Frequently Texas consumers contact Stateside Insurance Services and want to discuss the merits of maintaining employer-sponsored group coverage as compared to securing coverage on their own in the individual market. Group coverage is very different from individual coverage, and both types of insurance have advantages and disadvantages that should be evaluated.
An employer group policy is a health insurance policy provided through an individual's place of employment. The health insurance policy is a non-taxable employee benefit, meaning that the amount of premium is not subject to payroll taxes or federal withholding tax. Texas employers are not required to offer their employees health insurance coverage. Employees are required to work at least 30 hours a week to qualify for employer-sponsored group coverage.
Typically, the comparison between group coverage and Texas
individual coverage occurs when an individual wants to evaluate the
benefit of switching from group coverage to individual coverage due
either to cost or the termination of COBRA or state continuation of
In most cases, group coverage will be more expensive than individual coverage. The principal reason why group health insurance coverage is more expensive than individual coverage is related to guaranteed issue. Guaranteed issue stipulates that all applicants, regardless of health history or current health condition, will be offered health insurance coverage. Group coverage may offer guaranteed issue, but group coverage does not have to make available all benefits immediately. If an employee has not maintained coverage up to 63 days before the policy effective date or the hiring date, any preexisting condition can be subject to a waiting period for benefits. The waiting period for benefits for group coverage cannot be more than 12 months.
Group coverage will have a higher level of benefits than individual coverage, which is another reason why group coverage is more expensive. An example of increased benefits is maternity coverage, which is mandated with group coverage but is not available with individual coverage. Additional benefits available with group coverage, but not available with individual coverage address chemical dependency, extension of benefits for totally disabled individuals, fertility treatment, mental illness, and osteoporosis detection and prevention.
Group coverage requires the employer to contribute to or sponsor the Texas health insurance plan. The employer is required to pay at least 50% of the employee's premium. The employer is not required to pay the premium for spouse and/or dependent coverage. Depending on the type of coverage, the benefit structure and the amount the employer contributes towards the employee's premium, the individual coverage premium may be competitive with the group coverage premium, especially when insuring the wife or dependent.
Individual coverage benefits the consumer by allowing the insured to make the decision regarding the type of coverage, deductible amount and benefit structure. The disadvantage of group coverage is that someone else, typically the owner or president of the company, is making the coverage decision based on his or her preference and financial situation. Individual coverage allows the insured to make coverage decisions based on the available budget and coverage needs. For example, a 25-year-old male may elect a higher deductible and no office visit copays since he is healthy and does not visit the doctor frequently. Under a group plan, the owner of the business may select a policy with a very low deductible and an office visit copay benefit, which increases the cost substantially and requires the employee to pay 50% of the monthly premium.
Individual coverage also provides for flexibility regarding possible changes in coverage. The type of plan and benefits under group coverage are established for a 12-month contract period. Changes in coverage cannot occur because the group carrier commits to a 12-month rate guarantee based on a specific plan design. Typically, individual coverage can be changed at any time, either by submitting a request to reduce benefits or by submitting a new application. Most carriers will accept a reduction in benefits at any time, but there are a limited number of carriers that only allow a change to occur on the anniversary date of the policy.
Texas consumers should evaluate whether the coverage offered by the
employer is more suitable than coverage available in the individual
market. Because the Texas individual market is so strong and
competitive, consumers have a viable option to coverage offered in
the workplace. Group coverage offers a price advantage for the
employee since the employer subsidizes at least half of the premium,
but individual coverage may be an excellent option for the
employee's spouse or dependent.
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