 Personal Finance PowerPoint Presentation, Group Health Insurance, prepare to get financially fit by practicing personal finance. Insurance fits into our long-term risk mitigation strategy where we use the adage of measure twice, cut once, having a formal strategy, looking something like this. We're gonna set the goals, we're gonna develop a plan, we're gonna put the plan in action, and then we're gonna review the results and repeat periodically. We're now looking into health insurance. Most of this information can be found at Investopedia, Group Health Insurance, which you can find online. Take a look at the references, resources, continue your research from there. This is by Julia Kagan, updated July 6th, 2021. What is a Group Health Insurance Plan? Group Insurance Health Plans provide coverage to a group of members usually comprised of company employees or members of an organization. So typically, of course, we're talking about groups here, groups typically being from employees of a company or possibly from another organization. The benefit of the group plans would be that you might get a beneficial group right from it. So Group Health members usually receive insurance at a reduced cost because the insurer's risk is spread across a group of policy holders. So the rationale behind this from the insurance perspective would be that if I could get more information, know more about the group or policies holders that I have and I have more people involved, I might be able to lower my potential risk. And as the risk is lowered, then you might be able to get lower premiums involved. That means lower costs, of course, to the purchasers. So there are plans such as these in both the United States, the U.S. and Canada, how Group Health Insurance works. Group Health Insurance Plans are purchased by companies and organizations and then offered to their employees, their members or employees. So clearly we're talking about the group, oftentimes being a company that would then get the group plan and offer it to the employees. Plans can only be purchased by groups, which means individuals cannot purchase the coverage through these plans. So if you, usually when you're looking for insurance, that's one of the reasons that oftentimes your first thought would be, well, can I get it from my employer because they might have other options available, including Group Plans and possibly tax incentives for that to be the first place to go. So plans usually require at least 70% participation in the plan to be valid because of the many differences, insurance insurers, plan types, costs, terms and conditions between plans, no two or ever the same. So clearly they're gonna be different depending on the particular plan for the particular group. So once the organization chooses a plan, group members are given the option to accept or decline coverage. So clearly they're not requiring the members of the corporation, for example, to be part of the group coverage, but they're gonna get the plan in place and see if people want to be participating in it. Many people clearly would because usually if you can get those beneficial rates, it would be favorable to both sides of the transaction, the company, the employee as well as the insurance company. So in certain area plans may come in tiers where insurer parties have the option of taking basic coverage or advanced insurance with add-on. So depending on how complex the coverage you have is, there might be multiple tiers within the group plan. The premiums are split between organization and its members based on the plan. Health insurance coverage may also be extended to the immediate family and or other dependents of group members for an extra cost. So if you're part of a group plan, it's tied through the work. You might be saying, what about the members of my family? And you may be able to get them involved in it as well. The cost of group health insurance is usually much lower than individual plans because the risk is spread across a higher number of people. That's one of the points. If you can get that group policy, it could be beneficial to the insurance provider because they can lower risk, might be able to pass some of that lower risk onto the people purchasing the policy in the terms of the premiums beneficial to the company, the employee and the insurance company. So simply put, this type of insurance is cheaper and more affordable than individual plans available on the market because more people buy into the plan. History of group health insurance. Group health insurance in the United States originated during the 20th century, the idea of collective coverage first entered into public discussion during World War I and the Great Depression. So we had the Great Depression and World War I, which was obviously a tough time at that point. And there were many strategies that were put in place to deal with the problems of the Great Depression, a lot of top-down kind of strategies, most of which didn't really go through, but it seems like they were just kind of throwing a lot of laws out there. And then some of those laws have stuck until this point in time. So soldiers fighting in World War I received coverage through the War Risk Insurance Act, which Congress later extended to cover servicemen's dependence. In the 1920s, healthcare costs increased, healthcare costs increased to the point that they exceeded most consumers' ability to pay. The Great Depression exacerbated this problem dramatically, but resistance from the American Medical Association and the life insurance industry defeated several efforts to establish any form of national health insurance system. So you've got this same kind of arguments that we can see today with regards to healthcare in terms of is it something that we can make run by the government possibly or nationalize it in some way versus having more kind of market conditions within it. And oftentimes when you hear these kind of arguments that meaning we want a more top-down kind of government-organized system as opposed to a market-based system, then it often stems from places of when there's problems, like in the Depression and during wartime, because during those times, you often have the top-down control that's necessary in order to recalibrate people's efforts towards a war effort. In a war, you need a