Individual Health Insurance Or Group Health Insurance?
Most people believe that individual health insurance and
group health insurance are essentially the same thing and
that the only difference is that one is sold to individuals
and that the other is sold to employers and other group
organizations (such as clubs) to cover employees or members
of the organization. In fact it is not quite as simple as
that and individual and group health plans differ in a
number of significant ways.
One of the most significant
differences is that a group plan normally has fewer
limitations and does not usually require those covered under
the plan to provide proof of insurability. In other words
the mere fact that you are a member of the group to which
the plan applies means that you are eligible for cover.
Another important difference is that the contract for a
group plan is made between the insurance company and the
employer, union, trust, club or other sponsor and is not
made directly with you as would be the case with an
individual plan. This means that you have no power to
negotiate changes to the plan to suit your own specific
needs and that, where changes are made between for example
your employer and the insurer, you have no real power to
intervene.
The great advantage for most people of seeking health
cover through a group plan lies in the fact that it has
fewer limitations and is generally cheaper than an
individual plan. However, one significant disadvantage is
that your membership of the plan is tied to your membership
of the group and, in the case of employment, a change in
your employment status will affect your cover. For example,
if you retire, are laid off, quit, or simply suffer a
reduction in your hours you could suddenly find that you and
your family lose your health insurance.
Now there is of course some protection for individuals
who lose their employment through no fault of their own and
the Consolidated Omnibus Budget Reconciliation Act (COBRA)
will allow you to retain your group scheme cover for a while
(typically 18 months) while you make alternative
arrangements. The drawback of course is that you still have
to pay for cover and this can be very expensive since you
will have to pay not only the employee contribution which
you were paying while in work, but also the employer's
contribution since you are no longer on the payroll. The
benefits to which you are entitled under COBRA cover may
also be reduced in many cases.
One other key difference between group and individual
health insurance which is worthy of note here arises out of
the Age Discrimination in Employment Act. This essentially
means that, where a group plan is in existence covering a
group of twenty or more employees, the employer must make
insurance available to all employees, including their
spouses and dependants. Accordingly, there is no age limit
imposed for cover and this can be particularly beneficial to
older employees.
These are of course only some of the main difference
between group and individual health insurance but
nonetheless represent a good starting point in helping you
to decide between the two. Which you choose must of course
be a personal decision but one important thing to remember
is that health insurance becomes increasing difficult to get
and more expensive the older you get and, even if you do
decide to 'shelter' under an employer's plan, the day will
surely come when you will be on your own and forced to seek
cover outside of your employer's scheme.
Your employer's scheme may be fine today but do not
forget to view it not simply in terms of your present needs,
but also in terms of your longer term needs.
