The myth about group health insurance: It's cheaper
By: Health Insurance
Submitted: 2009-09-30 18:32:34 | Word Count: 615
Sometimes, what we believe to be logical and factual "just ain't so."
Take, for example, the common belief that group health insurance is less expensive than individual insurance. It makes sense, after all, that bigger is better - and cheaper, right? Not necessarily.
People always are surprised when I tell them that, in most cases, employer-based group insurance costs more than individual insurance. "How can this be?" they ask incredulously. The short answer lies in the fact that health insurance premiums are determined, primarily, by claims. The higher the claims, the higher the premium. It's that simple. And so in most cases, the individual "pool" of insured members will have lower claims than a comparable employer group-based pool.
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Why? Well, for starters, the state of Colorado requires group insurance to cover a number of conditions that individual policies don't have to cover. The two with the greatest impact on group premiums are mandated coverages for routine maternity and mental illness. Individual policies normally do pay for those expenses.
Another reason group insurance costs more is that real group insurance is employer-based and guaranteed issue, meaning you cannot be rejected, no matter what serious health problems you might have.
In addition, if you've had previous coverage, pre-existing conditions will be covered from day one. If you've had no previous coverage, pre-existing conditions will still be covered after six months. Watch out for rogue agents marketing fake "group" insurance, which fails to guarantee acceptance or cover pre-existing conditions. These "bad boys" give the rest of the industry a bad name.
Individual insurance policies, on the other hand, look at your medical history for the past 10 years. If you have a pre-existing condition, the insurance company usually will exclude your prior condition. Sometimes they will deny coverage altogether. This creates a healthier risk pool and, thus, lower premiums.
So why the persistent myth that group insurance costs less? The answer lies largely in the fact that employers subsidize at least half - and often more - of the employee's premium. Because most employees just focus on what is taken from their paycheck, they fail to account for the employer's subsidy.
We've all heard that "there is no free lunch" in life. The same is true with health insurance. Group insurance typically has richer benefits and takes all comers, while covering pre-existing conditions. That leads to higher claims - which translates into higher premiums.
Money-saving tip
Employers subsidize the employee's premium but do not usually subsidize the spouse or children. Your strategy should be to ask the employer to provide a break-out of the premiums for each family member covered under your plan. Then, compare what you are paying for them against what it would cost to get similar coverage on an individual basis. Assuming the family members are healthy, you could save several hundred dollars a month in premium. If you suspect that an issue may exist with pre-existing conditions, ask an agent can do a "pre-screen" and let you know if any exclusions are likely.
Author Resource:-
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