Due to rising medical expenses, many people are looking for ways to save on health coverage. Employees that work for businesses that offer health insurance as part of a comprehensive benefits package are typically able to participate in a group plan.
Individual Vs. Group Health Insurance
When health coverage is not available through an employer, individual health insurance can provide the coverage a person needs to pay for hospitalization and other medical-related costs. While individual and group health insurance has several similarities, there are also some key differences between these two plans.
What Is Individual Health Insurance?
Health insurance is designed to cover medical expenses for injuries, illnesses, and other medical procedures. With an individual health insurance plan, coverage is purchased by an independent person and not an employer. Individual health insurance plans are regulated under state law and there are policies available to cover the entire family. An individual health insurance policy may cover:
- Emergency services
- Ambulatory services
- Maternity care
- Prescription drugs
- Laboratory services
- Pediatric services
- Preventive and wellness services
- Mental health care
- Rehabilitative and habilitative services
There are several key benefits that individual health insurance has over group health insurance. First, people who choose individual health insurance have the ability to choose their own plan and options to meet their unique needs and the needs of their family.
Second, individual health insurance plans also provide policyholders with greater control over what insurance company they choose and the coverage amount. Third, with individual health insurance, policyholders can maintain their plan if they choose to switch jobs.
Obtaining individual health insurance can sometimes be tricky. Under the Affordable Care Act (ACA), as of 2014 health insurance companies can no longer limit, exclude, or deny coverage to Americans solely because of preexisting conditions.
However, Americans can only purchase coverage during the Open Enrollment Period, which only occurs once a year. But if a person misses this deadline, there are qualifying events that may allow them to obtain health insurance, such as changes in household or residence.
What Is Group Health Insurance
Group health insurance is a health plan offered by an employer to grant employees and their families health coverage. Businesses with as few as one employee are eligible to purchase group health insurance.
Under a typical group health insurance plan, premiums are often less expensive than individual health plans. Unlike individual plans which are paid by the individual out-of-pocket, premiums are paid using pretax dollars, meaning employees pay less in annual taxes. Employers can also benefit from offering health insurance by paying lower payroll taxes due to their annual contributions.
Insurance companies are able to provide businesses with insurance at a reduced cost as the risk is spread across all participants of the group plan. Only groups, not individuals, can enroll in a group health insurance plan. However, there are certain qualifications for businesses that wish to enroll. Most group health insurance plans require a 70 percent participation rate and premiums must be shared between employees and the company.
Dependents and other family members can often be added to a group health insurance plan at an additional cost. Group members also have the option to enroll or decline health coverage offered by an employer.
There are several key benefits to opting in for group coverage from an employer. An employer that offers group health insurance may:
- Provide a choice between several health insurance plans
- Answer questions about the plan
- Provide employees with plan documents
- Deduct a share of the premiums directly from each paycheck
- Pay for all or some of the monthly premiums
While group health insurance can be more affordable than individual plans, there are some downsides to consider. Most group insurance policies cannot be customized in the same way that individual health plans can and some employees may find that the insurance being offered is insufficient for their needs.
Group health insurance also becomes obsolete if a person loses their job, leaves their job, or retires. Although employees often have the ability to continue their coverage after leaving their job for at least 18 months through State Continuation or COBRA Individual health policies can be renewed each year with no fear that coverage will be lost.
Speak with an Employee Benefits Consulting Firm
For businesses that wish to remain competitive and retain their top talent, developing a comprehensive benefits package is critical. The right benefits can help keep employees motivated and improve productivity in the long-term.
Working with an experienced benefits consulting firm can help businesses in all industries establish a benefits plan that drives them towards success. For more information about the differences between individual and group health insurance, or to speak with an experienced employee benefits consultant, contact New City Insurance today.