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Friday, April 19, 2024

How Do You Calculate Group Health Insurance Premiums?

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Premiums and risks are correlated in health insurance since the premium is directly influenced by the risk covered. But several other factors also play a role in deciding the premium for a particular health insurance policy. In this post, we will focus on group health insurance plans and learn how the premiums are calculated when an employer offers it to cover their employees. 

What Is Group Health Insurance, And How Does It Work?

Group health insurance plans provide coverage to a group of members, usually company employees or members of an organization. These members receive insurance at a reduced cost due to the insurer’s risk spreading across policyholders. These plans are mostly purchased by companies and organizations and offered to employees. Individuals cannot buy the plans as they are only for a group of people and require at least 70% participation in the program to be valid. These plans differ based on plan types, insurers, costs, terms, and conditions. 

After a plan is chosen, the group members will be given the option whether to choose the coverage or not. Sometimes, the plans also come in tiers in which the insured parties can take basic or advanced coverage with add-ons. The group’s health insurance premiums are split according to the plan between the organization and its members. The insurance coverage can also be extended to the immediate family and other dependents of the group members but with extra costs. The cost of such plans is much lower than individual health insurance plans. Here are the factors on which the group health insurance premiums depend. 

Type Of Job

While some jobs are risk-averse, others have a huge element of risk involved. Hence, the type of job plays a major role in deciding the insurance premium. The higher the risk involved in the job, the higher the premium required to insure them. So an employer who has a manufacturing company will pay a higher premium than someone who owns an advertising company due to the huge difference in the risks associated with both types of jobs. 

People Covered By The Insurance

The coverage of group health insurance plans can be widened concerning the people covered by the policy. Some policies cover employees and immediate family members, while others cover in-laws. So the premium for an insurance plan that covers the employee, their spouse, and parents will be less than the one that covers the employee as well as their spouse, parents, and parents-in-law. 

Average Age

This is another factor that influences the insurance premium. This factor is also associated with ascertaining the risk. Since young people have better immunity and most are not yet diagnosed with chronic illness compared to other generations, they pose fewer health risks. Hence, their premium will be slightly lower. So the average age of the employees in a company will be determined for deciding the insurance premium.

Sum Insured

This is the monetary limit to which the insurer can cover the health-related expenses of the employee. The sum insured can be discussed and selected by the employer and insurance company, and this amount will apply to all employees. The higher the sum insured, the higher will be the insurance premium. 

Add-on Covers

Generally, there is a standard group insurance policy offered to employees. And if the employer wants to enhance the policy’s coverage, they can pick suitable add-on covers. This may increase the premium of the employer-provided group health insurance plan. Some popular add-on covers include consumables, OPD coverage, etc., so if a company is offered a policy with standard coverage, the employer increases the range by adding the OPD cover to the standard coverage. Then this premium will be more than what it should have been if the employer had chosen the standard one. 

Type Of Coverage

Group health insurance plans cover individuals working in an organization and are easily customizable based on your every need. You can pick a plan for top-level management and another for middle-level employees. These plans will have different premiums and add to your costs. The more dependents you add, the higher the price will be.

Claim history

This is another consideration when determining the premium of a group health insurance plan. If several claims are raised during the policy period, the insurer may likely revisit the chargeable premium when renewing the policy. If a company has raised more premiums during the policy period, the premium may be increased based on past claim history.

To conclude

Remember that there is no discounting the significance of a group insurance health for your employees. A good group insurance plan will cover the employees and the family members, offer a decent sum insured, and come at an affordable rate. The best group health insurance plan will include all the above points and provide hassle-free claims as well as extra features and services. 

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