Susan used to work for a large corporation where the premium for employment-base
ID: 1200399 • Letter: S
Question
Susan used to work for a large corporation where the premium for employment-based group health insurance was $500 per month. Of this, she contributed $100 and her employer contributed the remaining $400. When she left this job, her new employer did not offer group health insurance. She discovered than purchasing an equivalent quality individual health insurance plan would cost her a monthly premium of $800. Explain why there was such a difference in the premiums. (Assume this was before passage of the Affordable Care Act)Explanation / Answer
Group insurance is something that is very much tailored to meet the requirements of large group of people, Insurance companies offer lower premium to large sales like employee insurance, If an individual want to purchase same plan with similar benefits the risk for the insurance companies to verify the client etc goes a long way, So there is immediate hike in the premium,
The reality that insurance companies face is simple
1) High costs of marketing when single buyer buy premium
2) High processing fee to verify customers health records
3) It is not a group so individual risk is much higher, Ex: A person with illness may be able to buy the policy so risk increases.
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