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What is group vs. individual health insurance? This question is one of the most commonly asked by individuals and employers researching their health insurance options. A simple answer is that small business group health insurance is a policy purchased by an employer, while individual insurance is bought by a single person or family. Each option has distinct differences and reasons to consider, based on the specific needs of the person or employer seeking coverage. Some of these include cost, levels of coverage and enrollment restrictions.
All health insurance plans offer individuals and families coverage for medical care. Policy holders pay into their insurance plan through what are called premiums, and as a result, they are guaranteed coverage based on their specific plans. Without health care, many people would not be able to afford even basic checkups.
Most people get health insurance through their employers, though that is not always the case. In today’s economic climate, many small business owners have found that attracting and retaining qualified employees requires offering competitive benefits, including group health insurance. However, some businesses do not have the budget necessary to offer quality coverage for their small number of employees. In such cases, individuals may have to find their own health insurance outside of what their employer offers.
Group health insurance plans offered through an employer usually make coverage more affordable for individuals and families. Employers have the option to cover or pay a portion of the total monthly premium and have the employees pay the remaining amount, usually as a deduction from each paycheck. Some employers may pay 80 or 90% of the total premium while others may pay much less or push the full cost onto their employees. Some employers do not offer health insurance coverage while others provide access to health insurance but do not help at all with the premiums. Employers have the flexibility to decide what, if any, portion of the premium to cover when they set up group health insurance coverage for their employees.
In contrast, individual insurance is purchased by a single person who is responsible for paying the entire monthly premium. An insurance agent will often help guide individuals and review multiple individual health insurance plans to ensure they select the most affordable option with the best coverage. Individual health insurance typically requires more involvement by the policy holder, as they’ll need to know what they want covered and which plans are right for themselves or their families. Individual insurance tends to be a little more expensive than group health insurance because the costs are not spread between multiple policy holders and the employer.
Group health insurance is restricted to plans chosen by the employer as set up with an adviser. This results in fewer coverage options and less flexibility for employees, but with typically lower monthly premiums. Larger companies with 50 or more employees may offer additional features and options with their group insurance plans. In some cases, employers may allow employees to purchase add-on coverages, such as maternity, when it is not covered by the group health insurance plan. These add-ons are known as “riders” and can help expand coverage options to those who are willing to pay.
Because individual insurance is for a single person or family, an agent can provide one-on-one guidance in reviewing multiple plans, providing access to many options with varying premium costs and coverage levels. This allows more flexibility for a person or family as they choose customized health insurance coverage. Individuals may be able to add specific coverages to their plans more easily than someone with group health insurance, but it will likely be more expensive.
Group insurance plans typically have set annual enrollment periods and often have restrictions or waiting periods for new employees. These restrictions may create challenges for those needing insurance coverage for immediate or existing medical needs. However, it is important to note that insurance companies are not permitted to deny coverage or charge more based on existing medical conditions.
Generally, individual insurance also requires enrollment during a yearly open period, which necessitates advanced preparation and planning. The Affordable Care Act (ACA) offers the Health Insurance Marketplace at www.healthcare.gov where individuals can enroll in a chosen health care plan during open enrollment. In some special cases involving life events, such as losing previous health coverage, a person may qualify for a special enrollment period.
For more information on health insurance plans or for expert guidance on selecting health coverage for groups, individuals or families, contact an adviser at Fringe Benefit Analysts. Our team of experts can guide you through the often-overwhelming process of researching and selecting affordable, individual health insurance coverage that meets your specific needs.
