12.1 Group Health Fundamentals and Eligibility
Key Takeaways
- The employer holds the master policy (the contract); employees receive certificates that summarize coverage but are not the contract.
- Group plans underwrite the group as a whole, usually with guaranteed issue and no medical exam.
- ACA defines full-time as 30+ hours/week and caps the probationary/waiting period at 90 days.
- HIPAA special enrollment runs 30 days from a qualifying life event (60 days for Medicaid/CHIP).
- Dependent children may stay on a parent's plan to age 26 regardless of marital/student/residency status.
Group Health Fundamentals
Group health insurance covers a defined group of people under a single contract. The most common arrangement is an employer-sponsored plan covering employees and their dependents. The exam tests how group coverage differs structurally and legally from individual coverage.
The central distinction is the master policy / certificate model. The employer is the policyholder and signs one master contract with the insurer. Each covered employee receives a certificate of insurance, a summary of coverage. The certificate is proof of coverage, but it is not the legal contract.
Master Policy vs. Certificate
| Document | Holder | Legal status |
|---|---|---|
| Master policy | Employer (policyholder) | The actual contract; all terms, benefits, exclusions |
| Certificate | Each employee | Summary of coverage; NOT the contract |
The flow of the contract is: Insurer → Master Policy → Employer → Certificates → Employees. When the insurer amends terms, the amendment is made to the master policy, and certificates are reissued or supplemented. A frequent trap: a question describes the document an employee receives and asks whether it is the binding contract — it is not.
Group vs. Individual Underwriting
Group insurance underwrites the group as a whole, not each applicant. Most enrollees get guaranteed issue with no medical exam, because adverse selection is controlled structurally rather than through individual screening.
| Factor | Group | Individual |
|---|---|---|
| Underwriting basis | The group | Each applicant |
| Medical exam | Usually none | Often required |
| Guaranteed issue | Usually yes | Usually no |
| Adverse-selection control | Eligibility rules | Medical underwriting |
For large amounts of voluntary life or supplemental coverage above a guaranteed-issue limit, an employee may still be asked for evidence of insurability (EOI).
Eligibility Requirements
Group plans use eligibility rules instead of medical underwriting to keep the risk pool healthy. The key concepts are the probationary (waiting) period, the active-work requirement, and the definition of an eligible employee.
- Eligible employee — typically a full-time employee; under the ACA, full-time means averaging 30+ hours per week.
- Probationary / waiting period — new hires wait before coverage starts; the ACA caps this at 90 days.
- Active-work requirement — the employee must be actively at work (not home sick) on the effective date for coverage to begin.
- Eligibility period — a short window (often 30–31 days) to enroll after becoming eligible.
Enrollment Windows
| Window | When | Effective date |
|---|---|---|
| Initial enrollment | New hire becomes eligible | First of month after waiting period |
| Open enrollment | Annual (usually fall) | Plan-year start (often Jan 1) |
| Special enrollment | Qualifying life event | Date of event / first of next month |
Under HIPAA, qualifying life events — marriage, birth, adoption, loss of other coverage — trigger a 30-day special enrollment period (60 days for Medicaid/CHIP changes). An employee who declines coverage and has no qualifying event must wait for the next open enrollment; a late enrollee may face EOI or a longer wait.
Dependent Coverage
Under the ACA, group plans must allow children to remain on a parent's plan until age 26. This applies regardless of marital status, student status, residency, financial dependency, or whether other coverage is available — the only test is the parent-child relationship and age. A disabled child may continue past 26 with proof of incapacity. Eligible dependents include a legal spouse and biological, adopted, and step-children. Domestic-partner coverage is not ACA-mandated and is at employer discretion (and may create taxable income).
Newborn and Adopted-Child Effective Dates
Group plans must cover a newborn from the moment of birth, and an adopted child from placement, even before formal enrollment. The parent then has a short window — commonly 30 or 31 days — to add the child and pay any additional premium; coverage is retroactive to birth or placement.
The trap on the exam: a question states the parent enrolled the newborn on day 20 and asks whether a claim from day 3 is covered. Because coverage is automatic from birth and the parent enrolled within the window, the day-3 claim is covered. Failing to enroll within the window, however, can leave the child without continued coverage after the automatic period lapses.
Coordination of Benefits (COB)
When a dependent is covered under two group plans (e.g., both parents work), coordination of benefits prevents the family from collecting more than 100% of the cost. One plan is primary (pays first as if no other coverage exists) and the other is secondary (pays the balance up to its own limits).
For children covered by both parents, the birthday rule sets order: the plan of the parent whose birthday falls earlier in the calendar year is primary (the year of birth is irrelevant — only month and day matter). If both parents share the same birthday, the plan in force longer is primary. The plan covering a person as an employee is primary over a plan covering them as a dependent.
Two working parents cover their child under both their group plans. The mother's birthday is March 4 and the father's is September 12. Under the birthday rule, which plan is primary?
An employer holds the group health contract and each covered worker receives a document summarizing benefits. Which statement is correct?
Eligible Groups and Adverse-Selection Control
To issue group coverage, the insurer needs a bona-fide group that exists for a reason other than buying insurance — most commonly an employer-employee relationship. This rule blocks people from forming a sham "group" purely to obtain coverage, which would invite adverse selection.
Other acceptable groups include labor unions, trade and professional associations, and multiple-employer trusts. Within any group, the insurer defines eligible classes by employment criteria (full-time, salaried, hourly) — never by health. Each layered rule (group purpose, class definition, participation minimum, waiting period, active-work) shrinks the chance that only the sick enroll, which is the engine that keeps group rates below individual rates.