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Health insurance — choosing between group and individual plans

For most practical purposes, group health insurance means a plan provided by an employer, although other groups like colleges and universities can negotiate with insurers to produce good premium rates for the people identified as members, e.g. students, alumni groups, members of professional or trade associations, or people over the age of 50 who qualify to join the AARP plan. The advantage of any group of size is that the premium rates are generally lower than for the cover available under the standard individual policy. As in all situations, making the best decisions about health insurance relies on you reading the plans to see exactly what’s on offer. Only if one plan at an affordable premium rate meets your needs should you buy.

Starting with cover provided by your employer, the first issue is whether the employer offers a choice of plan. When you go to work for a large employer, there are often a number of choices with different premium rates. The most common choice is whether to include dental care but, when it comes to the detail of the medical cover, the only way to be certain which plan is the best fit for you and your family is to read the small print. In other situations, it can be a case of choosing between plans. For example, a young person about to go to college may be covered by their parent’s existing plan. So it’s necessary to read both plans to see which will offer the best short- and medium-term benefits. Remember, young people can stay on their parent’s policy until the age of 26 so, before moving on to a college plan, always find out whether the young person may rejoin the parent’s plan when the course is complete.

If your employer does not offer a plan, your spouse is not a member of a group plan that can accept you, you are self-employed or you are in education, you may decide to buy an individual policy. Unfortunately, this is the most expensive option so, if you do not qualify for Medicaid, the first decision is whether to buy term insurance. This is the cheapest form of individual health insurance. As a short-term measure, it gives limited cover for a set period of time. Hopefully, your family finances will improve sufficiently during this time to allow you to buy a full policy. If you are self-employed, most of the premium is tax-deductible.

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