How to Buy Health Insurance (1/4)

Last updated June 8, 2012

Part 1/4 - Health Insurance Categories: Group and Individual

Health Insurance Categories

In the US, there are basically two categories of health insurance: group and individual. Group plans are available through an employer or an association. Individual plans are available if no employer-sponsored plan available. Despite its name, individual health insurance may cover one person or all eligible members of a family. In most cases group policies provide more coverage and cost less.

Group Policies

Standard Group Plans - an employer negotiates a group rate with an insurance company for all of its qualifying employees. Typically employers and employees share the cost of the plans.
Single-Employer Plans (Self insurance) - employers assume the financial risk of providing health care insurance to their employees, rather than passing it on to an insurance company. The employer pays the claims filed by employees. An insurance company or benefits specialist company may handle the processing of the claims.
Professional Association - an association may offer it members group rates on insurance plans that are generally less expensive and easier to apply for than individual plans. These plans are usually offered through licensed insurance companies

COBRA

Cobra is a hybrid between group and individual plans. Federal law allows employees who leave an employer for retirement, quitting or being laid off to continue group health care coverage for a limited amount of time. This benefit also applies to their dependent who might lose coverage due to the death of the covered employee, divorce, covered employee becomes eligible for Medicare, or the loss of dependent status under the health care plan's provisions. COBRA applies only to employers with 20 or more employees.

If you qualify for COBRA, your health care administrator should notify you. You have 60 days to accept coverage or lose all rights to the benefits. If you accept, you must pay 100% of the insurance cost (the employer may have been paying a percentage for employees) In addition, you may have to pay a 2% processing fee.