All you need to know about group health insurance for your business

Small businesses tend to shy away from offering employee benefits such as group health insurance, as they may not understand what it entails or lack the resources to do so. Truth be told, the world of insurance can be complicated – but worry not, Pacific Prime is here to help. In this article, we’ll explain what exactly group health insurance is and why it’s so important for small businesses.

What is group health insurance?

Group health insurance is a type of health insurance plan that covers a number of employees or members of a company/organization. This is different from an individual health insurance plan that one may purchase for themselves. One main benefit of a group health insurance plan is that it can often cost less than individual plans, as the risks on behalf of the insurer are spread over the entire group.

In addition to this, group health insurance plans may also be able to provide better coverage. This is because group plans can cover pre-existing conditions (or medical conditions one has before securing insurance), whereas individual plans generally don’t. These group plans are known as medical history disregarded (MHD) policies. As per the aforementioned, insurers are happy to cover them because they receive good premiums from the entire group.


When it comes to selecting the benefits for group health insurance, here are your three main options:

Basic/essential benefits: Basic/essential benefits include inpatient and outpatient coverage. The former covers the employee if they need to be hospitalized overnight, while the latter covers them if they don’t need to be hospitalized overnight.

Middle cost benefits: Middle cost benefits are “additional” to basic/essential plans, providing coverage for dental, vision, maternity, fertility, and more. These benefits can increase the costs of the overall package.

High cost benefits: High cost benefits are known as a “comprehensive plan”, as they cover a wide range of treatments and have a high benefits level. They can include preventative healthcare like wellness programs and are the most expensive option.


The cost of your group health insurance premium will typically depend on factors such as:

  • Number of insured members on the plan
  • Average age of the insured members
  • Type of occupation (I.e. Certain jobs have a higher health risk than others)
  • Employer’s claims history
  • Geographical area covered
  • Level of benefits provided
  • Deductibles (I.e. A set figure you are required to pay out of pocket before the insurer begins to pay for covered medical services)

Employee contributing to the cost /receiving different benefits

Oftentimes, it’s possible to share the cost of the group health insurance plan with employees, or even provide different levels of coverage for different levels of employees. However, this breakdown should be standardized, rather than target individuals. For example, it’s acceptable to have a breakdown based on middle-level managers, entry-level employees, etc.

Why is group health insurance for small businesses so important?

Based on our inaugural Global Employee Benefits Trends Report 2020, we found that employees are increasingly prioritizing group health insurance, especially due to the impact of the unprecedented COVID-19 pandemic. As more and more employers up their employee benefits game to match employees’ preferences, it’s vital for your small business to do so as well.

Here’s a quick recap of the latest employee benefits trends to get you up to speed, before we proceed to look at benefits of group health insurance for small businesses:

Benefits of group health insurance for small businesses:

Implementing group health insurance plans will give your small business plenty of benefits. For starters, you’ll be able to stand out from the competition, enabling you to attract and retain the best talent. As we know, human resource is the backbone of any successful organization, but especially small businesses that are looking to grow.

What’s more, as your employees’ health outcomes begin to improve due to having access to good healthcare, you’re likely to see a lowering rate of health-related absenteeism and presenteeism at the workplace. With employees taking less sick leaves and working more productively, this may even result in substantial cost-savings for your small business.

Key metrics for success

Knowing that there are plenty benefits to the group health insurance plan isn’t enough. Once you’ve implemented the plan, it’s equally important to measure the success of your plan, while ensuring it is meeting the needs of your employees. You can delve further into the key metrics, but here is a list of them:

  • Loss ratio
  • Average claims per member
  • Insurer/broker response time and claims processing time
  • The number of people covered by the group health plan
  • The ratio of dependants covered by the group health plan
  • Employee demographics
  • Questions asked

If your small business would like to learn more about employee benefits such as group health insurance, you should check out our guide on Structuring an Employee Benefits Plan. It’s filled with useful information on defining your objective, calculating your budget, identifying your options, as well as building a benefits package.

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