Switching from group to individual health insurance is a change many people are currently facing. There can be some big differences between the two types of insurance and their cost. Becoming familiar with some of those basic differences will help you to know what to expect.
Group health insurance
Group health insurance is purchased by your employer from a health insurance company. Everyone who is eligible can receive coverage under the plan. Group health insurance is less costly than individual health insurance, because you have the buying power of the group. The insurance company bases the premium upon a calculation of how much insurance the group as a whole will use. However, if you are buying individual health insurance, the calculation of your premium is not based on a group, it’s based on you alone. That is why individual health insurance can be so expensive.
Individual health insurance
Individual health insurance is health insurance that you purchase from an insurance company on your own, and not through an employer. You can choose coverage for either yourself or your self and your family, individual policies often provide less coverage than group policies do. Under an individual plan, some services such as substance abuse treatment may not be covered.
Another important difference between group and individual health insurance is that with group insurance, the law requires the insurance company to cover everyone who works for that employer. With individual health insurance, companies are not required to issue you a policy. This can be very alarming for people who have pre-existing conditions. If you have recently lost your job, it can be surprising to find out that even though you have been covered under a group plan, there is no assurance that you will be able to obtain individual health insurance coverage.
In some states, health insurance companies are allowed to issue policies to people with pre-existing conditions, but they are issued with an exclusionary rider. That means that any services for the pre-existing condition are not covered. Each state has its own laws overseeing how individual health insurance is administered. Therefore, plans can very a great deal from state to state. Plans can also vary from one insurance company to another. Be sure to check around and compare quotes and plans from several different companies before making a decision.
COBRA as an option
One of the first options presented to people who have lost their health insurance coverage is COBRA. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act and it allows you to continue on your employer’s health insurance plan for up to 18 months after losing your job. However, there are several situations in which employees would not be eligible for COBRA coverage such as, if the company employed less than 20 people and went out of business, or if it dropped its group health insurance or went into bankruptcy.
One of the drawbacks of COBRA is the expense. Under COBRA you have to pay the entire amount of your health insurance coverage. Whereas when you were employed, your employer paid a portion of your benefits. One recent development that will be beneficial to COBRA recipients is that after March 1, 2009 recipients will only have to pay 35% of the cost of the monthly premium and the federal government will pay the remainder for up to nine months.
If you have recently lost your group health insurance, switching to individual health insurance will cause the cost of your health insurance to increase. Understanding the different types of insurance and how they work, will help you to prepare. If you have pre-existing conditions and are concerned about finding individual health insurance coverage, investigate COBRA and find out if it is an option. Also, check with several different health insurance companies and compare the costs before you make a decision.