The health insurance market is certainly a challenge, but count your lucky stars so that at least you have a choice. To that end, this article will explore the pros and cons of group health insurance.
Benefits of group health insurance
Collective health premiums are subsidized by the employer. In general, an employer must contribute at least 50% of the “employee only” premium. As such, if you’re the employee, you can probably get a richer health plan for less of a premium than what you would pay in the individual health market. However, the cost to add your dependents to the employer’s plan can be prohibitive. In this case, and assuming your dependents may be eligible, you may want to place them on an individual health plan.
Collective health premiums for large families are the same as for small families; while in the individual market, you pay a separate premium for each family member. So if you have a large family, you may be able to get a better deal by adding it to your employer’s plan. As with any change in insurance, do not make any changes without consulting an insurance advisor experienced in your state.
Group health insurance in most states is a guaranteed issue – meaning you can’t be turned down due to pre-existing health issues. It’s a real blessing if you or someone in your family suffers from a medical condition that prevents you from benefiting from an individual plan. But it’s a double-edged sword. While being a guaranteed issue is a huge benefit for those with pre-existing health issues, it comes at a price. This single characteristic alone explains most of the disparity between group and individual insurance premiums. Yes, that’s right – in most states, individual health premiums are almost always cheaper than group health premiums.
Most group plans cover maternity. So if you are planning on having more kids, you should definitely consider switching to a group plan. While you can add a “maternity rider” to individual plans, these riders tend to be expensive, restrictive, and otherwise offer less value than the coverage you can get in a group health plan. That being said, if you are planning on having more children, we recommend that you contact a health insurance advisor in your state for advice on what is best for your family. The correct answer is different for each unique family.
Economies of scale can benefit large employer employees. It is true that the larger the group, the greater the risk pool in which to share the risk, which MAY result in lower premiums than those available in the individual health market. However, the guaranteed problem “problem” MAY wreak havoc on this type of plan. For example, a large, well-rewarded employer tends to retain employees for long periods of time. Ultimately, the average age of the group starts to rise, and so do the premiums.. Additionally, people with significant medical needs (expensive medical conditions) tend to be drawn to large plans because they are guaranteed with good coverage. So, over time, not only does the average age of the group increase, but the group also attracts employees with significant expected health costs. This is the dilemma we see with big health plans like the American automakers and even government plans. Eventually, those with a lot of medical needs start to outnumber those with little or no need and the premiums are therefore higher and higher.
Disadvantages of group health insurance
Group health insurance can cost more than individual health insurance. In fact, if you disregard the employer’s contribution to premiums, individual plans are almost always more affordable than group plans. However, as we mentioned earlier, not everyone may qualify for an individual plan.
What happens if your employment is terminated (by you or your employer)? Yes, you will likely have continuation benefit rights (through COBRA or state continuation programs), but these benefits can be very expensive and the term limited. So, eventually, you must either get another job with benefits, an individual health plan (assuming you are insurable), or possibly join a government health insurance program for the uninsured (if you are not insurable). Let me stress that you should NEVER do without some form of major medical insurance. Not having this insurance puts you and your family at financial risk. In fact, a recent Harvard University study found that 50 percent of all bankruptcy filings were in part the result of medical bills. . Don’t let this happen to you.
Group health insurance premiums are growing faster than individual health insurance premiums. Why? Because most group plans are guaranteed and because they accept “all comers,” they tend to attract those with high medical costs. In contrast, most individual health insurance plans are medically purchased. This means that the insurance company can say “no thanks” to any request that it deems not to be in its best interests. Put yourself in their shoes – would you sign a contract to provide $ 30,000 in annual benefits to someone who would only pay $ 3,000 in premiums (For a net loss of $ 27,000) if you don’t? do it? Hmm … let me think about that one. The answer is a “NO!” Resounding. Through this process of purchasing individual health insurance, insurance companies can control their risks and manage their profitability more effectively, resulting in more stable prices.
As you can see, there is no clear answer as to which type of insurance is the best. The answer depends on a number of factors and is different for each unique situation. The best advice I can give you when considering your health insurance options – get the right advice from an experienced health insurance advisor.