Individual vs. Employee Insurance

Defining Individual and Employee Insurance

Before discussing about the differences between individual and employee insurance, it is important to know what each one is. Let us start by defining the two here

Individual insurance is the insurance package that a person generally buys, on his own money. This can cover him as well as any nominee he names in the plan. Employee insurance is usually a form of group insurance that a company offers its employee as part of its employee benefits and incentives plan.

Thus we have right there the basic difference between the two – one is bought by the individual, while the other is provided by the company as a perk or benefit.

Key Differences between Individual and Employee Insurance

One of the key differences between the two is that individual insurance may not always work out to be as expensive as employee insurance. This is true if you are not a resident of New York, New Jersey, or Massachusetts, which have very high-priced individual insurance plans.

However, employee plans have the advantage of the employer actually subsidizing the plan, so the amount the employee pays is not that much. Studies indicate that the employer usually pays 73% of the total bill in the case of family coverage. In the case of singles coverage, the amount goes up to 84%. This means that on an average, an employee would pay just $627 of the total bill of $4,242 annually for single coverage. IN the case of family coverage, this number would become $2,973 of the total of$11,480.

There is another big advantage that employee insurance plans have over individual plans – there is usually only a slim possibility of an employee being rejected on health grounds.

However, there has been a trend recently where employers, unable to cover the subsidy themselves, are shifting the larger share of the premium back to the employee. In such a scenario, the employee is at a disadvantage. If you are shopping for plans, make sure you take all these issues into account.

Individual vs. Employee Insurance – Some More Differences

Studies have shown there is evidence to suggest that not all individual insurance products available are popular. For instance, a study conducted on 20,000 policies purchased through the online insurance provider eHealthInsurance.com showed that while PPO products accounted for 75 percent of sales, the HMO products and indemnity plans accounted for just 16 and 5 percent, respectively. The remaining 3 percent were accounted for by POS and MSA products.

This indicates that as far as individual insurance plans are concerned, the spread across products is uneven; some are drastically more popular than others.

In the case of employee insurance plans, such disparities are not usually seen. An employer would usually provide the same set of plans to all its employees.

Another key difference is that in an employee insurance plan, the employee himself is not the sole and final authority; the employer is. Since it is more an incentive, treat it like one. It is logical to also look for a personal individual plan that caters to all the needs of your family, while meeting your price expectations.