What Is GHP Coverage and How Does It Work?

Group Health Plan (GHP) coverage is a fundamental aspect of health insurance, particularly for individuals who may have multiple sources of coverage. It plays a significant role in how various health benefits interact, ensuring a structured approach to healthcare payments. Understanding GHP coverage is important for navigating the complexities of health benefits and knowing which plan pays for services. This insight becomes especially relevant when an individual is covered by both a GHP and other forms of insurance.

Defining Group Health Plans

A Group Health Plan (GHP) is a health insurance plan typically established or maintained by an employer or employee organization to provide healthcare benefits to its employees and their families. This type of coverage is employer-sponsored, distinguishing it from individual health plans that individuals purchase directly from an insurance provider. GHPs generally cover multiple individuals under a single group policy, spreading the risk across a larger pool of participants. This arrangement often results in lower premiums for employees compared to individual plans, as the employer usually contributes a portion of the cost.

Group health insurance plans share common characteristics, such as requiring a minimum participation rate, often around 70% of eligible employees, to be valid. Employers select the plan options, and employees can then choose to enroll or opt out. These plans can include various types, such as Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Exclusive Provider Organizations (EPOs), or Point of Service (POS) plans.

GHP Coordination with Medicare

When an individual has both Group Health Plan coverage and Medicare, rules known as Medicare Secondary Payer (MSP) provisions determine which plan pays first. The plan that pays first is called the “primary payer,” covering its share of the bill before any other insurance. The “secondary payer” then covers remaining costs, up to its limits, after the primary payer has processed the claim. These coordination rules depend on factors such as the individual’s employment status, the employer’s size, and the reason for Medicare eligibility.

For individuals aged 65 or older who are still actively working, or whose spouse is actively working, the employer’s size generally dictates the primary payer. If the employer has 20 or more employees, the GHP is typically the primary payer, and Medicare is secondary. Employers with 20 or more employees are generally prohibited from offering incentives for employees to opt out of the GHP in favor of Medicare. In this scenario, the GHP must offer the same coverage to employees aged 65 and older as it does to younger employees.

Conversely, if the employer has fewer than 20 employees, Medicare is usually the primary payer for individuals aged 65 or older, and the GHP is secondary. In such cases, employers are not required to offer the same coverage to older workers as to younger ones. Individuals may need to enroll in Medicare Part B to avoid gaps in coverage and potential late enrollment penalties. Retiree health plans, regardless of employer size, typically make Medicare the primary payer.

For individuals under age 65 who are Medicare-eligible due to disability, the employer size rules also apply, but with a different threshold. If the employer has 100 or more employees, the GHP is generally primary, and Medicare is secondary. If the employer has fewer than 100 employees, Medicare is typically primary for disabled individuals. Special rules apply for individuals with End-Stage Renal Disease (ESRD), where the GHP is primary for the first 30 months of Medicare eligibility, regardless of employer size or employment status, after which Medicare becomes primary.

Employer Obligations for GHP

Employers offering Group Health Plans must comply with a range of federal laws designed to protect employees and regulate health benefits.

• The Employee Retirement Income Security Act (ERISA) sets minimum standards for most private industry health plans, requiring detailed plan documents and outlining fiduciary responsibilities. ERISA also mandates transparent communication about plan terms and operations to participants.
• The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees and their families to continue their group health benefits temporarily after certain qualifying events, such as job loss or reduction in hours. COBRA coverage typically lasts 18 months, but can extend up to 29 months for disability or 36 months for other specific qualifying events like divorce or loss of dependent status. Employers with 20 or more employees are generally subject to COBRA requirements.
• The Health Insurance Portability and Accountability Act (HIPAA) ensures the privacy and security of protected health information and establishes rules for health coverage portability. HIPAA sets standards for how health plans handle sensitive medical data and guarantees an individual’s right to enroll in new coverage if they lose their old plan. Employers must implement policies and practices to comply with HIPAA’s privacy provisions.
• The Affordable Care Act (ACA) also imposes significant obligations on employers, particularly those considered Applicable Large Employers (ALEs), meaning they have 50 or more full-time equivalent employees. These employers are required to offer affordable health coverage that provides minimum value to at least 95% of their full-time employees and their dependents. Failure to meet these mandates can result in penalties.

Other Coordination Rules

Beyond Medicare, GHPs also coordinate benefits with other types of coverage, although less frequently. When both spouses have separate GHPs, coordination rules determine which plan pays first for family members. Typically, the plan of the individual who is the patient is primary, and the spouse’s plan is secondary, though specific rules can vary by plan.

For individuals with GHP coverage and Medicaid, Medicaid is almost always considered the “payer of last resort”. This means the GHP will pay first for covered services, and Medicaid will only cover remaining eligible costs after the GHP has processed the claim. This hierarchy ensures that primary insurance resources are utilized before public assistance programs contribute.

In situations involving military health programs like TRICARE or VA benefits, the GHP generally pays primary. However, specific rules can differ based on the type of TRICARE plan or the nature of the VA services, so it is important to verify the exact coordination order. Similarly, for claims related to injuries, Workers’ Compensation and no-fault insurance typically pay primary over a GHP. These specific coverages are designed to address work-related injuries or auto accident claims before general health insurance becomes involved.