In Canada, there are many methods of accessing healthcare — provincial health care plans, group insurance plans, and individual insurance plans, for a start.
Yet when it comes to individual and group health insurance, there are some key differences working Canadians should be aware of. Let’s start with the definition of each:
Group Health Insurance
Group health insurance is provided to employees through their employer. Eligibility for employees under a group insurance plan is very straightforward. It is typically based on the number of hours worked and after meeting a waiting period. These plans are also set up based on the average age of employees, the industry they work in, as well as the assumption that working employees are generally healthy.
Individual Health Insurance
Individual health insurance is purchased by an individual who requires health coverage above and beyond what the government will cover. These plans are set up based on the individual person’s age, medical condition(s), and other lifestyle circumstances. As such, you may be required to submit medical evidence.
Eligibility and Medical Evidence
With group insurance, individuals do not have to supply medical evidence and are automatically eligible for coverage, provided they work the minimum number of hours and satisfy the waiting period. This makes group insurance very accessible.
Individual health insurance will often require applicants to submit medical evidence and other information prior to approving the coverage (though not all plans). Based on the supplied medical evidence, there is potential for coverage to be denied, whereas this is not the case with group insurance.
Coverage for Pre-existing Conditions
When applying for individual health insurance, the Insurer may deny coverage for any pre-existing conditions (or deny coverage altogether), based on the supplied medical evidence. Individuals with previously documented health conditions, such as diabetes or cancers, may be able to get health insurance, but likely not for those pre-existing conditions. A person’s age and smoking status can also impact coverage and even the cost of coverage.
However, group insurance coverage is available to all eligible employees, regardless of pre-existing conditions. Importantly, this does not necessarily mean that a group plan will offer coverage for all pre-existing conditions, as there may be specific pre-existing condition clauses within group insurance.
For example, travel insurance generally requires that a person is in stable condition for a certain number of days prior to departure. This is usually somewhere between 30-90 days.
As a general rule, group insurance will cost a person less than individual insurance for the same or comparable coverage. This is the case for three reasons.
- With group insurance, the risk of a claim is spread out across a large number of persons who are considered healthy (employees in a workplace). This is known as risk pooling.
- Employers are required to pay a minimum of 50% of the premiums for the group benefits.
- The cost of group insurance benefits is taken from an employee’s before-tax paycheque. With individual health insurance, you’ll pay premiums with after-tax dollars.
- With individual insurance, the monthly cost may increase slightly at each year’s renewal due to inflation and the age of those covered – it is generally not affected by the number of expenses claimed. However, with group insurance, the premiums increase at each year’s renewal due to the number of claims the employee’s have made.
For group insurance, insurance coverage is tied to the covered person’s employment. This means that coverage begins after they have satisfied a waiting period, and coverage will cease if that person leaves their job for any reason. When an employee leaves their employer, they have the option to convert their benefits to individual coverage without medically qualifying – which is important for those with pre-existing medical conditions.