top-down kind of system oftentimes because it's an emergency type of situation. So a lot of the laws that were put in place during that time, people look back on it if they like the government kind of control stuff. They look at it with nostalgia, saying look how everything worked good during those times when we had that, everybody was on the same page and doing the same stuff. But of course, one of the reasons those worked during that time is because we were trying to win the war. So when you have those same policies in a non-war kind of situation, you have the same kind of top-down regulatory control. People behave differently. So it's kind of an interesting dynamic. With regards to the Medicare system, whether we're gonna nationalize it, whether you can come up with some kind of national system, you have the same kind of problems you have with other kinds of industries. It's just that they're more pronounced when in the medical system. So if you have a market-based system, for example, the people that can't afford the appropriate amount of healthcare is very clear and everyone can see, well, that's a tragedy, that's a problem. But if you move it to a completely run by the government system and you remove the market forces on the system, then it's quite likely, as we would see the normal result from an economic standpoint, is that you lose the market forces and the industry becomes less efficient. So you might actually be able to give service to less people as there's kind of a decline or at least not as much of an increase in the advances of the healthcare system. So the more competitive system that we still have in the US, for example, does lead us to be able to come up with vaccines and that kind of stuff, possibly faster than other countries that have more of a top-down kind of system. So the question would be then, how could you still have a market system or use the good things in the market forces so that it will actually drive innovation and be able to service more people like markets do while still being able to provide coverage that would be necessary on a wide scale and obviously those kind of debates continue ever forward. So this opposition would remain strong into the 20th century. So employer-sponsored group health insurance plans first emerged in the 1940s as a way for employers to attract employees when wartime legislation mandated flattening wages. So you can see once again during the war and during depression time, during the 1930s, you had all these laws that were in place. Many economists think that a lot of them were not good in the long run, but some of them kind of stuck around. You could see what the results would be. If you try to flatten someone's wages, you say there's a cap on wages, we can't put more wages in because we need that money going somewhere else or something like that. Then people will still, under normal conditions, try to pay good employees better because they want the good employees. So the good employee is not gonna say, well, I'm just gonna work for anybody because everybody is gonna pay me the same. They're gonna work for the people that treat them better with benefits and other kind of things. So then you got these benefits, these benefits being something like the health insurance, for example, another form of pay, another way to pay someone that's under the regulation. So this was a popular tax-free benefit which employers continue to offer after the war's end, but it failed to address the needs of retirees and other non-working adults. Federal efforts to provide coverage to those groups led to the social security amendments of the 1965, which laid the foundation for Medicare and Medicaid. So you can see how this all kind of builds together from that point in time where there was a lot of issues going on, of course. So benefits of the group health insurance plan, who are the benefits? The primary advantage of a group plan is that it spreads risk across a pool of insured individuals and that risk spreading could lower the risk to the insurance company, lowering the cost of the premiums. This benefits the group members by keeping premiums low and insurers can better manage risk when they have a clearer idea of who they are covering. So insurers can exert even greater control over costs through health maintenance organizations. Those are the HMOs in which providers contract with insurers to provide care to members. So the more control they have in that instance to know who's involved in the medical process and decision-making in their opinion lowers the risk and then possibly they can lower the premiums there. The HMO model tends to keep costs low at the cost of restrictions on the flexibility of care afforded to individuals. Then we have the preferred provider organizations. These are the PPOs in contrast to the HMOs offer the patient a greater choice of doctors and easier access to specialists who tend to charge higher premiums than the HMOs. The vast majority of group health insurance plans are employer-sponsored benefit plans. So that's why typically when we think of health insurance we typically think of the employer first to see if we have coverage there because that might be the most beneficial place we have the capacity to get coverage from. It is possible, however, to purchase group coverage through an association other organization. Examples such as plans include those offered by the American Association of Retired Persons, the AARP. So if you don't have access from an employer you might be saying, well, what other groups can I look into that might give me a group plan? So they got the AARP, the Freelancers Union and the Wholesale Membership Clubs. Insurance options for uninsured individuals. Not everyone is covered by a group health insurance plan for many decades these uninsured people were forced to bear the cost of healthcare on their own but that has changed. Government-sponsored health plans continue to provide care to those left out of employer-sponsored group health insurance plans as national health expenditures have climbed past 17.7% of GDP gross domestic product, the Affordable Care Act of 2010 substituted a nationwide mandate that each taxpayer joined a group plan for this sort of single payer solution that has faced stiff opposition since the 1930s. So this is another way to try