Group insurance overview

Group health insurance is a single policy that covers multiple people. It’s typically offered through an employer or another legitimate (natural) group. The insurer issues one master policy to the group sponsor, and each covered person receives a certificate confirming their coverage.

Group insurance is usually more affordable than individual coverage because eligibility is based on group membership rather than individual risk. Many plans also allow dependents to be covered.

Key features of group insurance

• One master policy covers all participants

• Participants receive certificates of coverage, not individual policies

• The employer or group sponsor acts as the policyholder

• Dependents can often be included under the employee’s plan

• Eligibility rules and probationary periods may apply

Natural groups vs. fictitious groups

A natural group exists for a legitimate reason other than obtaining insurance, such as employment or professional affiliation. These groups can qualify for group coverage.

A fictitious group is formed solely to buy insurance. Because it doesn’t exist for a legitimate purpose beyond insurance, it isn’t eligible for group insurance plans.

Eligibility for coverage

To join a group health plan, a person must be a valid member of the group - typically a full-time employee. Employers often impose a probationary period before coverage begins. Some plans also require the employee to be actively at work on the effective date.

Group eligibility rules

Eligible group sponsors include:

• Employers
• Labor unions
• Trade or professional associations
• Creditor/debtor groups
• Bona fide associations (which must exist for a legitimate purpose beyond insurance, be in existence for at least two years, and serve a common interest)**

Employee eligibility

Employers may tailor coverage to specific employee groups. Plans may:

• Be limited to full-time employees
• Include part-time employees working a minimum number of hours (e.g., 20 or 30 per week)
• Require employees to be actively at work on the day coverage begins

Dependent coverage

Most group health plans allow insured members to add eligible dependents, including:

• Spouses
• Children up to age 26, regardless of student or marital status
• Permanently disabled children who rely on the insured for financial support*

Certificate of coverage

Each insured person receives a certificate that summarizes benefits, coverage limits, and how to file claims. The certificate isn’t the insurance policy itself. Instead, it serves as proof of coverage under the group’s master contract.

Lesson summary

Group insurance provides a single master policy to a qualified group, with individual members receiving certificates of coverage. The group must be legitimate, and eligibility rules may include probationary periods and full-time status. Dependents can often be included in the coverage**.**

Chapter vocabulary

Definitions

Bona Fide Association

A qualifying group that meets legal standards to offer insurance to its members.

Certificate of Coverage

A summary document showing that the individual is insured under the group policy.

Dependent Coverage

Health coverage extended to an insured person’s spouse, children, or other eligible dependents.

Eligibility Rules

Standards set by the employer or plan sponsor to determine who qualifies for coverage.

Fictitious Group

A group created solely for the purpose of obtaining insurance; these are ineligible.

Group Insurance

A single policy that covers multiple individuals under one contract issued to a group sponsor.

Master Policy

The official insurance contract issued to the group sponsor.

Natural Group

A group formed for a legitimate reason other than obtaining insurance.