Group and individual insurance are the two main groups of health insurance plans available. Although it seems like the plans only differ by whether they are provided for an organization or individual, they have many more differences. We focus on what you should know about group and individual insurance and how they differ.
Let’s begin by clearing up a common misconception about group and individual insurance. Group insurance plans typically cover employees of an organization or members of an association. The association or organization purchases the plan, which may be a general plan the insurance company offers or a custom plan. Individual plans are purchased by individuals. They may cover only the policyholder or their dependents. An individual plan can cover a family and is not necessarily meant for just one person. Thus, one main difference between individual and group plans is that the latter is only available to associations or organizations.
Having cleared that up, here are other core differences between individual and group insurance.
Cost
Group plans cater to more people; thus, they may be cheaper than individual plans depending on the size of the group and average age of the members. The cheaper costs could be described as a form of discount for getting bulk insurance. Even if individual insurance covers a family, a group per se, it is rarely as cheap as group plans. Employees with group insurance coverage typically do not need to pay extra costs apart from the premium, which is usually deducted from their salaries. But the biggest reason for this cost difference is that at a minimum the employer is expected to pay 50% of the employee’s premiums and many pay more than 50%.
No Claim Bonus
No claim bonuses are offered as rewards for not making any claims within a specific period. They are available for some individual plans but unavailable for group plans. Even if you didn’t need healthcare services for a long period, your premium will not be affected by this directly when you have group insurance. Although if the group as a whole experience less claims this could make a difference in future premium cost.
There is a flip side to this too. If other employees or members of the association that benefit from the group plan make huge claims, the price could increase. Or the services available to you, and everyone else, could reduce, if the organization does not increase the premium.
Ease
Group insurance does not require individual underwriting and one is never denied. The only requirement for group insurance is employment or membership of an organization. This is unlike individual insurance where the medical and financial history of the applicant may be considered on some plans. Group insurance can thus be described as more easily accessible than individual insurance, as the process of considering suitability for the plan is waived.
We should mention that the ease of group insurance comes with the suitability. Group insurance plans are mostly not tailored to individual needs. They are typically designed to cater to common needs within a larger group.
Access
It is as easy to lose group health insurance as it is to get it. Since it comes with employment or membership of an association, losing employment or the membership means no insurance coverage.
Insurance companies do have to offer continued coverage for a period of time under COBRA, but this often means very high premiums after losing the employers share of premiums paid.
Flexibility
Group insurance plans are more of general-purpose insurance than custom insurance solutions. Benefit limits, deductibles, and copays are determined by the insurance company and the organization offering the insurance. You might have 2 or 3 variations to choose from. But for the most part you get a one-size-fits-all plan with group insurance. You cannot choose your insurance company with group health insurance. You also cannot make direct negotiations in most cases.
Individual health insurance plans are more flexible and customizable than group insurance, as all interactions are directly between the insurance companies’ agent (or your broker) and the individual.
Support
Insurance companies tend to offer more support for group insurance than individual insurance. Corporate clients are the bigger clients and are bound to get more support for administrative and claim issues.
Although the extra support that comes with group insurance is not a given, it is worth noting when a small business owner is choosing between group and individual insurance.
Individual and group insurance plans are tailored to different needs. In choosing between both plan consider their features and core differences against your needs.
If you would like to consider the needs of your business and how they relate to the healthcare options available I’m here to help you all year round. Contact me at any time to start the process.