Most working-age Americans get health coverage through a group plan at work. Group insurance covers many people under one contract, underwrites the group as a whole, and spreads administrative costs, which lowers the cost per person. This guide covers eligible groups, contributory and noncontributory plans, group underwriting and rating, the ACA employer rules, self-funded plans and ERISA, continuation under COBRA, conversion, coordination of benefits, and the federal mandates that apply to group plans.

Eligible groups and the master contract

A group must exist for a purpose other than buying insurance, which limits adverse selection. Eligible groups include:

• Single employers (employees of one employer).
• Labor unions and Taft-Hartley (multiemployer) plans, which are run by boards of union and employer trustees.
• Trade and professional associations.
• Creditor-debtor groups (the creditor holds the master policy covering debtors).
• Multiple employer trusts (METs) and multiple employer welfare arrangements (MEWAs), which let small or unrelated employers band together; they are subject to both ERISA and state insurance regulation.

The group sponsor (usually the employer) is the policyowner and holds the master policy; each member receives a certificate of coverage describing benefits and rights.

Contributory vs. noncontributory

• Noncontributory – the employer pays the entire premium, and all eligible employees are covered.
• Contributory – employees share the cost, and the insurer requires a minimum participation percentage of eligible employees (the Connecticut glossary cites 75%) to limit adverse selection.

Benefit amounts based on a formula (a percentage of salary or job class) rather than individual choice also limit adverse selection.

Eligibility and enrollment

• Probationary (waiting) period – the time a new employee must wait before becoming eligible. Under the ACA, it may not exceed 90 days.
• Eligibility period – employees who enroll when first eligible need little or no evidence of insurability.
• Late enrollees apply after the initial window and may be limited to open or special enrollment periods.
• Open enrollment – a period to enroll or change coverage without proof of insurability.
• HIPAA special enrollment – an employee who gains a dependent through marriage, birth, or adoption, or who loses other coverage, may enroll within 30 days (60 days for loss of Medicaid or CHIP eligibility).
• Actively-at-work provisions require the employee to be working on the day coverage begins; under HIPAA nondiscrimination rules, an absence because of a health factor must be treated as being at work.
• Plans may set eligibility by bona fide job classes (full-time vs. part-time) but not by health factors.

Group underwriting and rating

Group underwriting looks at the group as a whole: size, composition, industry, and persistency (groups that switch carriers often raise acquisition costs).

• Experience rating – premiums based on the group's own claims history.
• Community rating – everyone in an area pays a rate based on the experience of the whole community. Under the ACA, small-group plans use modified community rating: only age, tobacco use, family size, and geographic area may vary the rate.

Small groups and the ACA employer rules

• The federal definition of a small employer is up to 50 employees; states may extend the small-group market to 100.
• Small-group coverage must be guaranteed issue, without health underwriting, subject to permitted contribution and participation rules.
• Employer shared responsibility (employer mandate) – an applicable large employer (50 or more full-time and full-time-equivalent employees) may owe a payment if it doesn't offer affordable, minimum-value coverage to full-time employees, defined as those averaging 30 hours a week (IRC 4980H).
• Individual coverage HRAs (ICHRAs) let employers reimburse employees tax-free for individual-market coverage; a QSEHRA for small employers may reimburse up to $6,450 self-only / $13,100 family in 2026.
• Section 125 cafeteria plans let employees choose among qualified benefits and pay their share pre-tax.

Self-funded plans and ERISA

• In a self-funded (self-insured) plan, the employer pays claims from its own funds, often through a third-party administrator (TPA) that handles claims while the employer keeps the risk.
• Stop-loss insurance protects the employer: specific stop-loss caps claims for any one person; aggregate stop-loss caps total group claims for the year.
• ERISA sets federal standards for private employee benefit plans: fiduciaries must act prudently and solely in participants' interest, and participants must receive a summary plan description. ERISA preempts state insurance law for self-funded plans; insured plans remain subject to state insurance law.

