What you need to know about Individual Health Insurance vs. Group Health Insurance
Before looking into the pros and cons of individual health insurance and group health insurance, it would be best to first look into the definitions of both types of coverage. Individual health insurance is purchased by a single person from the private market, either for oneself or for one's family. Individual health insurance can cover more than one individual, i.e. the entire immediate family, hence the common mistake that this type of coverage is meant for a single person only.
Conversely, group health insurance is designed for the purpose of a company purchasing insurance for its employees. This type of coverage may be purchased on the open market, similar to individual health insurance. It can also come in the form of a self insured plan that is designed by the company.
The first difference between the two types of coverage is cost. Affordability is perhaps the deciding factor as to why individuals opt to have a group health plan instead of individual health insurance coverage. The set rate for a group of individuals is much cheaper than buying for just one individual. It’s like buying wholesale. And because group health insurance is typically very comprehensive, each employee will not have to pay any additional fees unless anyone opts for additional benefits that are not offered to the group.
Another difference between the two types of coverage is underwriting. Companies that offer individual health insurance have the freedom to pick and choose which candidates they will approve for insurance coverage. This is applicable in most states, however, guaranteed states such as New Jersey can be very costly since their insurance companies are required to approve all individuals for insurance coverage regardless of what health issues they may have. On the other hand, a group insurance plan guarantees that every individual who applies for a plan gets accepted just as long as one is an eligible employee of the company. No individual can be denied insurance coverage due to pre-existing conditions. Most group health plans will not automatically cover one’s pre-existing conditions due to the waiting period before coverage is approved, especially when one has not maintained a continuous coverage. But should the candidate have a clean record and have not lapsed in coverage, he or she will instantly be approved.
Obtaining quotes for individual health insurance is easier than that of group health insurance quotes. With the convenience of the Internet, it just takes a few minutes to submit basic information and to receive quotes online. Obtaining group insurance quotes can be a more challenging and more involved process that requires filing census forms containing all employee information.
An advantage for group health plans is that maternity coverage is automatically included in almost all types of group coverage. By default, maternity coverage is not included in individual health insurance plans. Those with individual health plans will have to pay higher premiums to include the extra benefit of maternity coverage.
As opposed to group health plans, individual health insurance can be custom made or tailored to fit the needs of an individual just by adding or removing particular policy riders. For group insurance plans, it is the employer or company that decides which type of coverage to purchase. It can be beneficial to some, yet detrimental to others.
Generally speaking, individual health plans should only be explored by those who are self-employed or unemployed, or by those that do not belong to any groups that guarantee health insurance coverage.