Individual VS Group Policies

Health insurance in the United States is a rather unique industry relative to other insurance. Have you have been hired at a job and car insurance was offered as a benefit? Home Owners? General Liability? Sometimes life insurance is offered to employees, but it's quite unusual for that to be an option and often it is attached to a health insurance plan. So essentially health insurance is the only insurance product offered by employers to attract and retain staff. This is done through a group policy.

Group insurance plans came about during 1940s wartime America and since then they have changed with the needs of Americans. Group plans are good for the employees, employer and the insurance companies. With many people enrolled under the same policy the insurance company can spread their risk around. The employer can negotiate rates and benefits and the employee enjoys lower premiums and benefits they would likely not be able to get on their own.

For the most part group plans from an employer are quite good. Employees are paying little or nothing for their insurance, have lower premiums and lower deductibles. This does not mean that all employee plans are great. It just depends on what the company can afford to buy for their staff. I have lost track of how many employer plans I have had to replace for a family because they were not happy with the coverage, premiums or benefits.

Group plans are policies that cover a group of people of various demographics - age, gender, health, etc. This allows the insurance company to spread the risk of claims over a larger group of people. The young and relatively healthy employees may never use their benefits whereas the older crowd or those with ongoing health concerns may see providers and use other benefits on a regular basis. So in the long run the insurance company can hedge risk and continue to offer the same rates and benefits.

Essentially those insured under the policy receive a certificate of insurance and are subject to any changes made to the coverage the same as others in the group which could include rate increases, network changes and adding or losing benefits. For example: the insurance company decides not to cover cosmetic surgery anymore.

About 59% of Americans get their health insurance through an employer and thus are on group polices. There are another 20% that receive their coverage through a government program such as Medicaid, Medicare and Tri-Care (government and military employees). That leaves approximately 21% of us fending for ourselves.

These folks would be looking for "individual" policies. This means that it is not a group policy and it is purchased directly through the insurance company and not an employer or government agency. Individual does not mean it only covers one person. It means it is purchased individually and not via a group. Individual policies can cover one person or an entire family.

You may hear the the term "private" to describe a policy or plan. This is just another way to describe a policy purchased directly from an insurance company individually. 

Believe it or not even plans purchased via the Affordable Care Act are individual plans. Although they are regulated by federal law and offered exclusively through the government's exchange, they are still purchased directly from the insurance companies. 

Yes, they are subsidized and the government has oversight and control of pricing, but they are still purchased via the company. You are given a policy number and access to the support and customer service at the company where you enrolled just like you bought the plan on your own. Which you did in reality. 

To summarize, group plans are essentially accessed through an employer and you are insured as a member of the group. You have some limitations such as when you can add or remove benefits or members, when you can enroll onto or exit a plan and you are subject to the same general broad elements of the plan, such as the network and ancillary benefit options.

Individual plans you buy on your own directly from the insurance company with the aid of a licensed agent. You can usually choose from various networks and a selection of additional coverage such as dental, vision, life insurance, disability and more.

With individual plans you can usually enroll in and exit the plans at your discretion. There is no "open enrollment" period as with group plans. However, the individual plans offered through the Affordable Care Act exchange do have an open enrollment period when you can enroll on, change and exit plans. This has been running for 6 weeks starting November 1st. 

If you have questions about your current coverage or would like to inquire about a new plan please feel free to contact us here - CONTACT US.

Check out our new article here on bad health insurance.