Is Group Health Insurance Better Than Individual Health Insurance?
Group health insurance is a plan purchased by an organization that is then offered to their qualifying employees and members. The individuals included in this plan cannot purchase individual coverage, as these plans may only be bought by a group. Moreover, there needs to be at least 70% participation (although this exact number may vary by plan) in order for the plan to remain active. Plans may vary in the coverage they offer, their costs, their providers, and their terms.
Group health plans are great options to provide to your employees and can be especially beneficial when it comes to attracting and retaining top talent. When ranked against other employer-offered benefits, group health was considered to be the most appealing. But how does it stack up to individual health insurance? Which is better?
Well, it depends. Here’s why.
What are the benefits of group health insurance?
Group health insurance plans are generally handled by employers, which does offer several benefits. Namely, an employer may handle upwards of 50% – even 80% in some circumstances – of group health insurance premiums. A group health plan spares the worker from having to do any searching or research on their own. Note, however, that only full-time employees may qualify for group health insurance, or employees may be required to have worked at a firm for a certain period before being deemed eligible.
Note also that an organization may only be eligible to qualify for group health insurance if you have a certain number of employees. Some providers may offer plans to companies with as few as one or two employees, whereas other carriers may only offer plans for midsize businesses with upwards of 100 employees. It all depends on the carrier.
Here are some of the benefits of group health insurance plans, as offered by employers:
- Employees get comprehensive coverage.
- They may select from a range of doctors.
- They can receive discounts for spouses and dependents.
- There may be coverage for pre-existing conditions.
- They may receive the option of adding dental and vision coverage.
With group health insurance, there is the benefit of having a large variety of choices. Many employees will opt for group health insurance over individual insurance, but there are still just as many reasons why someone may choose an individual plan instead.
What are the benefits of individual health insurance?
Individual health insurance may also be referred to as self-insured coverage. This is a health plan purchased by an individual for themselves and/or their spouse and dependents. Often times when purchasing individual health insurance, a person might enlist an insurance agent to help them narrow down their options. If they choose, employers can help their full-time employees purchase individual health insurance by offering what is referred to as an HRA, or Health Reimbursement Arrangement. HRAs are tax-free and help to reimburse employees for their healthcare expenses. They may receive a monthly allowance that they can then use towards their premiums as well as any other potential qualifying health-related expenses. Unused funds are returned to the employer at the end of the year.
Here are some of the benefits of individual health insurance plans:
- Individual health plans may still be valid after an employee has lost their job or had their hours significantly reduced.
- Employees have an unlimited choice of carriers.
- Premium tax credits are available to employees who qualify.
- The plan is owned and managed by the employee.
Similar to group health insurance, there are plenty of benefits, and it’s no wonder why employees may struggle to choose between two major options. The primary characteristics of these two plans vary, but they each offer their own benefits. How do we make that choice?
Is group health insurance more expensive than individual health insurance?
Plans may vary in costs, so there’s no way to say for sure which plan is more expensive. In some cases, especially with an HRA or individual health insurance plans may be less expensive than group plans. However, not every employee may have the option of reimbursement and therefore may find group health plans to be more affordable. It is also important to note if you have access to employer-sponsored coverage, getting your own individual plan may not even be an option for you.
For employers, group health insurance plans can be a great way to attract talent, and the larger risk pool for the plan can reduce overall costs for your workers and you. You will have to pay a certain contribution percentage, usually between 50-80%, but you may receive tax incentives.
What it comes down to is your personal circumstances, your employment, what your organization offers, and what you need. For more information or a more specific answer based on your individual situation, discuss your options with a Hitchings Insurance Agency representative today. If you are an employer and want to learn more about group health insurance, read our group health plan page for more information.