Group or Individual Insurance?

When it comes to choosing the best insurance policies for their employees, small-business HR executives typically have fewer options from which to choose. The number of employees plays a significant role in determining whether or not group insurance is an option. This same decision applies to voluntary insurance programs.

Now that some voluntary insurance providers offer group insurance policies to businesses with as few as 100 eligible employees, the decision to offer group over individual policies may become a bit of a guessing game for benefits managers.

This is where agents and brokers can demonstrate value and necessity by providing guidance to benefit decision-makers. Each platform has its own benefits and drawbacks, so it’s essential that you educate clients on which offerings may be better suited for certain company and employee needs.

The following overview breaks down the differences between group and individual insurance platforms, and helps take the confusion out of this important decision-making process.

Group plans: A cost-effective, viable option

Group insurance plans tend to offer less expensive rates, which is crucial for all companies, but especially for smaller businesses. Finding ways to make competitive insurance benefits available at lower costs to the employer is a major goal for most companies in today’s environment. Historically, however, group insurance policies have been considered out of reach for many smaller companies because they employ fewer workers. This left individual policies as one of the only benefits options available.

With providers lowering the minimum number of employees to 100, it’s now much easier for many business owners to secure group insurance plans. And with voluntary group insurance platforms, there’s more choice for employers and employees. Employees can control how much or how little coverage they want, with no direct cost to the employer.

Group insurance options give employers and employees more ease of enrollment and use, taking the lengthy training sessions out of the mix. Many voluntary group platforms require only one application, rate set and underwriting structure, and employees can participate through the use of online tools that allow them to manage their own claims and coverage at the click of a button.

The pros and cons

Although there are many reasons to make group voluntary insurance available, there are also a few drawbacks. For example, under a group plan, individual policyholders receive a certificate rather than a policy of insurance, and many of the policy terms are negotiated by the group. The group (called the “master policyholder”) has the option to terminate the policy at any time, which means the individuals who hold certificates under the policy will lose their rights to continue the group insurance coverage. While it doesn’t occur often, some companies choose to terminate the master policy as a result of an acquisition, merger or bankruptcy.

Furthermore, although policies through group plans are voluntary, they are not always portable. This means that group plans may not be attractive to employees who are planning to eventually leave or retire from the company. In some cases, if the company cannot maintain the minimum number of enrollments needed to retain coverage, the entire case could be jeopardized.

Individual platforms: The personalized approach

Like group insurance platforms, individual voluntary insurance policies have their own pros and cons. To begin with, individual voluntary insurance policies are available based on the needs of an individual or family. This is especially helpful for those with pre-existing or hereditary conditions, such as cancer. For individual policies, participants can have the opportunity to speak one-on-one with a professional about their needs so that they can pick and choose the coverage that is right for them.

Individual voluntary insurance policies are portable, meaning that each employee owns their policy and can take it with them if they retire or leave their employer. This is an important consideration for policyholders, because voluntary benefits offer coverage for any life stage or situation, including cash benefits to assist employees with expenses due to hospitalization, unforeseen health events or hospital confinement.

Voluntary insurance through individual platforms have fixed premiums, as well as locked-in age premiums at issue. Individual insurance policies are typically not subject to increase without state insurance department approval.

For employers in some states, many individual voluntary plans offer preventive care benefits that encourage employees to choose healthier lifestyles, such as mammograms and routine physicals.

One of the most important factors in implementing health benefits is weighing the options of cutting costs while maintaining benefits. Some major medical insurance companies do not offer benefits for preventive care, but studies show that health care costs decrease, for both employee and employer, if preventive care is accessible. Benefits, such as gym memberships or healthy lifestyle education, can cut health costs by encouraging individuals to make healthier choices.

The area where individual insurance platforms may not measure up to their group platform counterparts is cost. Enrollment tends to be more expensive for individual plans, and premiums are often higher, too. This is because there is no maximum number of participants required, which means that group savings are not passed on.

Although many types of individual coverage can be purchased, another disadvantage to individual policies is that plans are not easily customized.

These are complex, highly personal issues, so it’s important to conduct thorough research when making a decision about insurance platforms. Always take into account cost benefits for both employee and employer, as well as which platform makes the most sense for a company’s workforce.   «

Ron Agypt is Aflac’s vice president of U.S. market development and broker sales.

