Health insurance is health insurance, right? Well, not quite. Here’s a brief look at some of the differences between a group plan and an individual plan.
Group health insurance
Most people younger than age 65 have group health plans through their employers. Group health insurance is partially paid for by the employer, which makes it more affordable for the employee. Usually, about 50 to 90% of the cost is covered as part of an employee’s compensation.
Employers are not required to offer health insurance, but if they do, the regulations under the Health Insurance Portability and Accountability Act (HIPAA) kick in. That means that, under a group plan, applicants cannot be denied coverage. A group plan, like an HMO or PPO, usually offers a provider network and, because of the large number of people in the group, lowers costs.
Individual health insurance
Individual health insurance is paid for solely by the insured person. It is purchased from an insurance company for oneself or one’s family. While it may not actually cost more than a group policy, it will seem more expensive because the premium is paid entirely by the policyholder.
Each policy is unique to the person and, in most states, companies selling these policies can pick and choose who they want to insure. Most require applicants to fill out questionnaires and get physicals. The policy can be underwritten to exclude coverage for pre-existing conditions and the cost of the policy can be adjusted to reflect the health of the applicant. If applicants are in poor health, they can be denied coverage entirely.