12.1 Group Health Fundamentals and Eligibility

Group health insurance covers many people under a single contract. The exam tests how this differs structurally and legally from individual coverage, because the differences drive eligibility, underwriting, taxation, and continuation rules tested throughout the national portion.

The Master Policy and Certificate Structure

In a group plan the insurer issues one master policy (also called the master contract) to the policyowner, which is normally the employer. The master policy contains all benefits, exclusions, conditions, and premium terms. Individual employees do not receive the policy.

Each covered employee instead receives a certificate of insurance (certificate of coverage). The certificate summarizes the member's benefits and states the right to convert. It is evidence of coverage but is not the legal contract.

Because the employer is the policyowner, amendments and rate negotiations occur at the master-policy level, and the employee has no direct contractual standing with the insurer beyond the certificate.

What Qualifies as an Eligible Group

To prevent the group mechanism from becoming a vehicle for sick people to buy coverage, the law requires that an insurable group exist for a purpose other than obtaining insurance. Acceptable groups include single-employer groups, multiple-employer trusts (METs/MEWAs), labor unions (Taft-Hartley trusts), trade and professional associations, and creditor-debtor groups.

Common Eligible Group Types

• Single-employer groups — the most common; one employer covers its employees.
• Multiple-employer trusts (MET) — several small employers band together to obtain group rates.
• Multiple-employer welfare arrangements (MEWA) — similar pooling, often association-sponsored.
• Labor union (Taft-Hartley) groups — coverage negotiated through collective bargaining.
• Association groups — members of a trade, professional, or alumni association.
• Credit groups — debtors of a common creditor (credit life/health).

The key exam idea is anti-selection control: a pre-existing, ongoing group that formed for business or social reasons spreads risk across healthy and unhealthy members, so the insurer can offer coverage without individual medical underwriting.

Eligibility for Employees

Group health plans define who may participate. Standard plans cover full-time employees, commonly defined as those working at least 30 hours per week (the ACA threshold) or as set by the plan. Part-time, seasonal, and temporary workers are frequently excluded.

Two timing concepts govern when coverage starts:

• Probationary period (waiting period) — the time a new hire must work before becoming eligible (e.g., 30, 60, or 90 days). Under the ACA, this waiting period cannot exceed 90 days.
• Eligibility (enrollment) period — typically a 31-day window after eligibility begins, during which the employee may enroll without proving insurability. Enrolling within this window avoids late-entrant treatment.

The Late Entrant Trap

An employee who declines coverage and later wants in becomes a late entrant. Late entrants may be required to provide evidence of insurability and can face delayed effective dates or limited benefits until the next open enrollment. This is a common exam distractor: only timely enrollees get guaranteed acceptance.

Guaranteed Issue and the Actively-at-Work Rule

Because underwriting is done on the group, individual members usually receive guaranteed issue coverage — no medical questions when they enroll on time. The insurer offsets the loss of individual selection with two safeguards.

First, the actively-at-work provision requires that the employee be performing normal duties (or be capable of it) on the date coverage takes effect; otherwise the effective date is deferred until the employee returns to work. This blocks coverage from attaching to someone already disabled on day one.

Second, minimum participation and contribution rules (covered in 12.2) keep healthy members in the pool. Dependents — spouse and children — may also be covered, with their own enrollment windows; a newborn is automatically covered for the first 31 days, and the employee must notify the plan and pay any added premium within that window to continue dependent coverage.

Coordination of Benefits and Dependent Rules

When a person is covered by more than one group plan, a coordination of benefits (COB) provision prevents the insured from collecting more than 100% of the actual expense. One plan is primary and pays first up to its limits; the other is secondary and may pay the remaining allowable amount.

Standard COB order-of-benefits rules the exam tests:

• An employee's own employer plan is primary over a plan where they are covered as a dependent of a spouse.
• For a child covered under both parents, the birthday rule applies: the plan of the parent whose birthday (month and day) falls earlier in the calendar year is primary.
• An active employee's plan is generally primary over a retiree or COBRA plan.

A Common Trap

COB never lets the insured profit. If allowable charges are $1,000 and the primary plan pays $700, the secondary plan pays at most the remaining $300 - not another full benefit. Examiners frequently offer an answer that double-pays; reject it. Dependent eligibility also has edges: a child typically remains eligible to age 26 under the ACA, after which loss of dependent status becomes its own COBRA qualifying event.