Are you chasing down group health insurance?

Can you make a group for group health insurance out of thin air?

I read a lot of forums aimed at small business people and professionals, and I see a common topic arise. One member wants to try to get other members to form a small group or association and negotiate a group plan for these people. On the surface, this sounds like a noble idea, but I do see some problems for trying to make a group out of a 'bunch' of people who need health insurance.

The first problem is that these people are not really employed by the same company, so it wouldn't be a true group. Some insurers go so far as to eliminate any 1099 employees from the true group, and some insurers will accept this. OK, so that's the first hurdle. You don't really have a group, and you probably won't get enough people to really negotiate on price. You would probably need thousands.

The problems with group health insurance for small groups

I've stated this before, but let me do it again. Group health insurance is not cheaper than individual health plans for most people. It might seem cheaper because your employer is picking up a large percentage of the price tag, but it really isn't when you add up the employer contribution plus the employee contribution. That's why people complain that their COBRA payments are so high! You aren't paying for COBRA. You are paying the total price tag for health insurance.

Group health is often very high because the insurer must take employees without underwriting. Of course, they don't do this as a service, but they do pass the costs along. With individual health insurance, and insurer gets to underwrite, choose who they will insure according to their guidelines, and take the people who they will insure, and exclusde pre existing conditions for a certain amount of time. Of course, these premiums are actually cheaper.

But group health insurance seems better!

If you really compare apples to apples, it works out. Most people want to spend far less out of their own pockets for the total bill than the amount employers fork over. I've spoken to small business owners who were paying 800 to 1000 for employee medical insurance. Many families would like to limit their total price tag to half of that or less. I cannot understand why I have to offer much higher deductibles or greater coinsurance amounts to fit a plan within their budgets.

If you are healthy, why not quote individual health plans? You may be pleasantly surprised. If you are not healthy, a group plan will certainly seem more attractive, but you do have other alternativies. All states have some fallback plan for high risk residents. In Texas, we have a risk pool. Other states have companies which offer guaranteed acceptance health plans. Of course, these plans are not free, and they are usually expensive. But group health will be expensive anyway.

If you cannot afford to pay for health insurance, many counties and states have health plans that they underwrite for lower income people. To work with country programs, and especially low cost insurance for children, you do not have to be destitute - and in fact, many middle income people qualify!

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