According to 2021 Census data, over half of insured Americans – some 54.3% – receive their health coverage through a group plan provided by their employer. That’s up from 49% in 2019. Yet many employees may not fully understand the difference between group plans and individual policies. The same can be true for individual health plans compared to small group insurance.
Let’s explore some of the key differences.
WHAT IS GROUP HEALTH INSURANCE?
Group health insurance plans are extended by an employer to their employees or staff. (Typically, this coverage is offered to their dependents as well.) Business owners pay either a percentage or the total cost of the monthly premiums and may see certain tax benefits as a result.
Under the Affordable Care Act (ACA), businesses with 50 or more full-time employees are required to provide health insurance to them as well as dependents under the age of 26. This is known as the employer mandate. Failure to make affordable insurance available can result in penalties.
WHAT IS INDIVIDUAL HEALTH INSURANCE?
Individual health insurance is purchased by an individual for themselves and their family. The guidance of experienced agents or brokers can help navigate the many choices, plans, and premiums available. When buying individual plans, employees often end up paying more, either in monthly premiums or out-of-pocket costs. But premium tax credits are available to those who qualify.
THE MAIN DIFFERENCES:
- Group health insurance coverage commences shortly after a new employee is hired—regardless of the time of year.
- Individual health insurance, on the other hand, requires individuals to purchase a plan either during the nationwide ACA open enrollment period or after experiencing a qualifying life event.
- Group insurance often provides employees with comprehensive benefits they may not otherwise be able to afford themselves.
- Individual coverage, however, is limited to compliance with the ACA.
- The employer chooses group plans to accommodate the needs of everyone at the company, typically offering as many providers, locations, and services as possible.
- Individual plans are chosen by the employee—for the employee—not based on the blanketed needs of coworkers or any other sizable cohort.
WHAT ARE SOME THINGS YOU CAN EXPECT FROM EACH?
With a small group insurance plan, your employer:
- Will include a range of options including HMO, PPO, or additional coverage, such as dental, vision, and life insurance.
- Will be responsible for a significant portion or the entire monthly premium.
- Will deduct the share of your premium from your paycheck each pay period.
- Will provide additional assistance through their human resources department, where you can access documents relevant to your plan and direct questions about coverage.
With individual coverage, you:
- Must choose a plan that covers you and your family and incur the monthly payments.
- Must plan on enrolling during an “open enrollment” period. You can only obtain coverage at other times of the year if you meet certain qualifiers.
- Must determine if you qualify for cost assistance as well.
- Must select from Bronze, Silver, Gold, or Platinum plans offered via the health insurance marketplace, a broker, or directly from a carrier if you’re not subsidy eligible.
BENEFITS OF GROUP HEALTH INSURANCE PLANS
While there’s no one-size-fits-all solution, most small group insurance policies have several advantages over individual plans. For instance, many employers provide supplemental health plans, which include dental coverage, vision coverage, and pharmacy coverage, either separately or as a bundle.
Another critical benefit of group plans is lower premiums. You’ll generally reap cost-saving benefits such as a larger risk pool for the plan, employer contributions toward your premium (often 50%), and tax benefits to both the employer and employee. Specifically, the money employers pay towards monthly premiums is tax-deductible. Employee premium payments can also be made pre-tax, which may reduce their total taxable income.
MAKING THE RIGHT CHOICE FOR YOU
There are very few concrete right or wrong answers when it comes to choosing health insurance because there are so many variables to consider. That’s why it can be invaluable to work with a trusted advisor to develop a strategy that works for you. At Health & Benefits Partners, we’re here to help guide you through the process. Contact us today if you’d like help navigating the often-confusing healthcare landscape.