Health Insurance Planning Center

Buying health insurance for your company is one of the key business decisions you will make. Like most things in life and business, you have various options to select from when purchasing company health insurance.

The three primary options are summarized in the table below.

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Type of Health Plan	Summary
Group Health Insurance	A traditional health plan in which the company funds at least 50% of the employees' cost. Coverage is issued on a guaranteed issue basis, generally subject to minimum participation of 75% of eligible employees.
Consumer Directed Healthcare/HRA	A combination of a savings account and high deductible health insurance plan. Some level of company funding is required, but the company can contribute as little or as much as it wants. Insurance is generally not guaranteed issue, meaning that employees or dependents with health problems may have problems obtaining coverage.
Individual Health Insurance	A fully 'hands off' strategy in which the employer contributes nothing to the health program. The employer simply gives employees access to a web site or insurance agent where employees can purchase and pay for their health insurance.

Business Considerations

When considering a company health insurance program, the company must decide whether to offer group health insurance or individual health insurance for its employees.

A group health insurance policy is issued to a company, and employees of that company receive benefits according to the terms of the policy. Group health insurance is “guaranteed issue”, meaning that all individuals who meet the eligibility requirements determined by the company qualify to receive coverage, regardless of their individual health conditions. All employees get the same or similar level of coverage and participate in the same network of providers. Premiums are adjusted annually and the rate increase is often shared by the employer and employee.

The main advantage of group health insurance is guarantee issue – meaning that every qualified employee is eligible to receive coverage. Because of this, however, group insurance can be very expensive for small businesses because they do not have a sufficiently large employee base over which to spread the cost of claims. High health care expenses incurred by a single person can dramatically increase the cost of insurance paid by each member of the group. Additionally, employees who leave their company cannot continue to participate in the insurance plan, except for those employers large enough required to offer a 18-36 month period COBRA option.

Individual health insurance has different advantages than group insurance and differs from it in three major ways:

1. First, individual health insurance is not guaranteed issue. Each employee must apply for the insurance coverage by providing information about his or her health history. The insurance company then evaluates this information and elects whether or not to offer the employee coverage. Because of this, the per-person cost of individual health insurance is usually lower than that of group insurance, particularly for employees who are younger or who have maintained their health.



2. Second, an individual health insurance policy is issued to an individual or family, not a company. Thus, the health insurance coverage is not conditioned on employment. This means that when a person changes jobs, his or her health insurance remains in effect as long as monthly premiums are paid. Additionally, the insurance company is able to spread the cost of insurance over its very large pool of individual customers, so the monthly premium of one member is not increased by high expenses incurred by another member.



3. Third, individual health insurance is personalized. Each employee can select the insurance company, provider network, and coverage levels that best fits his or her needs; a single plan does not need to be selected by the employer.

As decision maker, your key decision is "how do we handle employees who, because of health problems, will not qualify for individual health insurance?" If you want to guarantee that these employees or dependents receive comparable health insurance as the rest of your employees, you are pretty well locked in to the true group option. If, on the other hand, you are willing go consider other solutions (such as referral of the poor risks to a high risk health insurance pool within your state), you can benefit from a consumer directed health plan with individual insurance.