Limitations Of Group Health Insurance

Some of the features of a group contract which make it so desirable also make it undesirable. For example, the group contract is considered advantageous since it offers benefits to a relatively large number of individuals at a low cost. However, the benefits offered are fixed and may in fact increase the cost to a given insured since he may not need some of the benefits offered. On the other hand, he may need other benefits not offered. 

Often benefit and coverage levels are geared to salary. This arrangement may work a hardship on an individual who has a relatively small income yet needs a relatively large amount of coverage because of a large family. In short, these limitations focus on the fact that it is very difficult or impossible to tailor group coverages to fit the specific needs of the individual members of the group. 

Another group of limitations centers on the fact that few group contracts provide permanent forms of insurance. Most contracts provide term insurance which results in the insured being deprived of the advantages of permanent insurance such as cash and loan value. A rebuttal against the argument of nonpermanency is that the insured is usually given the right to convert when he leaves the group. However, the problem is that the insured must convert at his attained age and thus pay a higher premium. The higher premium in itself makes conversion an unattractive alternative.