12.4 Group vs. Individual Health and Eligibility

Group vs. Individual Health and Eligibility

Health coverage is delivered through two channels the exam contrasts repeatedly: group plans, sponsored by an employer or association, and individual plans, purchased directly. The mechanics of underwriting, contracts, and continuation differ sharply between them.

In a group plan the master contract is issued to the employer (the policyowner); each covered employee receives a certificate of coverage, not a policy. Group plans use experience or community rating and typically require no individual medical underwriting—instead they apply eligibility rules: full-time status, a probationary period (a wait before becoming eligible, often 30–90 days), and an enrollment period during which employees elect coverage.

Group vs. Individual Comparison

A core anti-selection safeguard in group plans is the participation requirement: a minimum percentage of eligible employees must enroll (commonly 75% for contributory plans, 100% for noncontributory) so the group does not consist only of unhealthy lives.

Contributory vs. Noncontributory

• Noncontributory plan — the employer pays the entire premium; 100% of eligible employees must be covered. There is no individual selection, so anti-selection risk is minimal.
• Contributory plan — employees share the premium cost; typically at least 75% must participate.

Late enrollees who skip the open enrollment period may be required to submit evidence of insurability before joining, again to prevent anti-selection. Newly eligible employees usually have a short window (for example, 31 days) to enroll without proof of insurability.

Continuation: COBRA and HIPAA

When group coverage ends, federal law provides continuation rights:

• COBRA applies to employers with 20 or more employees. After a qualifying event, qualified beneficiaries continue group coverage at their own cost (up to 102% of premium) for 18 months (termination or reduced hours) or up to 36 months (death, divorce, loss of dependent status). The beneficiary has 60 days to elect.
• HIPAA guarantees portability—prior group coverage limits new pre-existing exclusions and guarantees access in certain situations. Under the ACA, pre-existing exclusions are generally prohibited entirely.

Eligibility and Enrollment Traps

• Open enrollment for individual ACA plans runs during a defined annual window; outside it, a special enrollment period (SEP) requires a qualifying life event such as marriage, birth, or loss of other coverage.
• A probationary (waiting) period for new employees cannot exceed 90 days under the ACA.
• Conversion privilege lets a departing group member convert to an individual policy—usually without evidence of insurability—but at individual rates and often with narrower benefits.
• Dependents are typically covered to age 26 under ACA rules regardless of student or marital status.

Other Group Arrangements and Sponsors

Groups eligible for true group health coverage are not limited to single employers. The exam recognizes several sponsor types:

• Single-employer group — the most common form.
• Multiple Employer Trust (MET) or Multiple Employer Welfare Arrangement (MEWA) — small employers band together to obtain group rates.
• Association group — a professional or trade association sponsors coverage for members.
• Labor union group — coverage negotiated through collective bargaining.

In every case the group must be formed for a purpose other than obtaining insurance, which prevents adverse-selection pools of only sick lives. The insurer underwrites the group as a whole, evaluating its size, industry, claims history, and demographics rather than each individual.

Eligibility Timeline Scenario

Consider a worker hired January 1 at a 50-employee firm with a contributory plan, a 60-day probationary period, and a 31-day enrollment window. She becomes eligible March 2; if she enrolls within 31 days she joins without evidence of insurability. If she declines and later wants in, she is a late enrollee and may face evidence-of-insurability screening.

If she is terminated in June, COBRA lets her continue coverage up to 18 months at up to 102% of premium. If she instead leaves and the plan offers a conversion privilege, she may convert to an individual policy without proving insurability, though at higher individual rates. Map each fact—hire, eligibility, election, termination—to the correct rule, and the answer follows.