How does group health insurance work?

Here's how your premium is calculated under an employer's plan.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Gerri Willis, CNN personal finance editor

For more information on managing your largest investment, check out Gerri Willis' 'Home Rich,' now in bookstores.
CDs & Money Market
MMA 0.69%
$10K MMA 0.42%
6 month CD 0.94%
1 yr CD 1.49%
5 yr CD 1.93%

Find personalized rates:

Rates provided by

NEW YORK (CNN) -- Ever wonder how your health insurance premium is calculated if you're covered under your employer's plan?

1. Know how it works

If you work for a smaller company, you may have noticed how much you pay for your health insurance differs from your neighbor who works for a larger firm.

The key is how group insurance is priced. When you're in a group plan, it's not only your health that you have to worry about -- it's the health of all your colleagues.

Basically, your company will obtain group rates from several different companies. In turn, those firms make their calculations based a number of factors to determine what kind of risk that specific workforce represents.

In general, group plans are less expensive than individual plans because the risk is spread over a wider array of people.

2. Policy ingredients

Age plays a large role in how much you shell out for health insurance each month. If your company employs a lot of older people -- say, late 40s or early 50s -- chances are your policy is more expensive than a company that hires a lot of college graduates, says Edward Kaplan of Segal Co., a human resources consulting firm.

Your company's claim history is also important in determining rates. If the company employs a lot of older males, premiums will likely be higher since this population is prone to more cancer diagnoses, hypertension, diabetes and heart attacks. On the other hand, companies with lot of women in their 20s and 30s will also pay more due to maternity and childcare costs.

Location is also important. For example, a hospital bill in New York City is much more expensive than other towns and states.

Finally, some industries are more prone to claims than others. Teachers, nurses and construction workers tend to file claims more frequently than retailers or technology workers, says Kaplan.

3. Companies with lower premiums

Larger companies tend to offer lower employee premiums simply because the risk is spread out. The smaller the firm, the more age and gender play a role in what you'll pay.

Consider a company with only 10 employees. If one or two of those workers have major surgery or give birth to a premature baby, for example, it's likely the group premium will jump significantly.

You may find smaller premiums at companies that put an emphasis on health and wellness through discounts on gym memberships or weight management classes.

-- CNN's Jen Haley contributed to this article.

Talkback: Are you happy with your group health care coverage? To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.