If My Employer Offers Group Health Insurance, Can I Buy My Own Individual Plan?

Health insurance is a benefit offered by some employers to their employees. Having access to health insurance is important to many people, and those with pre-existing medical conditions may find it difficult or impossible to purchase an individual health insurance policy. If you are in good health, it may be advantageous to purchase your own individual plan instead of participating in your employer's group health insurance plan.

Qualifying for Individual Health Insurance

• Unless you live in a state that requires insurance carriers to accept everyone who applies for health insurance, you must go through the underwriting process to obtain an individual health insurance policy. If you've been uninsured for a period of time, the carrier may request a paramedical exam as part of the process. In a paramedical exam, samples of blood and urine are taken, your vital signs are checked, and you may be asked questions about your health history. If you have had a heart attack or have been diagnosed with diabetes, you may not qualify for individual health insurance.

Group Health Insurance Advantages

• If you have pre-existing health issues that prevent you from obtaining an individual health plan, federal law requires insurance carriers to accept eligible employees and groups for insurance coverage, regardless of health history. State law also outlines the coverage that must be included in group health insurance plans. For example, maternity coverage may not be offered in a standard individual health insurance policy unless you pay for additional coverage through a rider or have held the policy for a period of one to two years. State law also requires employers to pay a portion of the employee's health insurance premium.

Individual Health Insurance Plan Advantages

• If you buy your own health insurance, you can choose the types of benefits you want to include in your plan, such as maternity or dental coverage. You also choose the deductible, and you may consider a high-deductible plan that is eligible for a health savings account (HSA). Because you are choosing some of the benefits and the deductible level, you have more control over the premium payment, something you don't have in an employer-sponsored group health plan. Even though the premiums for your insurance are not deductible on your income taxes, contributions you make to your HSA are deductible on your tax return, up to limits set by the IRS each year. If you leave your job voluntarily, or if your company unexpectedly closes, you will still have health insurance. An individual plan is portable, meaning that it goes with you. Group health insurance plans are limited to COBRA coverage or may terminate immediately if your employer goes out of business.

Why an Employer Encourages Participating in a Group Health Plan

• For an employer to meet participation requirements, an insurance carrier may require that at least 50 or 75 percent of all employees eligible for health insurance participate in the plan. Insurance carriers usually establish participation rules to prevent employers from providing coverage for "healthy" people with one carrier and coverage for people with pre-existing conditions with another carrier. Premiums collected by insurance carriers from healthy participants help offset the higher claims paid for participants with health issues. If an employer fails to meet the participation requirements, the insurance carrier may not have to renew coverage.