What typically happens to the premium rate when an employee converts a group health plan to an individual policy?

When an employee converts a group health plan to an individual policy, the premium rate typically increases compared to the group rate. This is primarily due to the dynamics of risk pooling in group insurance versus individual insurance.

In a group health plan, premiums are generally lower because the risk is spread across a larger number of individuals, allowing for a more balanced risk profile and thus lower rates. When an individual transitions to a personal policy, they lose that collective risk benefit and are instead assessed based on their own health status, age, and other personal factors. Since there is a higher predictability of individual healthcare costs, insurance companies tend to charge higher premiums to account for the risk associated with insuring one person rather than a large group.

Additionally, individual policies often come with more tailored coverage options, which can also contribute to a higher premium. The nature of underwriting for individual policies necessitates a more thorough assessment of the applicant's health risks, which further influences the increased costs. Therefore, it's understandable that the premium rate for an individual policy is usually higher than that of a group plan.