What is the basic difference between individual and group health insurance coverages?
An individual policy is purchased by you directly with the insurance company.

With a group health insurance policy, the group is the master insured and the insurance company contracts with the group. Insurance certificates, issued to a participating member, act as your policy. Often group health insurance costs less than would have been charged had the insurance company sold individual policies to each member separately. In addition, group health insurance often contains special coverages that are not available or are very expensive on an individual basis. The purchasing power of the group makes this economically feasible.

What types of individual health insurance policies are available?

There are a variety of policies which insurance companies offer on an individual basis. Some of the more common types of policies include:

1. Major Medical – provides coverage for doctor visits, surgery and hospitalization or ongoing illnesses.
2. Hospital and Surgery – provides coverage solely related to hospital stays and surgical services, such as room and board, laboratory tests, X-rays, plus doctors’ charges
3. Hospital Confinement Indemnity – a policy designed to pay a set amount (an indemnity) for each day you are an “in-patient” at a hospital.
4. Health Maintenance Organizations (HMOs) – centralized service provider, commonly with a general practitioner (limited selection of participating doctors) coupled with coverage by specialists upon referral. Doctor visits, surgery, hospitalization and often reduced-rate prescription medicine are provided. May also cover preventive care, often not included in major medical policies.
5. Specified Disease (also called “Dread Disease”) – covers costs associated with a single disease, such as cancer, AIDS, heart attack, etc.
6. Short-Term – typically a major medical policy but with coverage lasting only for a specified length of time. Might be purchased to cover the time you are between jobs.
7. Accident Only – provides coverage for doctor visits, surgery and hospitalization resulting from an accident (no coverage for disease or illness).
8. Dental – provides coverage for costs associated with dentists and orthodontists.
9. Vision – provides coverage for sight correction
10. Home-Health Care – care provided to enable you to remain in your home while receiving services which can range from assisted living (help around the house) to around-the clock nursing with other health care providers on call.
11. Long Term Care – coverage provided to individuals who otherwise would not be able to take care of themselves. A range of services from delivery of prepared meals, assistance with managing the residence, to stays in residential facilities. Often associated with long-term illness and the elderly.
12. Limited – Benefit – not very common, a bare-bones type of coverage intended to cover specific situations.

What types of group health insurance coverages are available?

Group health insurance makes individual coverages available on a group basis. A primary advantage is the purchasing power of the group that achieves reduced acquisition costs for the insurance company. The insurance company is then able to reduce the rate it charges to provide insurance for each individual member of the group. The Group is in a better position to bargain with the insurance company for additional benefits for its members. There are a variety of types of group health insurance plans, the major distinctions being the mechanism used for purchasing the insurance. Common varieties of group health insurance plans include:

1. Fully Insured Employer Group – The employer contracts directly with the insurance company to provide certificates to covered employees. Typical arrangement is either for major medical or health maintenance organization (HMO) coverages.
2. Small Employer Group – Insurance companies group certain industries together and then gather small employers together to form a larger group. These groupings enable the insurance company to better predict the cost of providing the insurance. The small employers can then get coverages otherwise not available unless charged a much higher rate. All the small employers get the same policy without deviation.
3. Large Employer Group – same as a fully insured employer group with direct contract between the insurance company and the employer to provide individual certificates to covered employees.
4. Health Maintenance Organization (HMO) – a group program under which the organization provides a full range of medical services to participants. Participants are either assigned or select from a group of general practitioners, who then refer their patients to specialists when the need arises. Good generalized system of providing medical care which is marked by curtailment in selection by the individual participant of the health care provider who render services. Individual participants insured by an HMO are called “enrollees”.
5. Self-Funded ERISA – available to large groups. The group contracts with an insurance company or third-party administrator to handle the paperwork. The group pays for all costs associated with the operation of the insurance plan itself, along with the added cost for administration.
6. Association Group – similar to a fully insured employer group, the distinction being that instead of an employer, it is a different type of group, such as a credit card company offering insurance as a benefit to its cardholders or a church group offering insurance to its parishioners.
7. Group Managed Care – a long-term health insurance plan offered through the group or association.
8. Preferred Provider Organization – another kind of health care network (doctors, hospitals, and other health care providers) that contracts with health insurance companies.

What’s the difference between primary and secondary coverages?

Since many people have available medical insurance from more than one plan (such as two employed spouses covered under group health insurance plans), insurance companies do not want insureds to profit through their health insurance. To prevent double recovery, most health insurance plans have provisions which determine how primary versus secondary coverage will be determined.

Primary coverage is provided through the plan of which they are a member (such as the spouses both covered through their respective employment – the primary coverage is provided under the plan provided by the employer of each spouse) or the plan under which the member has been a participant for the longest time period.

Secondary coverage, usually as a result of being covered as a dependent under someone else’s health insurance plan, provides reimbursement for medical expenses after exhaustion of coverage available through the primary plan.

Ways health insurance companies can mess with you

Shopping for a health insurance policy can be a daunting task, made even more difficult by the great variety of types of health insurance coverages that are available and by the desire of all insurers and their agents to get your business. This desire to get your business can cause insurers and their sales representatives to overstate or mischaracterize the true nature and benefits of the insurance coverage you are purchasing. This, of course, makes your job even more difficult.

