Medical Expense and Group Health Insurance
Group mechanics
The employer, union, or association holds the master policy and issues certificates to members. The group, not the individual, is underwritten using group size, industry, average age and sex, location, participation, and the employer's contribution. Noncontributory plans usually require 100% participation; contributory plans commonly require 75% of eligible employees. New employees may face an eligibility waiting period and must be actively at work. An individual cannot be singled out for cancellation.
Coordination and continuation
Coordination of benefits prevents double payment. For dependent children covered by both parents, the birthday rule makes the plan of the parent whose birthday falls earlier in the year primary. COBRA lets qualified beneficiaries continue group health after a qualifying event - employers with 20 or more employees, for up to 18 months (29 months for disability, 36 months for dependents of a deceased, divorced, or Medicare-eligible employee), at up to 102% of the premium. HIPAA adds portability, credit for prior coverage, and special enrollment rights.
Funding arrangements and public programs
Section 125 cafeteria plans, FSAs, HSAs, and HRAs use pretax dollars. Medicare: Part A hospital (premium-free with sufficient work history), Part B medical (means-tested premium), Part C Medicare Advantage, Part D drugs. Medigap is purchased separately, with a six-month guaranteed-issue open enrollment. Under the ACA, plans must cover essential health benefits, may not impose annual or lifetime dollar limits, must extend dependent coverage to age 26, and owe medical loss ratio rebates.
Trap: the employer's contribution to health premiums is not taxable income to the employee, and employer-paid premiums are deductible to the business. Worked example: both parents carry the child; the parent born in March pays primary over the parent born in August.