Group Medical Insurance
Jason Stolz CLTC, CRPC
Group medical insurance is a cornerstone of employee benefits for businesses of all sizes. Whether you run a two-person company or a growing organization with dozens of employees, group health coverage provides access to affordable, comprehensive care — while helping you recruit and retain top talent. At Diversified Insurance Brokers, we work with over 100 national carriers to tailor group medical plans that balance premium control, flexibility, and long-term sustainability.
In this guide, we’ll explain how group medical insurance works, who qualifies, the types of plans available, and strategies to lower your company’s overall healthcare costs. For related insights, see small employer group health insurance and what is self-funded group health insurance.
Compare Group Medical Insurance Options
See how your business can offer affordable health benefits and reduce taxable income through group coverage.
How Group Medical Insurance Works
Group medical insurance allows employers to provide healthcare coverage to employees under a single policy. Premiums are typically shared between the employer and employees, and costs are generally lower than buying individual plans because risk is spread across the group. Employers can choose between multiple funding structures and plan types, each offering different levels of flexibility and risk-sharing.
- Fully Insured Plans: The insurance carrier assumes all financial risk and sets a fixed premium based on group demographics and claims history.
- Level-Funded Plans: Hybrid models that blend predictability with the potential for end-of-year refunds if claims are low.
- Self-Funded Plans: Employers fund claims directly with stop-loss protection to limit exposure, often reducing long-term costs.
To understand which model fits your organization, review how self-funded health plans work for smaller employers.
Who Qualifies for Group Medical Coverage?
Eligibility for group medical insurance typically requires at least two full-time employees or owners, with a valid business entity and Employer Identification Number (EIN). Some states allow groups of one under specific conditions, but most require two unrelated individuals. Learn more in our article on minimum employees for group health insurance.
- Must operate as a legitimate business with proof of active payroll or ownership structure
- Employees must work a minimum of 20–30 hours per week
- Employer must contribute at least 50% of the employee premium (varies by carrier)
- 75% of eligible employees must enroll, unless they have other valid coverage
Benefits of Group Medical Insurance for Employers
- Lower Premiums: Group risk pooling reduces per-person costs compared to individual policies.
- Tax Advantages: Employer-paid premiums are deductible as a business expense.
- Employee Retention: Health benefits remain one of the top reasons employees stay with an employer.
- Customizable Coverage: Choose from PPO, HMO, and HDHP/HSA plans with different cost-sharing levels.
- Predictable Costs: Level-funding or self-funding structures stabilize budgets over time.
Plan Design and Cost Control Strategies
Effective group medical plans balance quality of coverage with cost predictability. Employers can fine-tune benefits and contributions by:
- Implementing health reimbursement arrangements (HRAs) or health savings accounts (HSAs)
- Offering multiple plan tiers (e.g., Gold, Silver, Bronze)
- Encouraging preventative care utilization to reduce claims
- Using carrier-provided wellness programs and virtual care options
- Reviewing stop-loss coverage annually for self-funded plans
Tax Advantages of Group Medical Coverage
Group medical insurance offers several key tax benefits:
- Employer premium contributions are tax-deductible business expenses.
- Employee contributions can be made pre-tax via Section 125 cafeteria plans.
- Self-funded employers may also deduct claim payments and administrative fees.
- Plans structured as HDHPs enable tax-deferred growth through HSAs.
These tax advantages can lower overall business expenses while improving employee satisfaction — especially for small businesses seeking cost efficiency.
Fully Insured vs. Level-Funded vs. Self-Funded
| Feature | Fully Insured | Level-Funded | Self-Funded |
|---|---|---|---|
| Premium Stability | Fixed monthly rates | Fixed with refund potential | Variable based on claims |
| Employer Risk | Low — carrier assumes risk | Moderate with stop-loss protection | Higher — employer funds claims |
| Administrative Control | Carrier-managed | Third-party administration | Employer-managed with TPA |
Find the Right Group Medical Plan
We’ll help your business design a health plan that balances cost, compliance, and employee satisfaction — all in one consultation.
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FAQs: Group Medical Insurance
What is group medical insurance?
Group medical insurance is an employer-sponsored health plan that covers multiple employees under a single policy, offering lower premiums and broader benefits compared to individual plans.
Who qualifies for group medical insurance?
Most states require at least two eligible full-time employees or owners. Married couples usually count as one entity, so two unrelated participants are typically needed.
Can small businesses with only two people qualify?
Yes, two-person businesses can often qualify for group health coverage if both are active employees and not married to each other. Learn more in our guide to 2-person group health insurance.
Are group medical insurance premiums tax-deductible?
Yes. Employer contributions to group premiums are tax-deductible, and employee contributions can be made pre-tax under Section 125 plans.
What types of group medical plans are available?
Employers can choose from fully insured, level-funded, or self-funded plans, each offering different cost structures and risk profiles.
Can I change carriers mid-year?
Yes. Group medical insurance can typically be adjusted at renewal or during a qualifying event. Employers may switch carriers to improve pricing or coverage quality.
