- Employer-sponsored health, life and disability coverage falls within the category of group health insurance plans. When insuring groups of people, insurance companies can spread the overall claim risk across a pool of people. With self-insured policies, companies base a large degree of the risk on a single person. In effect, the smaller the risk pool, the larger the risk an insurance company takes on. This difference affects premium rates and coverage options, as well as eligibility for insurance coverage in some cases. As a result, group insurance coverage often provides cheaper rates and looser eligibility criteria. Group insurance can also provide less flexibility in terms of coverage options since all persons in the group fall under one policy plan.
- Insurance underwriting practices determine policy rates and conditions for any type of insurance coverage. Within the health insurance industry, insurance companies use rating factors to determine the coverage terms for employer-sponsored and self-insured policies. Rating factors include gender, age, location and claims history. With employer-sponsored -- or group -- plans, companies assign rating bands based on group averages in terms of the ages, genders and claims histories of the people in a group. With self-insured policies, any rating factors used apply to a single person. The average age within a group, the number of men versus women and the average number of claims filed by the group is viewed in much the same way as the age, gender and claims history for an individual filing for a self-insured policy. In effect, the older the age and the longer the claims history, the more expensive a policy or plan will be.
- Underwriting practices for life insurance coverage look at many of the same rating factors considered when providing health insurance coverage. The age, health condition and medical history of a group or individual -- in the case of self-insurance -- are the primary areas considered. As far as premium rates and coverages go, young people in good health may get a better deal with a self-insured policy than employer-sponsored plans since a group's rating factor can trigger higher group rates and less coverage than an individual rating. Oftentimes, employer-sponsored life insurance comes in the form of term-life plans as opposed to whole-life policies, which build cash value. Also, employer-sponsored plans may not offer adequate coverage amounts for a young family in the event of an untimely death. In effect, self-insured policies allow for larger death benefit coverage amounts and lower premium costs for the young and healthy.
- Long-term disability coverage provides insurance protection in the event a person becomes injured to the point where it affects his ability to work. The main differences between employer-sponsored versus self-insured plans have to do with how these policies are structured in terms of renewal options and policy definitions for disability. Self-insured plans provide guaranteed or fixed-premium rates along with a guaranteed or conditional option to renew, whereas employer-sponsored plans may not come with these options. Some employer plans may provide for guaranteed renewals, which works well for employees who have chronic health conditions. As far as policy definitions for disability go, self-insured plans allow for more flexibility in terms of what types of conditions or injuries warrant disability coverage, while employer-sponsored plans are more apt to deny a claim if certain conditions aren't met.
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