- Medical insurance that is provided by an employer is commonly known as a "group health plan." This type of insurance is designed to protect employees and workers from unexpected medical costs if an unforeseen medical problem occurs. Because employer medical insurance is usually offered to a group of many employees, the cost of this coverage is typically lower than comparable individual coverage.
Not all employers provide medical insurance plans for their workers, and the laws regarding employee insurance coverage vary from state to state. Even when it is not legally required, however, employer medical insurance is often offered as an incentive or fringe benefit, and is useful in retaining quality employees.
- Several options are available for employers who offer medical insurance. Generally, these options vary based on how the coverage is paid for and delivered. In some cases, employers offer full medical insurance that is included with employment. With this option, employees do not pay any costs for the insurance, and employers pay for the entire policy out of their own pocket.
Another common option is for employers to contribute only a portion of the employee insurance cost. In this case, the company and its workers split the cost of medical insurance. This allows employees to purchase insurance at a reduced rate.
A third option for employers is to pass the full insurance plan cost on to the enrolled employees. With this approach, companies save a significant amount of money. Employees must pay for their insurance directly, but because group insurance can be purchased at a discount, the price is often less than the cost of individual insurance plans.
- Employer medical insurance plans have several advantages compared to other insurance types. One main advantage is the economy of scale involved when workers obtain insurance through a group plan, instead of individually. Many insurance companies are eager to sell plans to large groups of employees, and offer attractive prices in order to be competitive.
As second advantage of employer medical insurance is worker retention. By offering benefits such as health insurance, employers can attract and keep the best workers. As with insurance companies, competition between different companies to offer the most attractive benefits package can result in lower costs for everybody.
- Employer medical insurance does have a few disadvantages. Often, workers are limited only to the coverage plan that has been chosen by the employer. If a worker has insurance needs that are not covered by the chosen plan, they must purchase insurance elsewhere and lose the cost saving benefits of a group plan. Employees also lose their coverage if they change to a different job. This disadvantage is avoided if a worker buys insurance independently, instead of through an employer plan.
Employer medical insurance can be expensive for the company providing coverage, especially if coverage is paid for entirely by the business. Some small or struggling businesses may not be able to afford the prices of coverage, and choose to not to incur this extra expense.