Group health insurance is a reality for many businesses, both big and small, but it’s not always the “benefit” that companies would like it to be. Even the most popular group plans can sometimes fall short of expectations, and there are several reasons why it might not be the right solution for your business or your employees.
What is group coverage?
Generally speaking, group health insurance is defined as a plan purchased by an employer to cover eligible employees and their family members. The benefit is extended to employees for the duration of their employment with the company and terminates when they are no longer working there. Many companies offer these health insurance plans as a benefit of employment and often contribute toward the cost of the monthly premiums. This is how the majority of people in the U.S. receive health benefits, and while it can be an advantage for some employees, in some respects even these plans can fall short.
The gaps in group health plans
Health insurance has historically been regulated at the state level, but with the implementation of the Affordable Care Act (ACA), the federal government now regulates some aspects of the insurance market as well, and this is particularly true for individual plans and small businesses with 50 or fewer employees.
Perhaps one of the biggest areas where group health plans fall short is the fact that they are tied to an employer, so when you quit or lose your job, healthcare coverage goes, too. Having a family member who becomes ill and requires care could also cause you to lose your job. The consequences of this could be significant—medical bills are the leading cause of bankruptcy in the U.S., accounting for 62 percent of all personal bankruptcies. Interestingly, and perhaps alarmingly, the same Harvard University study showed that 78 percent of those who filed for bankruptcy due to medical bills had some health insurance coverage at the time.
Group health insurance is also costly, and while your employer is often paying a portion of the monthly premiums, the truth is that most group health insurance policies cost significantly more than individual plans would, and sometimes the difference can add up to thousands of dollars a year.
When you get coverage under a group health insurance policy, your employer chooses what will be included in that coverage, which doctors and hospitals are in-network, and what your co-pays, deductibles, and prescription coverage will be. It’s a one-size-fits-all approach to a very personal choice.
While many Americans like the idea of having health coverage as a benefit of their employment, the truth is that you might be able to save a significant amount of money and get better coverage that fits your situation by getting an individual plan.
Have you compared group and individual plan costs? Leave a comment about what you discovered.