What’s The Difference Between Group Health Insurance And Personal Health Insurance?
Dan Levenson June 23, 2015
While the Affordable Care Act has changed the landscape for many aspects of health insurance options for business, there is still a significant difference between group health insurance and the coverage you might select as an individual.
Before 2014 and the ACA, health insurance applicants were subject to a review of their medical history and the presence of pre-existing conditions. The goal of insurance companies is to measure their risks over a pool of insured clients and to set premiums to cover that risk. Traditionally, companies enjoyed more favorable rates over individual coverage due to their participation in a larger, healthier pool of insured. Individuals seeking insurance for themselves and their families were pooled with others needing private coverage, and those often resulted in larger premiums being charged by the insurance companies.
In today’s health insurance environment, there are still a number of differences between group and private health insurance. These include:
- Selecting A Plan
As an employee in a group plan, you have a fairly narrow number of options to match your plan with your specific needs. Your employer will negotiate an initial plan with certain deductibles, benefits and other elements. While you may have a few choices, they will be constrained to the overall plan affecting all your fellow co-workers. On the other hand, when you select an individual plan, you can work on your own or with an experienced agent to select from a wide variety of plans. You can balance your monthly premium against a larger or smaller deductible, and add the other elements you desire for you and your family’s needs.
- Tax Issues
While the laws and regulations in this area are constantly changing, your coverage in a group plan is deductible. However, this may be affected by your employer’s use of a Defined Contribution HRA and how they treat contributions to it. On the other hand, if you purchase insurance as an individual, you have a number of tax factors to consider, including whether or not you avail yourself of subsidies under the ACA.
- Plan Management
Many people find managing their health plans somewhat intimidating. A group plan has the advantage of an employer not only paying all or part of the monthly premium, they will normally have an administrator to handle other details. This includes deducting any premium share you are responsible for, processing claims and other plan documents, and helping you answer questions and resolve problems. Of course, with an individual plan, you are responsible for all paperwork, paying all premiums, and dealing with any issues that arise between your health care provider and the insurance company.
When you participate in a group health plan you have limited ability to keep the plan after you leave a company, voluntarily or involuntarily. While you can select COBRA protection for a period, you may find this prohibitive in cost. With an individual health care plan you can choose to keep or modify your coverage based on your own desires, independent of your employment status.
Many companies find offering health insurance helps them attract and keep good employees. This is because much of the direct cost and administrative hassles of the insurance are borne by the company. However, with the shifting environment for health insurance, many individuals are finding individual health insurance is worth the added cost and administrative details.