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13.2 Types of Eligible Groups

A group health plan is an employee welfare benefit plan that is established or maintained by an employer, an employee organization (such as a union), or both, to provide medical care to participants and their dependents, either directly or through insurance coverage.

Most private-sector health plans are subject to the Employee Retirement Income Security Act (ERISA), which regulates employer-sponsored retirement, welfare, and benefit plans. ERISA establishes protections for plan participants and beneficiaries, including the right to access important plan information. It also imposes fiduciary standards of conduct on individuals who manage these plans. Employers are required to provide a Summary Plan Description to employees, typically filed with the U.S. Department of Labor, outlining plan benefits. In addition, an annual financial report must be submitted to the Internal Revenue Service.

In addition to employer-sponsored groups for eligible employees, other types of groups may also qualify for group insurance coverage.

Multiple Employer Trusts (METs) are arrangements formed by unrelated employers within the same or similar industries. These trusts are typically established and managed by a third-party administrator (TPA) or sponsoring organization, allowing small to mid-sized employers to pool their employees into a larger group to obtain more favorable premiums and enhanced benefits. Key characteristics include:

  • The sponsor or TPA is responsible for designing the plan, establishing participation requirements, and administering the program.
  • Because participating employers are generally smaller, coverage is typically fully insured through an insurance company.
  • The trust, rather than the individual employers, is issued the master policy.

Multiple Employer Welfare Associations (MEWAs) are arrangements typically established by larger employers to secure more favorable life and health insurance rates. These associations often consist of employers that self-fund their employees’ health benefits, meaning the employer assumes financial responsibility for claims. Administrative functions, such as claims processing, are usually handled by a third-party administrator (TPA), and coverage is not backed by an insurance company.

Labor Unions: The Taft-Hartley Act, an amendment to the National Labor Relations Act, allows labor unions—under specific conditions—to establish employer-funded trusts that provide health and welfare benefits to union members.

Associations​

The association must meet minimum membership requirements—typically at least 100 members—and must be formed for a purpose other than obtaining insurance. Examples include teacher associations, trade organizations, professional groups, and alumni associations.

The association serves as the master policyholder and is responsible for administering and managing all funds for the group.

Blanket Insurance​

Group blanket insurance provides coverage for groups with frequently changing membership, such as students, passengers on a common carrier, athletic teams, volunteer firefighters, or similar groups exposed to a specific risk.

Customer Groups​

Customer-based groups include depositors, creditors, and debtors.

Risk Pools​

High-risk pools are state-organized, privately funded health insurance programs designed to provide coverage for individuals who are considered high risk and are unable to obtain group insurance. In most states, these pools operate as independent entities with their own governing boards and administrators, while in some states they are administered through the state’s department of insurance.

Quiz​

1. What is the primary purpose of a group health plan?

A. To provide individual investment options

B. To offer medical care to participants and their dependents

C. To insure only employers

D. To provide retirement income only

Correct Answer: B

Rationale: A group health plan is designed to provide medical care to employees (participants) and their dependents.

2. What is the main function of the Employee Retirement Income Security Act (ERISA)?

A. To regulate only individual insurance policies

B. To eliminate employer-sponsored plans

C. To establish standards and protections for employee benefit plans

D. To provide direct medical care

Correct Answer: C

Rationale: ERISA sets standards, protects participants, and enforces fiduciary responsibilities for employee benefit plans.

3. Which type of group combines small to mid-sized employers to obtain better insurance rates and benefits?

A. MEWAs

B. METs

C. Labor Unions

D. High-risk pools

Correct Answer: B

Rationale: Multiple Employer Trusts (METs) pool smaller employers to gain more favorable premiums and benefits.

4. Which group typically self-funds employee health benefits without insurance company backing?

A. METs

B. Associations

C. MEWAs

D. Blanket groups

Correct Answer: C

Rationale: Multiple Employer Welfare Associations (MEWAs) are often self-funded and rely on employers to cover claims.

5. What type of insurance is designed for groups with constantly changing membership, such as students or passengers?

A. Association insurance

B. Customer group insurance

C. Blanket insurance

D. High-risk pool coverage

Correct Answer: C

Rationale: Blanket insurance covers groups with fluctuating membership exposed to a common risk.