Individual vs. Group Health Insurance Plans: Breaking Down the Basics

Individual vs. Group Health Insurance Plans

Prior to passage of the Affordable Care Act (ACA) and the creation of public health insurance exchanges, individual heath insurance was difficult to get and generally did not provide very good coverage. People typically only explored individual plan options if they’d lost their jobs, were self-employed or retired early and needed coverage before their Medicare kicked in. Group plans from employers were far-and-away the preferred coverage.

What is a group health insurance plan?

A group health insurance plan provides healthcare coverage to a specific group of people, often employees of a company or employee organization, like a union. The policy is purchased by the employer (or organization) and is offered to all eligible participants and their dependents. Typically, group plans offer the same benefits to all members of the group.

What is an individual health insurance plan?

Unlike the group coverage listed above, for individual health insurance plans, the participant purchases the policy on their own. These policies can be purchased through the healthcare exchange, or off-exchange from the insurance carrier directly.

Today, that’s all changed. Because the ACA requires minimum levels of coverage and prohibits insurance companies from denying people coverage because of pre-existing conditions, individual plans are better and easier to get. Plus, they’re often more affordable than comparable group plans.

Because of the public exchanges and companies like Gravie, there are now places where people can shop for a plan amongst hundreds of options. More and more employers are taking the approach that Gravie offers, allowing employees to go to the individual market to select the health insurance that’s best for them.

Differences Between Group and Individual Health Insurance Plans

Choice

• Group plans typically give employees 1 – 3 plan options to choose from. These are plans picked by the employer.
• With individual plans, employees go to the individual market and shop through the government-run public exchanges or in the private market where they purchase directly from the health insurance company.
• The individual market gives employees significantly more options – sometimes hundreds. From there, they choose the plan that best fits their needs.

Cost

• Because every employee’s unique needs can’t be accommodated by the employer’s choice of plans, some employees in a group plan find it affordable but lacking in coverage, while others are forced into paying for extra coverage they don’t need.
• Plans in the individual market are typically less expensive than comparable group plans.
• Plus, with hundreds of plans available for sale, employees get to choose how much coverage they want and need, and thus, how much they pay.
• Some employees may even be eligible for government tax credits that reduce the monthly cost of their health insurance.

Plan Design

• Group plans are chosen by the employer to accommodate the needs of everyone being covered at the company, so they typically offer as many providers, locations, and services as possible.
• Individual plans are chosen by the employee for the employee, not based on the needs of coworkers.
• Health needs can vary greatly across households and ages. With choice of plan design in the individual market, families choose the exact coverage that fits their situation best.

Independence

• Employees lose their group plans if they lose their job or change to a job that doesn’t offer group coverage. Some even stay in jobs they don’t like because they don’t want to be without insurance.
• Individual plans are separate from their employment, so employees can keep their coverage as long as they choose.
• They can also choose to switch coverage and health insurance companies during the annual open enrollment period.

Want to learn more about how your employees can benefit from individual coverage? Reach out and we’ll tell you as much as you need to know – call 844.540.8701 or fill out our contact form here. You’ll be glad you did.