Insurance Agent Forum

[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]

Originally Posted by 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?

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]

so is the statement I made correct?

[TXINSURANCE]

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]

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]

Originally Posted by 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.

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]

Originally Posted by ABC

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.

[Dave020]

Originally Posted by 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.

Lately I am starting to see more and more employers dropping group health coverage. It's kind of scary right now.

[Newby]

Speaking from personal experience as a consumer, I would never want group coverage again unless it was a last resort.

If you have individual coverage and at age 40 you get cancer or another serious health condition, you still have your health insurance whether you can work or not. It's also MUCH more portable if you want to change jobs.

Group coverage is very limiting (employment-wise) and will end if you get serious health problems and can't work.

I'm no expert in health insurance but it's my opinion that group is ALMOST always more expensive then comparable individual IF you buy the individual coverage when you are healthy.

If you have health concerns, group is the better deal.

[HomeService]

Health ins. became a "must have" benefit somehow, for the employee, when in reality, the employee is actually extremely lucky to have a job at all, let alone a job that offers health insurance.

[ABC]

CA is tough.
Here in Indiana a small group can get .650 if they are healthy but a max load is 1.35.

I just wrote a 4 life group with a diabetes that pushed the rate to 1.01 which increased the premium $700+ a month for the group. The employer decided to go with the plan because the person with the health condition was a key employee.

This employee could not get an indiviudal plan or I would have put them all on indiviudal.

[asianguy86]

Sorry guys, I'm fairly new to this business and have some questions
Dave,
What are RAFs?
Newby,
Are you saying that if you have group coverage and then you get sick and can't work anymore, then you wouldn't be able to purchase individual health insurance cheaper like you would if you had individual health insurance when you were healthy and then became sick and renewed your individual health plan?
Also, what is the deal with COBRA? Don't they kick in if you were to lose group coverage.and do they include preexisting conditions?
Also for group coverage, do they typically cover preexisting conditions because i know that individual health insurance such as United don't always cover preexisting conditions?

[moonlightandmargaritas]

Originally Posted by asianguy86

What are RAFs? Sorry im fairly new to this business

That's the Royal Air Force, silly....

[Dave020]

Her Majesties Royal Air Force..Rule Brittania..wot wot

RAF= Risk Adjustment Factor. This is the percentage of the standard premium a carrier charges on group business. Example, 1.10 is 110% of standard premium or a 10% rate increase above the standard. In CA, RAF on small groups ranges form .90 to 1.10 so + or - 10% of the standard premium depending on risk.

As to an earlier post, group-->COBRA/MiniCOBRA-->HIPAA. Most people experience an increase in premium from group/COBRA to HIPAA.