Group Health Insurance - Its Merits and Demerits
A Health Care Article Contributed by Kj Vohra
What is Group Health Insurance
You could describe Group Health Insurance as that health insurance which includes all people in a group (provided of course they are eligible) irrespective of what their age or medical profile may be.
In practice, it is seen that many employers go for group health insurance for their employees. So, along the line, there is a connection between employer-based health insurance and group health insurance. Normally, you will see groups such as various associations or government/professional bodies opt for group health insurance also. The 'Small Group Health Insurance' covers a small group that could be anywhere between 1 to 100 but usually would fall between 3 and 25.
The age and medical profile are considered while fixing the premium as also the type of health plan. Obviously, if your medical condition has the potential of greater medical care, you would pay a greater premium. Another factor considered is the prevailing medical costs in the area where insurance is required.
Advantages of Group Health Insurance
When your employer contributes to the premium, and often even your contribution, this money is not taxed. But of course when the company gives the money for the premium that can also be used otherwise, then you would not get the tax benefit. You cannot complain on that, friend!
Additionally, in a group, the high risk people and low risk people get combined, so that the overall premium remains sensible, which otherwise would have been high for the high risk people. Group insurance gives the obvious advantage that you get for numbers. This even spreads to getting better premiums generally. The larger the group, the lower the average premium.
The basic 'economy of scale' principle dictates that the fixed costs like marketing etc. remain the same for the insurance company or increase marginally in proportion to increased numbers. Besides, a company with a large number of employees can bargain harder to get low premium for the employees.
Disadvantages and Other Facets of Group Health Insurance
The main disadvantage is that an employee may not get the exact type of health plan he wants. For instance, if an employee prefers to cover his eye care, it may not be covered in the group, and if he wants to include it, the additional cover may come expensive. You must understand how things work. An employer generally will contribute to the premium what amounts to be the lowest average cost. If the employees stick with this basic cover, they will get the insurance cover for free. But if they want to add more benefits the additional premium will have to be borne by them.
Other issues are like inclusion of dependents in the group insurance. Obviously, including dependents will increase the premium as the dependents generally will not be as healthy as the employee and the risks become higher. So, should you bear the cost of dependents' cover when you yourself do not have dependents? There are chances that in group insurance you may not get a plan that is exactly specific to you. But you weigh it against getting it free or cheaper than individual plan.
We also need to understand that for an insurance company, the risks are greater in individual plans as against group plans, as in a group the risks versus premium returns are nicely spread. For this reason also, individual insurance comes more expensive. It is a question of choice, really.
