The Group Insurance Environment

The term group insurance, like the term employee benefits, can have different meanings to different persons. Most employees view group insurance in a very broad sense as any arrangement under which an employer makes benefits available to employees for life insurance, disability income, medical and dental expenses, legal expenses, and property and liability insurance. To employees, it usually makes little difference whether a benefit plan is funded with a traditional insurance contract or through some type of alternative arrangement; it still is group insurance.

Even though the broad meaning of group insurance is used, it is important to make a distinction between group insurance plans that are funded with traditional insurance contracts and those that use alternative funding methods. Although alternative funding methods, including total self-funding, are becoming more common, the majority of group insurance is still fully insured through insurance contracts.

The character of group insurance has been greatly influenced by the numerous laws and regulations that state governments and the federal government have imposed. The major impact of state regulation has been felt through the insurance laws governing insurance companies and the products they sell. Traditionally, these laws have affected only those benefit plans funded with insurance contracts. However, as a growing number of employers are turning toward self-funding of benefits, there has been increasing interest on the part of state regulatory officials to extend these laws to plans using alternative funding methods. The federal laws affecting group insurance, on the other hand, have generally been directed toward any benefit plans that are established by employers for their employees, regardless of the funding method used.