to think about well, how can we get some government intervention or some rules and regulations here to try to spread healthcare over a broader range? One of the ideas would be that, and this becomes quite complicated, but one concept would be well, healthcare has a free rider kind of problem which is an economic term which basically says that the people that opt out of healthcare because we still wanna provide a minimum of health services to people. In other words, if you go to the emergency room and you need care and it's an emergency, then you're still gonna get some level of care. Generally, it would be the general idea and if they don't have coverage, then of course no one's paying for that care. There's a free rider problem. So if people decide not to opt into the healthcare system, they still get some level of care in general just the way the system is set up and therefore the people that are paying into the healthcare system are basically picking up that coverage. So the argument would be well, what if we can kind of force everybody to get some minimal level of care or some minimal level of insurance then you would eliminate the free rider problem and because everybody's paying into the system then it could lower the health insurance overall and have more people that would be covered into the system. So you can try to get everybody into one big pool because from an insurance standpoint, if the pool was bigger, you'd lower the risk and then you'd be able to cover more people at a lower cost and you can eliminate the free rider problem. But there's a lot of issues that came up with regards to that one being, is it legal for you to force someone to purchase insurance? Because that seems like something that might be unconstitutional, it was argued possibly and then it seems like a lot of kind of control situation from all the way up on the federal side of things. So there's a lot of complexity that would be involved in that. So there's gonna be, there's some back and forth with that argument, you can see the argument in the pros and cons of it. According to government data, roughly 23 million Americans are taking advantage of health insurance under the ACA according to the most recent set of numbers from the 2019 under the Obama administration. People who remained uninsured under the ACA were required to pay at health insurance mandate. So this was repealed by the Trump administration which stated it penalized people unnecessarily. So in other words, if you're trying to get everyone that's gonna be on the health insurance to pay some form of health insurance so that you don't have the free rider effect, well, how do you do that? First, you got the problem of, well, is it gonna be a government mandated thing that you're required to do because that might be unconstitutional, maybe was the argument. And then two, well, how would you enforce it? Well, you could try to penalize people on their taxes to force them to do that. And then the question, well, is that a tax or is that a penalty? Is that legal with regards to the tax code? And so the argument, you know, the debate continues. Example of group health insurance. UnitedHealthcare, a division of UnitedHealthGroupUHC is one of the nation's largest health insurers. It offers a buffet of group health insurance options for all types of businesses. Include our medical plans and specialty supplemental plans, such as dental, vision, and pharmacy. Small business plans are available in most states for companies with one to 99 employees. In addition to its proprietary plans, UnitedHealthcare offers federally sponsored marketplace options, small business health options. That's the shop SHOP for small businesses. In exchange, some employers qualify for the temporary small business tax credit up to 50%. Mid-sized businesses with between 100 and 2,999 employees have various options available, including bundles. Large businesses with 3,000 or more employees qualify as national accounts, which have more services and healthcare features, including the ability to customize plan offerings. What is a group health plan? Group health plans are employer group sponsored plans that provide healthcare to members of their families. The most common types of group health plan is group health insurance, which is health insurance extended to members, such as employees of a company or members of an organization. What is a group health cooperative? A group health cooperative, also known as Mutual Insurance, is a health insurance plan owned by the insured members. Insurance is offered at a reduced cost and what they collect from members is based on claims paid. The cost of care is spread out across the insured population. How many employees do you need to qualify for group health insurance? Many group health insurers offer plans to companies with one or more employees. The type of plan available, however, may vary according to the size of the business. For example, UnitedHealthcare provides various plans for small businesses with one to 99 employees, mid-sized businesses with 100 to 2,999 and large employers with 3,000 or more employees. What are group health insurance benefits? Group health insurance plans offers medical covers to members of an organization or employees of a company. They may also provide supplemental health plans such as dental, vision and pharmacy separately or as a bundle. Risk is spread across the insured population which allows the insurer to charge low premiums and members enjoy low cost insurance which protects them from unexpected costs arising from medical events. How much does group health insurance cost? The average group health insurance policy costs a little more than $7,400 for an individual annually with employers paying approximately 80% of the employees 80% and the employees paying the difference. Family coverage averaged slightly more than 21,000. Bottom line, group health insurance plans are one of the most affordable types of health insurance plans available because risk is spread among insured persons. Premiums are considerably lower than traditional individual health insurance plans. This is possible because the insurer assumes less risk as more people participate in the plan for employees who ordinarily would not be able to afford individual health insurance. It is an attractive benefit.