Although group health insurance and individual health insurance both provide people with coverage for healthcare expenses, the rates, plan structure, and several other features can vary considerably. If you are currently trying to determine which plan is right for you, the information provided below can help you select the most appropriate plan.
Group Health Insurance: Fully-Insured vs. Self-Insured Plans
People who buy health insurance for a group represent an employer. The more people covered by the health insurance plan, the higher the discount the employer receives, which is an example of fully-insured health coverage for employer groups. Some of the prominent benefits of this type of plan include:
- The employer pays a premium to a health insurance company to secure coverage for employees for one year.
- The rate the employer pays for that year, depending on the number of employees enrolled in the plan.
- The employee must pay out-of-pocket for co-pays, deductibles, and any other amount required by the plan for services received for himself or herself and dependents.
- Premiums go to the company providing health insurance, which then pays claims for the employees and dependents of its clients.
- Monthly premiums typically don’t change for employees during the calendar year unless they have had a qualifying event such as marriage, divorce, or the birth of a child.
Some employers opt for self-insured group health insurance plans. Self-insured group health insurance plans are more common among large companies because it doesn’t require working with a third-party agent to secure the best rates. The employer collects premiums and assumes the risk and financial responsibility of paying claims for covered employees and their dependents.
Arizona employers who go this route may also choose to purchase stop-loss coverage for employee healthcare expenses that surpass a pre-determined dollar amount. Companies offering self-insured plans may send claims to a third-party claims processing organization. Outsourcing claims processing, as well as tasks like data entry, help reduce the employer’s administrative burden and expenses.
It costs less for insurers to collect premiums and process claims for employers with many employees enrolled in the plan. One reason for the lower cost is that some covered individuals will never claim against their health insurance during their one year of coverage. The concept of group health insurance is similar to buying in bulk from a warehouse or discount club. The more people buy, the less they pay per unit. Since having several people enrolled in a group plan reduces administrative costs for the insurer, it lowers costs for the employer and payroll deductions for employees.
Although most Arizona employers can’t afford to cover 100 percent of the cost of healthcare premiums, the amount deducted from employee paychecks is on a pre-tax basis. That means the employee pays no tax on the money used to pay health insurance premiums, and it lowers his or her effective tax rate.
Individual health insurance plans require underwriting, which means that the company might deny an applicant due to poor health history. With group health insurance in Arizona, everyone eligible to receive benefits through the employer can sign up for coverage without the fear of denial. Obtaining health insurance through a group can be a good option for people with pre-existing conditions that individual health providers won’t cover. Unfortunately, this isn’t always possible if you are self-employed, a student, work part-time, or have other obligations or health conditions that prevent you from accepting full-time employment in the southwest.
Health Insurance Options When Terminating Employment
Although health insurance through an employer group often cost less, and you’re guaranteed coverage if you meet the employer’s eligibility requirements, it also ends when you terminate your employment. In 1986, the United States Department of Labor introduced the Consolidated Omnibus Budget Reconciliation Act (COBRA) to provide departing employees with access to the former’s employers group insurance plan if necessary.
While COBRA can help to fill the gap when leaving one job and becoming eligible for benefits with another, it is quite expensive. That is because you, as the former employee, pay 100 percent of the cost of the premium without any contribution from your previous employer. The only obligation the company has to you under COBRA is to offer it to you for 18 months to three years after terminating employment, depending on your unique circumstances. Spouses, former spouses, and dependents can all opt to purchase health insurance in this manner as well.
Individual Health Insurance Offers Greater Flexibility
Although it costs more than group health insurance, one benefit of individual health insurance is that you can choose which treatments and conditions you want to be covered as well as the deductible you must pay. Some people without access to a group plan choose only catastrophic health insurance to keep their premiums low. Catastrophic health insurance is a risk more appropriate for younger people in generally good health with no dependents.
Get Help from an Arizona Licensed Insurance Broker
Whether you’re an individual looking for coverage for only yourself or an employer needing to cover several employees, Anderson Insurance Services can help. Jerry Anderson holds a license in Arizona to help residents of the state locate and compare features and costs of multiple plans. Please contact us today to request your initial consultation.
If you're a business owner with employees, then you know health insurance is critical to employee recruitment and retention.
Working with an Arizona health insurance broker is the best way to help you navigate the many health insurance options available to the self-employed. Brokers know the laws and can help you determine the best policy for your specific situation. Most importantly, a local health insurance expert can help you find quality plans at an affordable rate.
Call us to schedule your free consultation.
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