group and individual health insurance

Differences between Group and Individual Health Insurance

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If you are a full-time employee, your employer likely offers an optional group health insurance plan that provides medical benefits to and your eligible family members. If you are a working adult who is not currently receiving insurance through your employer, or you are a senior citizen, a college student, or a disabled adult needing coverage, then you are likely in pursuit of an individual health insurance plan. There are different options within each type of insurance plan, and distinct variances between group and individual health insurance options. Below is an overview of the two types of health insurance plans and their associated options.

Health Insurance Plan Options

There are a few common options within both types of health insurance plan, each with their benefits and drawbacks:

·         HMO

HMO plans tend to have low premiums and copays, but they are not as flexible as PPO plans. With an HMO plan, you must choose a primary care physician and obtain referrals in order to see specialists.

·         PPO

PPO plans are much more flexible than HMO plans, but this flexibility comes at a price. Premiums, copays, and out-of-pocket expenses are generally higher. On the other hand, individuals on a PPO plan do not have to designate a primary care physician or obtain referrals before seeing specialists.

·         Medi-Cal

Medi-Cal is offered to low-income families, seniors, and adults with disabilities. This program covers preventative care, doctor and hospital visits, immunizations, maternity and pediatric care, disease management, medical tests, and mental health care.

Individual Health Insurance

Individual health insurance provides medical benefits to an individual and their family, and is purchased independent from an employer. These policies have various prices and premiums, but are generally more costly than group plans. In addition, oftentimes this type of health insurance policy requires the individual to answer a health questionnaire or undergo a medical exam to offer the insurer an opportunity to decline or limit coverage. Under the Affordable Care Act, as of January 1, 2014, health insurance companies cannot refuse to cover you based on pre-existing conditions. However, if you are in a “grandfathered” health care plan (if you signed on or before March 23rd, 2010), this provision of the Affordable Care Act does not apply to you.

The cost and coverage by an individual health insurer is based on the following factors, among others:

  • Age – price tends to increase as an individual ages
  • Location – individuals living in large metropolitan areas often incur higher premiums
  • Family Size – family size can greatly increase the price of an individual insurance plan
  • Tobacco Use – individuals with a history of tobacco use commonly pay up to 1.5 times more than non-tobacco users

Group Health Insurance

A group health insurance plan, also known as an employer-sponsored insurance health plan, is purchased by the employer on behalf of their employees and their eligible dependents. Most working age Americans have health insurance coverage through their employers. In contrast to individual health insurance, the insurer is chosen by the employer, not the individual.  The employer and employee often share the cost of the premium, and therefore these plans tend to be lower in cost than individual health plans.

Another difference between group insurance and individual insurance is the need for a medical examination prior to coverage. Group health insurers often waive this requirement because the risk of one decreases in comparison to the reward of many. There are often enough healthy employees insured to balance out more costly medical requirements of a few, resulting in a net win for the insurer.

Group and individual health insurance is generally the same in terms of what is offered to the patient. Both types of insurance offer HMO, PPO, and Medi-Cal options. Individual insurance is often sought by those not already covered by group plans, or by individuals who prefer to obtain insurance through an alternate provider.

AdminDifferences between Group and Individual Health Insurance