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Insurance · Individual and Group Coverage

What is the main difference between individual and group health insurance underwriting?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

Group plans pool risk across all members of the group (often with limited or no individual medical underwriting); individual plans assess each applicant individually under modern ACA rules, though pre-existing conditions cannot be a basis for exclusion

  1. A Group is always more expensive
  2. B Group has worse coverage
  3. C Group plans pool risk across all members of the group (often with limited or no individual medical underwriting); individual plans assess each applicant individually under modern ACA rules, though pre-existing conditions cannot be a basis for exclusion
  4. D Individual plans are illegal

Why this is the answer

Group health insurance pools risk across all members of a group (typically employees of a company) and historically has used minimal individual medical underwriting — anyone in the group qualifies based on employment. Premiums are based on the group's overall demographics and claims experience. Individual health insurance under ACA rules is community-rated (premiums based only on age, geographic area, family size, and tobacco use — not health status) and 'guaranteed issue' (no one can be denied for health reasons). Before the ACA, individual policies used full medical underwriting and could exclude or rate up for health conditions. Group policies typically offer more comprehensive coverage at lower per-person cost due to risk pooling and employer contribution.
Source: NAIC Model Outline, Individual vs Group

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About this topic: Individual and Group Coverage

Individual and group coverage questions cover how group plans are underwritten and administered, eligibility and enrollment, conversion and continuation rights (COBRA), and how individual policies differ. This is one of 7 Health Insurance questions on individual and group coverage, each with a full explanation on a single study page.

New to this exam? Our Insurance exam guide explains the format, scoring, and how to prepare.

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