Difference Between Group & Individual Insurance

Different insurance policies offer different levels of coverage for medical care and prescriptions.

Americans can purchase health insurance either through a group insurance plan or an individual policy. Because health insurance policies can be complicated, understanding the differences between these types can help you avoid unpleasant surprises down the road.

Features

Group plans are available through an employer and lower costs for the group. Individual insurance plans are available independent of employment and cost is based on an individual's risk profile.

Types

Group insurance plans include health maintenance organizations (HMO) and preferred provider organizations (PPO). Individual insurance plans include high deductible plans and risk pool plans.

Considerations

Group and individual insurance plans differ widely in the cost to the consumer; consumers should consider the deductible, coinsurance and out of pocket maximum.

Warning

According to the Wall Street Journal Online, insurance companies in more than 35 states can refuse a person for individual insurance if he has a preexisting condition such as diabetes.

Misconceptions

A change in health status could make an individual ineligible for individual insurance plans, even if she was previously covered.

Benefits

People who are in good health might find that individual insurance plans are less expensive. Group insurance plans are often less expensive for those with an ongoing health condition.

References

• Alabama Department of Insurance: Explanation of Health Insurance Terms and Coverages
• Financial Web: Individual Versus Group Health Insurance: Get The Facts
• Wall Street Journal: Going It Alone When Buying a Health Policy

Resources

• Health Insurance Resource Center: How to Buy Health Inusrance