Comparing the Two
It’s important to understand the distinctions between individual health insurance coverage and group health insurance coverage. To learn which is right for you, consider the following differences.
What is Group Health Insurance?
Insurance that’s available to employees of an organization or members of an association is called group health insurance.
Like the name suggests, group insurance coverage is intended to benefit a specific group of people. The group may have a self-contained plan or, more likely, has access to one from an insurance provider. All group members or employees are eligible for the same coverage and benefits for the same rate.
Typically, group insurance packages cost less for employees or members than individually purchased coverage because the risk of needing health care is shared by the entire group instead of a single person. Employers pay most premium costs with a group package and deduct the rest of the expenses for tax benefits.
What is Individual Health Insurance?
Individual (sometimes called private) health insurance is bought on your own and not provided by an employer or association.
The name individual refers to the fact that the risk is borne by a single individual who purchases the plan, unlike group coverage. Therefore, an individual policy can cover multiple people. An individual typically purchases an insurance package for themselves and/or close relatives, like family members.
Although individual health insurance often costs more than group insurance, you have more control over things like deductibles, premiums, and the types of coverage needed with an individual package. And unlike group coverage, there are typically no open enrollment periods required to add and remove benefits.
How Much Does it Cost?
With a group insurance package, employees can access plans at little to no upfront cost. No further fees are required of the employee, unless an option is added to the package from outside the group. The cost of premiums are shared with the employer and deducted from the employee’s salary every pay period.
Individual plans, on the other hand, are paid privately and there may be a large upfront cost before coverage commences. At the same time, these plans offer the ability to customize benefits and tailor a package that’s right for an individual family’s needs, saving money in the long-term.
How Many Options Are Available?
Occasionally, an insurance company can elect not to provide an individual package to patients because of things like financial issues or medical history. These issues are non-existent with group insurance packages, as all employees eligible for coverage can receive a package automatically.
A patient’s medical history or financial background is not examined in great detail with a group insurance package, because the plans are underwritten based on the group’s characteristics as a whole. This means it’s often easier to obtain coverage simply from being hired by a company that provides it.
But with an individual health insurance policy, a person can modify coverage as needed and opt out at any time. An individual package is underwritten specifically with the requester in mind, so your financial and medical situation is examined more closely and in-depth before receiving a policy.
Are There Incentives to Selecting Coverage?
Sometimes with individual insurance, you’re eligible a bonus if you go the entire term of the policy without making a claim. This acts as an incentive to remain healthy throughout the policy period and can come in the form of lower renewal rates or added coverage.
On the other hand, coverage rates with a group insurance plan can vary based on the employer’s need; that is, premiums are often reduced to save costs and that cost is transferred to the employee in the form of reduced coverage. This option can save money for those with healthy lifestyles.
What Happens to a Group Policy is the Relationship with an Organization Ends?
You may no longer be eligible for group coverage through your organization if and when your employment relationship ends.
It’s important to note that employer-provided health insurance only covers you while you are employed with a company and premiums are paid. If your employment relationship is terminated, you might be able to convert your group insurance plan into an individual plan from the same provider at higher rates.
This option should only be considered if you have no other coverage for insurance and if premiums are less expensive on their own than with the group. In addition, different employers have different policies and you may find coverage at a new employer to vary from what was previously provided.
Which One Should I Choose?
An individual plan allows you to determine the exact type of coverage you and your family needs based on your medical histories and anticipated life events. On the other hand, a group insurance package is modified with the employer’s needs in mind and may be adequate to cover your family. The biggest benefit of group insurance is in the cost savings to the employer and employee.
If you’re looking to have more control over your policy and coverage, an individual health insurance plan may be right for you. But for those with cost savings in mind, the group insurance option works best.
At the end of the day, the ideal option is going to be the one that’s right for you and your situation. Knowing the ins-and-outs of both group and individual health insurance, however, helps you to make an informed decision.
aller companies can choose to take.