Since group plans are guaranteed issued policies and not subject to medical underwriting there is more liability insuring them so the premium is based on a census table of the group and subject to a 15% discount if all overall healthy or 15% rate increase if pre-existing conditions found through the limited underwriting/review that is performed.  It also assumes maternity coverage whereas for individual medically underwritten plans one must add maternity coverage as an optional benefit.  So with that said, group is usually more costly than an individual plan since medically underwritten plans can decline an applicant, issue exclusionary riders and/or impose a rate increase to an individual’s monthly premium.  Whenever possible, it is more cost-effective to go with an individual plan since you can usually find a comparable plan in benefits at a much lower premium.

Also, a group insurance plan also has another disadvantage that is not always mentioned but quite important.  That is, that if an employee and/or their dependents were to develop some kind of medical condition while insured under their employer’s group coverage then they would not be able to enroll in a medically underwritten plan should they be terminated from their employer’s plan or reach the limiting age as a dependent or otherwise lose their eligibility to remain on the group plan.  This is where I have seen many problems in that one would have limited choices in continuing their coverage.

1. Elect Cobra if they are offered upon losing their group coverage and they must remain on the plan until the full time period that the plan is provided is exhausted (18 months usually).
   1. Also note, that the primary insured has to remain as the primary policy holder in order to keep a dependent insured.  So for instance, an employee has her husband and children insured as dependents on her employer’s policy and then is terminated from her job and loses that coverage but has the option to enroll in Cobra.  Although she is healthy, her husband has prostate cancer and is not eligible for medically underwritten plan – she must elect the COBRA policy despite the higher cost (remember, she was used to the employer paying at least 50% of the employee’s premium) and exhaust the COBRA Benefits (in this scenario MINI-COBRA for 12 months).  She was eligible for Cobra premium assistance through the American Recovery and Reinvestment Act (ARRA) in which provided a subsidy of 65 % of the entire COBRA premium and she had to pay only 35% of the total COBRA premium.  However, the subsidy was only good for 9 months and the premium went up to the full amount. They must pay that amount for the remaining 3 months and once COBRA is exhausted they are offered a Conversion policy through the insurance carrier administering the COBRA policy.
   2. The Conversion policy is substantially more than the already usually high COBRA premium and is one of the only alternatives an individual has in maintaining the same level of benefits if deemed uninsurable on a medically written plan.  Remember, these individuals got to this point usually because they were terminated from their jobs so are least likely to have the funds necessary to continue paying their premiums.  The good news is that the spouse can now enroll in the conversion plan as the primary insured and the children and wife (primary insured on the group plan and the COBRA plan) can drop off the plan and enroll in an individual/family plan that is medically underwritten.
   3. Depending on the state, the husband with prostate cancer may have to enroll in the conversion plan or perhaps can enroll in a high risk pool if enrollment is still available but usually may not be able to shop around HIPAA plans with other carriers.  It’s a pretty bad situation to be in especially when many times one cannot afford the CONVERSION policy and has to lapse on their insurance – this is what health care reform should really be all about; not the people who don’t want to buy insurance but for those that do for years and essentially, get screwed when bad luck strikes after paying for years. (sorry, had to interject with my own opinion here).

Finally – the main reason that employer’s have had to obtain group insurance policies for their employees is due to tax reasons and the law.  Employer’s cannot write off premiums paid for individual insurance even if it is to insure their employees – this is not to say that they don’t still do it, but technically they are not supposed to.  If you are self-employed you can write off the premium paid from your small corporation but not if the employee is not related to you.  So this is where employers need to decide what is the best option for them.  Overall, individual health insurance I would say is the best option for the employee in most cases especially when insurable and in many cases for the employer since they do not need to contribute a minimum amount to the premium (group insurance policies requires that the employer contribute at least 50% of the employee’s premium and also requires that 75% of the employees participate in the plan).

Should the laws change, sure..they should offer incentives to the employer to pay for INDIVIDUAL INSURANCE for employees – not just GROUP INSURANCE PLANS really for the sake of the employee and their dependents.  But currently, this is the way it is legally and the only good thing that I have seen happen lately is the implementation of LIST BILLING through some of the biggest insurance carriers that facilitate the process for employer’s to control and pay for the employees’ premiums but they are supposed to still deduct it from the employee’s payroll.  Also, HRA accounts may be a viable alternative – much like an HSA but the employer is the one that contributes and can write off accordingly.