Individual vs. Group Question

[asianguy86]

Hey everyone,
I was just curious. Is it true that an employer with a small amount of employees such as 4 employees that has group coverage usually more expensive than if each of the 4 employees received individual insurance and have the employer pay for it?

 

[retread]

Re: Individual Vs Group Question

Hey everyone,
I was just curious. Is it true that an employer with a small amount of employees such as 4 employees that has group coverage usually more expensive than if each of the 4 employees received individual insurance and have the employer pay for it?

Would it help if I asked you to think about the Law of Large Numbers? How about adverse selection within a small group?

Get the idea?

 

[asianguy86]

Re: Individual Vs Group Question

so is the statement I made correct?

 

[TXINSURANCE]

Re: Individual Vs Group Question

It is a complicated question. Varies by location.

Varies by the health of those individuals, some of which might not be able to go on their own and buy policies.

Varies by the age of those in questions.

Tons of variables - but in general I would agree on VERY small groups individual can be more affordable , all other variables equal.

In most states it is technically not permitted for employers to pay individual policy premiums, although it is done anyhow.

 

[djs]

Re: Individual Vs Group Question

In a lot of small groups, there is usually 1 person (or dependent) that is not insurable on an individual plan, a small group plan is setup for the guaranteed issue benefit. Trying to write back to individual can be problematic.

Of course, every state is different on how this works.

Also, most group plans (in California) are slightly more expensive than a close to equivalent individual plan, but is a more feature rich plan, making it a virtual tie. For instance, group plans may have office visits included without meeting the deductible, where the individual plan you have to pay the deductible before office visits are covered.

Unless there is a true pain point for someone, I wouldn't spend a lot of time trying to market a small group to individual coverage. Your area may be different.

Dan

 

[LGilmore]

In my state group is better than individual IF you want comprehensive coverage. If you just want a high deductible medical only (no rx) you can find cheap in individual.

So your statement is going to depend on where you are and what they want.

 

[asianguy86]

The reason I asked is because, even though people sell individual insurance, they cold call employers with 1-4 employees when instead those businesses with 4 employees can get group coverage.

 

[ABC]

The reason I asked is because, even though people sell individual insurance, they cold call employers with 1-4 employees when instead those businesses with 4 employees can get group coverage.

This is true and the benefits will be richer on a group depending on the plan but you have underwriting and employer contributions.
Any risk with a group this size will increase the over all premium.

 

[Dave020]

This is true and the benefits will be richer on a group depending on the plan but you have underwriting and employer contributions.
Any risk with a group this size will increase the over all premium.

It may differ per state, but in CA a group this size would automatically fall at 1.10 RAF which is the highest rate (they could reduce to 1.08 by purchasing life with Anthem) regardless of health history. A group this size here would also not likely ever see lower than a 1.05 at best, so there is zero premium risk for very small groups here.

I assume it operates similarly in other states?

I have seen this tried so many times, and each time it falls apart for one simple reason, there is inevitably someone currently employed or not yet employed who is uninsurable.

 

[HomeService]

The reason they cold call the small businesses is to sell individual coverage: the employer may want just individual on himself, he may not wish to offer his employees anything at all. He does not have to. And, with this economy, more and more employers do not offer it.

Or, the employees may wish to buy on themselves, no group insurance at work, so they need individual plans. The employer may wish to payroll deduct- or not.