it often pays a portion of the monthly premium for each employee. The amount of the employer contribution varies from company to company, but most contribute at the same level for every full-time employee in the organization. In some locations, this equality of contribution is legally mandated. Plans may be offered only to the employee, but many companies also offer plan options that include spouses and children as well.

A group health insurance plan need not be sponsored by an employer company. Almost any formally-organized group can become a group plan sponsor as long as it is a legal entity, and it has a formal membership list. Entities such as unions, social organizations and professional organizations often offer group plans to their members.

In some locations, group health care plans are so common that many insurers no longer offer private insurance. These insurers prefer to focus on the quantity and consistency that offering group plans provides. Most insurers require sponsors to enter into a contract for one or more years in order to guarantee the discounted pricing.