 
 
 
 
 
 

When it comes to choosing the best insurance policies for their employees, small-business HR executives typically have fewer options from which to choose. The number of employees plays a significant role in determining whether or not group insurance is an option. This same decision applies to voluntary insurance programs.

Now that some voluntary insurance providers offer group insurance policies to businesses with as few as 100 eligible employees, the decision to offer group over individual policies may become a bit of a guessing game for benefits managers.

This is where agents and brokers can demonstrate value and necessity by providing guidance to benefit decision-makers. Each platform has its own benefits and drawbacks, so it’s essential that you educate clients on which offerings may be better suited for certain company and employee needs.

The following overview breaks down the differences between group and individual insurance platforms, and helps take the confusion out of this important decision-making process.

Group plans: A cost-effective, viable option

Group insurance plans tend to offer less expensive rates, which is crucial for all companies, but especially for smaller businesses. Finding ways to make competitive insurance benefits available at lower costs to the employer is a major goal for most companies in today’s environment. Historically, however, group insurance policies have been considered out of reach for many smaller companies because they employ fewer workers. This left individual policies as one of the only benefits options available.

With providers lowering the minimum number of employees to 100, it’s now much easier for many business owners to secure group insurance plans. And with voluntary group insurance platforms, there’s more choice for employers and employees. Employees can control how much or how little coverage they want, with no direct cost to the employer.

Group insurance options give employers and employees more ease of enrollment and use, taking the lengthy training sessions out of the mix. Many voluntary group platforms require only one application, rate set and underwriting structure, and employees can participate through the use of online tools that allow them to manage their own claims and coverage at the click of a button.


The pros and cons

Although there are many reasons to make group voluntary insurance available, there are also a few drawbacks. For example, under a group plan, individual policyholders receive a certificate rather than a policy of insurance, and many of the policy terms are negotiated by the group. The group (called the “master policyholder”) has the option to terminate the policy at any time, which means the individuals who hold certificates under the policy will lose their rights to continue the group insurance coverage. While it doesn’t occur often, some companies choose to terminate the master policy as a result of an acquisition, merger or bankruptcy.

Furthermore, although policies through group plans are voluntary, they are not always portable. This means that group plans may not be attractive to employees who are planning to eventually leave or retire from the company. In some cases, if the company cannot maintain the minimum number of enrollments needed to retain coverage, the entire case could be jeopardized.

Individual platforms: The personalized approach

Like group insurance platforms, individual voluntary insurance policies have their own pros and cons.
To begin with, individual voluntary insurance policies are available based on the needs of an individual or family. This is especially helpful for those with pre-existing or hereditary conditions, such as cancer. For individual policies, participants can have the opportunity to speak one-on-one with a professional about their needs so that they can pick and choose the coverage that is right for them.

Individual voluntary insurance policies are portable, meaning that each employee owns their policy and can take it with them if they retire or leave their employer. This is an important consideration for policyholders, because voluntary benefits offer coverage for any life stage or situation, including cash benefits to assist employees with expenses due to hospitalization, unforeseen health events or hospital confinement.

Voluntary insurance through individual platforms have fixed premiums, as well as locked-in age premiums at issue. Individual insurance policies are typically not subject to increase without state insurance department approval.

For employers in some states, many individual voluntary plans offer preventive care benefits that encourage employees to choose healthier lifestyles, such as mammograms and routine physicals.
One of the most important factors in implementing health benefits is weighing the options of cutting costs while maintaining benefits. Some major medical insurance companies do not offer benefits for preventive care, but studies show that health care costs decrease, for both employee and employer, if preventive care is accessible. Benefits, such as gym memberships or healthy lifestyle education, can cut health costs by encouraging individuals to make healthier choices.

The area where individual insurance platforms may not measure up to their group platform counterparts is cost. Enrollment tends to be more expensive for individual plans, and premiums are often higher, too. This is because there is no maximum number of participants required, which means that group savings are not passed on.

Although many types of individual coverage can be purchased, another disadvantage to individual policies is that plans are not easily customized.

These are complex, highly personal issues, so it’s important to conduct thorough research when making a decision about insurance platforms. Always take into account cost benefits for both employee and employer, as well as which platform makes the most sense for a company’s workforce.  

Ron Agypt is Aflac’s vice president of U.S. market development and broker sales. Visit aflacforbrokers.com, call 888-861-0251 or email brokerrelations@aflac.com to learn more.

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