Job Based Coverage vs. Individual Coverage

Many of us are fortunate enough to be employed by mid-sized or large companies that offer comprehensive benefits packages.  These packages almost always contain job based health insurance coverage in addition to life insurance, long- and short-term disability, and flexible spending accounts.  Unfortunately, rising health insurance premiums are causing more and more companies to cut this important benefit, or they may require employees to dig deep into their pockets to share the mounting costs.  Nonetheless, it has long been held that individual coverage is not the best route to go when job based coverage is available, but is this true? 

Job based coverage may be just what the doctor ordered, unless it is too costly.  Employee spending for health insurance coverage, deductibles, and co-pays has risen sharply, and there are times when individual coverage will actually cut the cost of insurance for an employee.  For example, a single insurance customer in good health and without dependants to cover will be able to purchase less comprehensive coverage than a married consumer with children in the house.  Granted, many a job based plan offers a scaled back version of their plan, but realistically, these options still may cost more money since the financial insurance risk is spread out amongst the plan participants.  An individual plan will only take the applicant’s health care history and needs into consideration, and it may thus be a lot more cost-effective.

Individual coverage may be a wonderful idea, but it depends largely on where the individual lives!  It is important to remember that individual health insurance coverage is regulated at the state level, and thus may vary widely from state to state.  If a consumer lives in a favorably regulating state, then such a policy may be rather advantageous and offer a host of benefits.  If, however, an employee lives in an unfavorably regulated state, it might be wiser to stay with  job based coverage which is, after all, regulated by the federal government, and thus endowed with numerous protections for the worker.  In addition to the foregoing, if a worker anticipates a move to another state, this becomes an important consideration when opting for benefit portability or perhaps starting over with a new health insurance company.

Job based coverage is quite often somewhat limited in which selections the company will offer its employees.  Usually, the plans that offer the most freedoms are also the most expensive and thus the most likely to get cut by the company when the renewal date arrives.   If an individual is happy with a more limited coverage option, then job based coverage will be adequate.  Yet, if someone desires extensive coverage with the freedom to choose providers, and services offered, a PPO might be a good choice.  If this is not available through the employer, then an individual plan will be most likely the best route to choose. The important point to remember, however, is that PPO coverage is expensive, and thus a worker who has access to such a benefit from an employer will almost always to financially better by signing on with the job based plan, rather than seeking to purchase such a policy on an individual basis.

Workers with pre-existing health conditions will quite often enjoy the ability to sign up with an employer based plan rather than having to go through the waiting periods that individual plans will dictate -- if the worker can qualify as a new enrollee.  Additionally, insurance premiums of job based plans will not skyrocket because of any pre-existing condition, while an individual plan will take into account these conditions when selling a policy.  For this reason, if you or any dependants you wish to cover under your policy have pre-existing conditions, and you have the choice to sign on with job based coverage, it may very well be a fiscally sound move.  It is obvious that there is no “one size fits all” template when it comes to individual insurance needs, and consumers will do well to not only shop around different plans in addition to their job based benefits, but also do some soul-searching prior to signing on for any coverage, so as to truly ascertain what the needs are and who may best fill them.