Continuation under COBRA

COBRA lets employees and dependents continue group health coverage after a qualifying event.

• Applies to employers with 20 or more employees. Church plans and federal government plans are exempt; state and local government plans follow parallel rules. Many states have mini-COBRA laws for smaller employers.
• Applies to group health plans, not group life.

Timing and cost:

• The employer notifies the plan administrator within 30 days; the administrator sends election notices within 14 days.
• Qualified beneficiaries have at least 60 days to elect.
• The first premium is due within 45 days of electing; later premiums have a 30-day grace period.
• The premium may be up to 102% of the plan's cost ($600 × 1.02 = $612), or up to 150% during the disability extension.
• Coverage can end early for nonpayment, if the employer ends all group health plans, or if the beneficiary later gains other group coverage or Medicare.

Conversion

A conversion privilege, where the plan or state law provides one, lets a departing member obtain an individual policy without evidence of insurability, usually at individual rates and with different benefits. Whether a conversion right exists depends on the plan and state law.

Coordination of benefits (NAIC Model #120)

When a person is covered by two plans, coordination of benefits names a primary plan (pays first) and a secondary plan, so total payments don't exceed 100% of allowable expenses. Order-of-benefit rules:

1. The plan covering the person as an employee is primary over the plan covering them as a dependent.
2. For a child of married or cohabiting parents, the birthday rule: the plan of the parent whose birthday (month and day, ignoring the year) falls earlier in the calendar year is primary.
3. For a child of divorced parents with no court decree: the custodial parent, then the custodial parent's spouse, then the noncustodial parent, then the noncustodial parent's spouse.
4. Active employee coverage is primary over coverage as a retiree, laid-off employee, or COBRA continuee.
5. If nothing else decides it, the plan that has covered the person longest is primary.

Medicare secondary payer: for an employee 65 or older at an employer with 20 or more employees, the group plan pays first and Medicare second.

Changing carriers

Under the NAIC group coverage discontinuance and replacement model:

• No-loss/no-gain – the new carrier must cover people insured under the old plan, even those not actively at work, so no one loses coverage solely because of the change (but no one gains more than the prior plan provided).
• Deductible credit – amounts paid toward the old deductible count toward the new one in the same year.

Federal mandates on group plans

• No pre-existing condition exclusions (ACA).
• Dependent coverage to age 26 for plans that offer dependent coverage.
• Guaranteed renewability of small-group coverage while premiums are paid.
• Newborns' and Mothers' Health Protection Act – at least 48 hours after a vaginal delivery, 96 hours after a cesarean.
• Women's Health and Cancer Rights Act – plans covering mastectomies must cover reconstruction, symmetry surgery, prostheses, and treatment of complications.
• Mental health parity – mental health and substance use benefits may not be more restrictive than medical benefits.
• FMLA – group health coverage continues on the same terms during covered leave.
• USERRA – employees returning from military service get reinstated coverage without new waiting periods or exclusions (except service-connected conditions).

Common exam traps

• Groups must exist for a purpose other than buying insurance.
• Noncontributory = employer pays all, everyone covered; contributory = minimum participation.
• ACA waiting period limit: 90 days.
• COBRA: 20+ employees; 18 / 29 / 36 months; up to 102% (150% during the disability extension); 60 days to elect.
• Birthday rule uses month and day, not age.
• Employee coverage is primary over dependent coverage.
• Self-funded plans fall under ERISA, not state insurance mandates.
• Medicare is secondary for active workers 65+ at employers with 20+ employees.

Quick recap

• Group coverage uses a master policy and certificates; the group is underwritten as a whole.
• Contributory plans need minimum participation; probationary periods are capped at 90 days.
• Rating is experience or community based; the ACA requires guaranteed issue and modified community rating for small groups.
• Self-funded plans use stop-loss and TPAs and are governed by ERISA.
• COBRA continues coverage; conversion moves members to individual policies where available.
• COB (Model #120) decides primary and secondary plans; federal mandates add maternity, mastectomy, parity, FMLA, and USERRA protections.