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Who regulates employer group health insurance plans?


Many employer-based health insurance plans are fully insured by a health insurance company. This means the employer contracts with a health insurance company to provide its employees benefits, pays premiums for such coverage, and the insurance company assumes all claims risk. The states regulate fully insured group plans.

However, larger group health plans (usually several hundred employees or larger) may choose to either fully or partially self-insure their group benefit plans. This is also called self-funding. This means that instead of paying health insurance premiums to a company, the employer sets a pool of funds in reserve and assumes the risk for health benefit claims. Companies that self-insure generally buy what is known as a stop-loss insurance policy to protect the employer's assets against losses above a certain threshold. They also contract with either a third-party administrator or a health plan to administer benefits and handle claims.

Many employees of companies that self-fund coverage do not even realize that their plan is self-funded by their employer. Self-funded plans are regulated federally by the Department of Labor under the Employee Retirement Income Security Act of 1974 (ERISA), so they are sometimes known as ERISA plans. If employees are uncertain whether they are covered by a fully insured (and state-regulated) plan or a self-funded (and federally regulated) plan, they should ask their employer. 

A self-funded plan does not have to meet all of the insurance laws and requirements imposed by a state. If a state mandates coverage for a medical service or treatment, e.g., in vitro fertilization, a self-funded plan providing coverage to employees in that state would not have to provide the in vitro fertilization coverage.

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 states 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. Employers generally have to provide payroll tax documentation validating who is an employee.

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. In some states, continuation coverage mandated by the state may be more generous than COBRA. The benefit summary booklet provided by the employer may provide details about continuation coverage or who to contact for additional information.

Also, many people leaving group insurance for the individual market have group-to-individual health insurance portability benefits that are mandated by federal law. (Source: Nahu.org)

Additional Resources:

To learn more about San Francisco group health insurance, call 415-512-2100 today.

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