So you own a business and are considering the small group benefits route versus going with individual medical coverage. There is a fairly big difference in some aspects of the coverage but at the same time they are generally very similar. Knowing the difference between the two kinds of coverage is important if you want to make the most appropriate decision, because an assumption that the coverage is the same can cost a lot of money when you realize those things not covered by one or the other policy can add up quickly.
The biggest difference is that group insurance plans (unless specifically excepted out) cover normal maternity services. Indivdual coverage only covers complications to pregnancy, which generally means there will be no coverage for the actual delivery which can run several thousand dollars. So if you are a young business owner looking to expand your family that is probably all you need to hear to know that group coverage will be the better option for your family.
Individual policies historically have had greater restrictions about the amount of coverage for certain kinds of care as compared with what is found in many small group policies. The group policies tend to be more generous in the amount of care you can get for specific provider types such as therapists. Of course with healthcare reform we will see, less differential between the plans, but that does not kick in for nearly 2 years still, if it is not overturned in the Supreme Court.
The small group policies comparing the same deductible and PPO to PPO or H.S.A. to H.S.A. based plans we find most often that the small group will be more costly than individual. However when comparing the actual coverage and realizing you have expanded coverage on the group coverage it becomes apparent that for most the small group coverage is better. Then there is the entire issue of underwriting and getting a policy issued in the first place.
With a small group plan you have a guaranteed issue policy. With individual coverage you are at the mercy of the carrier’s underwriting guidelines to get coverage or be presented with a decline. In Texas if you are declined for an individual policy you do get the option to secure a policy thru the Texas High Risk Pool, which is quite a bit more expensive. By contrast any legitimate group is able to get group coverage. A group is 2 or more people working for the same employer, a relationship which must be documented thru specific records.
Small groups are medically underwritten, but instead of accept (maybe with a rate up) or decline as happens with individual plans small group must accept, but can rate up the group up to 67% above the base rates for the group. The group will have base rates issued based on age/sex of the employees along with the industry in which the group works. Some groups get a bit of rate relief based on industry while others pay a surcharge. Then during medical underwriting the underwriter reviews based on information on the application for the group if there is a likely expensive chronic condition which warrants additional premium being charged for the group.
In the end small group is best for those wanting to have kids on the insurance plan, and who have medical issues that would likely cause a decline for an individual insurance application. Individual may be better for a very healthy young male who has no plans to get married and have kids in the near term.
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