The following are some of the ways in which insurers and their sales agents cause you to make a wrong decision:

1. Delivering a policy containing the words “Approved by the [name of state] Department of Insurance,” or words of a similar meaning. For an insurance policy to be sold, it must be reviewed and approved by the state insurance department. So there is nothing unique about it being approved by the insurance department. In fact, there is something wrong if it is not. But these words make it sound like the insurance department is endorsing that particular policy. That is misleading.
2. Distributing a written document misrepresenting, with respect to a policy issued or to be issued, the terms, benefits or advantages of the policy. This can be done by overstating the scope, type, amount or length of coverage. For example, an agent or written material from the insurer may allow you to think the policy you are considering is all-encompassing when in truth there are significant limitations, exceptions and reductions in benefits. Every policy has limitations. You need to know what these limitations are in the policy you are purchasing. Do not rely on the agent’s word or on marketing or supplementary materials. Read your policy and then ask the insurer representative (field agent or home office) to point out where in the policy the wording is that provides the coverage of interest to you.
3. Using a name or title of a policy or a class of policies that misrepresents the true nature of the policy or class of policies. A marketing name such as “Benefit Builder” or “Security Blanket” might lead you to think this insurance will protect you from all medical expenses or that it operates as an investment for your financial advantage. There is no health insurance policy that covers all medical expenses. They all have limits. None of them can properly be viewed as providing you with financial security. For a premium, they merely provide coverage for some portion of your medical expenses.
4. Making statements to you to encourage you to allow existing insurance to lapse or to forfeit or surrender the existing insurance. Never let an agent convince you to let your existing health insurance lapse before your new insurance coverage begins. You could have a catastrophic injury or illness that occurs during the lapse in coverage and you would not be covered under either policy. Be very wary of any agent who is pushing you to discontinue your existing insurance if there is any doubt about when your new coverage will begin. In fact, you should allow some overlap so that you have time to actually read your new policy (not the advertising or supplementary material, but the actual legal contract) to make sure it is going to provide the coverage you thought you were buying. The new policy has a free-look period during which you can return it at no cost to you if you discover, upon reading it, that it is not what you thought it was going to be.
5. Making ads containing untrue, deceptive, or misleading statements regarding the business of insurance or a person conducting the business of insurance. Insurance company advertising is regulated by state insurance departments, but it is often after the fact. Insurance policies are required to be filed, reviewed and approved by state insurance departments before they can be sold. Generally, however, insurance companies do not need to file advertising with the insurance department for review before it is used. Thus, there is the risk that an insurer (or, more often, an agent) may, intentionally or unintentionally, provide you with advertising material that is inaccurate or misleading. A good general rule as a consumer is to never rely on the advertising material. Rely on the insurance policy (the legal contract) that has been filed and approved by the state insurance department.

More ways health insurance companies can mess with you

Check out the following ways in which health insurance companies and their sales representatives can make the process more difficult for you or cause you to make a wrong decision.

1. Making, aiding or encouraging any statement that is false, maliciously critical of, or derogatory to the financial condition of an insurer. There is no place in the sale of insurance for maligning the competition. If your agent, or the company he or she represents, is putting an emphasis on critical, derogatory comments of the competition, you would be well advised to find another agent and/or company. There is a good chance that such comments are being made to distract you from deficiencies in the product being sold or the company selling it.
2. Making, aiding or encouraging any statement that is calculated to injure a person engaged in the business of insurance. Same thing. Be very wary of an agent who is attempting to sell you insurance by making statements intended to harm another competitor. If the agent is willing to do this, how can he or she be trusted to provide you with honest information about the product he or she is selling?
3. Offering to make an insurance contract in terms different than those actually written down in the insurance contract. This is an absolute red flag! Insurance products are heavily regulated. In order to be sold in a state, the policy must be filed with, reviewed and approved by the state insurance department. Forms that are not approved aren’t permitted to be sold in the state. Any variations from the approved forms are not legal. Agents are not allowed to make special deals outside the terms of the approved policy contract form.
4. Offering a special favor or advantage (e.g., higher benefits) or valuable consideration (e.g. cash, premium reduction, etc.) as an inducement to purchase the insurance that is not specified in the insurance contract. This is another red flag. This type of activity by the insurer or by the agent is commonly referred to in the industry as rebating and is expressly prohibited by the laws and regulations of the states. If you are presented with such an offer, ask the agent if it is legal and ask for evidence to support it.
5. Offering stocks or shares in a corporation as an inducement to buy the insurance. This is just another form of illegal rebating and is prohibited by state laws and regulations. Companies and their agents know rebating is illegal. Therefore, if they engage in it, it is intentional. This tells you something about the integrity of the company and the agent and should make you question whether they can be relied upon with regard to the insurance product they are selling you.
6. Using as a corporate or business name one that is the same or is deceptively similar to a name of an existing insurance company or insurance-related company already authorized to do business. Obviously, a new company will not for long be successful in adopting for its name a name that is deceptively similar to that of another company already established in the market. This is a red flag because if the name is too similar to a company already established in the market, there is a good chance the new company is not properly licensed to do business in the state. If it were, the similarity probably would have been detected and prohibited by the state licensing agency – the state insurance department.
7. Using a word, symbol or slogan that is the same as or in a way that is deceptively similar to that already being used by an insurance company or insurance-related company already authorized to do business. Another red flag. The use of such a word, symbol or slogan is a warning to you that the company you are dealing with is worthy of further investigation by you regarding their financial stability and ability to provide you with the benefits you have bargained for.

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