INDIVIDUAL AND GROUP HEALTH INSURANCE EXPLAINED

While Canada’s publicly funded healthcare system ensures that all Canadians have access to acute medical services, this doesn’t cover the full breadth of Canadian’s healthcare needs. Prescription drugs, dental services, paramedical services and vision care are all paid for directly by (or not available to) Canadians without an employee benefits plan. In addition, publicly funded disability coverage is minimal. As a result, many people seek additional coverage through individual or group extended health and dental coverage. Both options have some advantages, and it really depends on an individual’s circumstances as to which option is appropriate.

Individual insurance

Individual insurance is purchased by a single person and it can usually be extended to cover their family if necessary. The individual is the policy holder. It’s a personal choice, as there is no legal requirement to obtain this coverage. There are many options, but some common choices are: life and disability insurance, dental, medical and vision care. The individual can shop around and select a provider they’d like to use, as well as what coverage they’ll purchase. Often, an individual will make the choice to get coverage so that in the event of a negative health event, they can still meet their financial obligations.

Group health insurance

Group health insurance (sometimes called group benefits) are offered through an employer or organization. The benefits cover many individuals, but the employer or organization is the policy holder. In most cases, it is mandatory for individuals in the group to be part of the group benefits plan. There are exceptions, but typically insurers require at least 70% of a group to participate in the plan in order to provide coverage.

Individual vs Group Coverage

For some people, individual coverage may be the only option available. For others, coverage may come as part of a group benefits plan. Either way, there are some important elements of the two types of coverage that deserve further attention.

1. Control of the coverage
   When a person is part of a group benefits plan, they have less control over the coverages (or “benefits”) they receive. The employer chooses which benefits to provide and how much coverage is given. Because it’s a larger scale, the employer can choose a provider that works with many insurers, so that the best products (regardless of insurer) can be provided. The employee can sometimes buy optional coverage alongside the group benefits plan, or use flexible tools for health spending accounts to choose how to spend their benefits dollars, but in general, the plan sponsor is in charge of all benefits decisions.
   In contrast, a person who buys individual insurance can make all the decisions surrounding coverage type and amounts. Theoretically, the individual can choose the coverages they would like and the maximums. That being said, often individual coverage options are “cookie-cutter” type offerings where the individual picks from several options.
2. Portability
   A person covered under a group benefits plan is only covered under the plan when they are employed with the company. When employment with the company is terminated, the individual’s coverage is also terminated. Simply put, group benefits are not portable – if an individual moves on to a new job, they cannot take their group benefits with them.
   The same is not true with individual coverage. If a person has purchased individual insurance coverage and chooses to change employers, the coverage is not affected. Individual health insurance is portable.
3. Medical Evidence
   Because a group health insurance policy spreads the risk amongst many people, medical evidence (below a specified threshold) is not required. This is an important consideration for those with pre-existing medical conditions.
   When it comes to individual health insurance, extensive medical evidence is required before coverage is offered. Any underlying health conditions directly impact the premiums charged for the coverage. An individual may not be able to secure coverage at all if they have certain pre-existing health conditions.
4. Cost
   One of the biggest differences between individual and group health insurance is the cost. Group coverage for extended health is usually significantly less expensive than individual coverage. When insuring an entire group, the risk is spread amongst the group, so the per person cost is lower. Sometimes employees are covered under a group benefits plan at no cost to themselves, other times they are responsible for a portion of the cost. Either way, from an employee perspective group coverage is almost certainly cheaper for employees.

Group coverage has many advantages

From an employer perspective, there are many good reasons to sponsor a group benefits plan for employees. The most obvious advantage is tax savings for the employer. A positive impact on recruitment and retainment efforts is also a benefit. Less tangible (but equally important) is the ability to improve the health of employees. Not everyone can or will get coverage, so without a group plan, some employees will not necessarily have access to certain medical services or prescriptions.

Good Advice is Key

Are you looking for more info on group benefits and insurance? Do you want to support your employees so they don’t have to look for individual coverage? Review your options with one of our licensed advisors on the phone, or contact us for a comparison quote.

Whether you’re looking for extended health and dental coverage, disability coverage, or life and critical illness coverage, GroupHEALTH has affordable benefits packages that work as hard as you do.