Why is individual health insurance more affordable than group health insurance?
Group health insurance tends to cost more than individual health insurance. With this in mind, it makes sense that small businesses would use individual health insurance to structure their health benefits. After all, it makes the money spent on health benefits go a long way. In this Pacific Prime Singapore article, we discuss how these types of health insurance work and why individual health insurance is more economical than group health insurance.
What is the difference between individual and group health insurance?
Individual health insurance is a type of health insurance policy that a person purchases for themself and/or their family. These types of policies are usually purchased with the help of an insurance broker or agent to negotiate plan options and premium costs. When it comes to individual health insurance, the risk is distributed over a large group, covering anywhere from hundreds of thousands to millions, depending on the policy and insurer.
Group health insurance, on the other hand, is a type of health insurance policy that an employer purchases and pertains to eligible employees within the organization, along with eligible dependents of employees. With this type of insurance, the employer chooses the plan(s) to provide to employees. Nowadays, the premium cost is typically split between both parties. The employer also has to contribute a minimum percentage to the premiums.
What’s more, for group policies, the amount of premium paid by the employer generally increases annually according to the previous year’s healthcare of the group. For group health insurance, the risk is distributed over the number of employees that are covered in the company.
Why individual health insurance is more affordable
For most small groups, individual health insurance policies are more economical than group health insurance due to the risk pool’s size. As previously mentioned, the risk is distributed over a significantly larger group for individual health insurance. Small businesses also find it less risky from a financial viewpoint to use individual health insurance as the basis for employee health benefits.
Conversely, with group health insurance plans, if one employee develops a chronic illness, has surgery, or has a baby, it’s likely that the premium rate will increase significantly at the annual renewal date. By having employees purchase individual health insurance, which is considered a pure defined contribution (DC) approach, the business can predict the costs more accurately.
Pairing individual health insurance with defined contribution
Since individual health insurance is more affordable, in comparison to group health insurance, many small businesses are pairing individual health insurance with a pure defined contribution approach to provide employee health benefits. Once this strategy is implemented, employees are offered a health insurance allowance that they can use to purchase individual health insurance.
As a result, employees are able to purchase a plan that is most suitable for their health needs. Employers can also predict costs without worrying about maximum or minimum contribution amounts. Based on the affordability and advantages of individual health insurance, it’s easy to see why small businesses are choosing these plans over group health insurance.
What is the best private individual plan in Singapore?
There are two primary ways that a business or individual can find individual health insurance in Singapore: by searching independently or using an insurance broker.
Searching independently
Shopping around on your own takes a lot of time and effort. You’ll have to contact all the insurers you’re interested in and make a note of each of the plans that are on offer. Since there are so many international health insurance companies in Singapore, and each of them has several insurance options and plan types, collecting all these details can be both daunting and time-consuming.
Using an insurance broker
When you use an insurance broker, all you have to do is contact a reputable broker and let them know what your business is looking for in a health insurance plan. Once the broker has finished conducting their research and applying their industry expertise, they’ll come back to you with the most suitable options.
Ultimately, the goal of both routes is identical: to find a high-quality, affordable health insurance plan for your employees. However, it doesn’t end with securing a health insurance plan. Once you’ve chosen a plan, it must be presented to your employees in a way that they can understand. Likewise, their questions need to be answered, claims need to be managed, and plan use needs to be monitored to ensure proper conduct.
The last step of the cycle involves going through the renewal process once the policy’s term comes to an end. This entire process can be quite tedious for most people, which is why working with an insurance broker tends to be the best option.
How Pacific Prime Singapore can help you
Pacific Prime Singapore is available to help you with your health insurance needs, whether you’re looking for group medical insurance in Singapore or a family health plan. You can have a look through our website to find out more about health insurance options in Singapore. Contact us to speak to one of our insurance experts for professional advice or get a free quote and plan comparison today.
Jantra curates and reports on the results of Pacific Prime’s monthly newsletters, as well as manages Pacific Prime’s Deputy Global CEO’s LinkedIn posts. Complemented by her background in business writing, Jantra’s passion for health, insurance, and employee benefits helps her create engaging content - no matter how complex the subject is.
Growing up as a third-culture kid has given her a multicultural perspective that helps her relate to expats and their families while 8 years of working remotely have given her unique insight into hybrid work arrangements and enthusiasm for employee benefits.
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