A contributory group health plan is one in which covered employees pay a portion of the premium. Because employees must elect coverage and contribute financially, insurers commonly require a minimum percentage of eligible employees to participate. The participation requirement reduces adverse selection by helping ensure that enrollment includes a broad cross-section of the eligible group rather than only individuals who expect immediate medical expenses.

A noncontributory plan is one in which the employer pays the full premium for eligible employees. Because employees are not required to contribute, participation is generally expected to be much higher and may be mandatory for eligible employees under the employer’s plan rules. The distinction is based on premium contribution, not on whether the coverage includes dependents, dental benefits, or a network.

Group insurance is characterized by a master policy issued to the policyholder, commonly an employer or association. Individual insureds receive certificates of coverage that describe the benefits and rights under the group contract. The employer’s role, employee eligibility rules, waiting periods, and contribution structure must all be disclosed accurately.

On an examination question, remember the primary rule: contributory means employees contribute toward premium; noncontributory means the employer pays the entire premium for the covered employees.

References/topics from the Study Guide: Group Health Insurance; Contributory Plans; Noncontributory Plans; Participation Requirements; Certificates of Coverage.

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