What happens to the premium rate when an employee converts a group health plan to an individual policy after being laid off?

When an employee converts a group health plan to an individual policy after being laid off, the premium rate will typically be higher than the group rate. This is primarily due to the nature of risk pooling in group plans, where the costs are spread out among many individuals, allowing for a lower average premium. In contrast, individual policies assess the risk for each person individually, often leading to higher premiums, especially for those who may have increased health risks or pre-existing conditions.

Additionally, group health insurance plans often offer lower rates due to their ability to negotiate with insurers based on the collective bargaining power of a larger group. Once an individual separates from the group, they lose these advantages and may have to pay higher rates that reflect only their personal health status and insurance needs.

In the context of insurance, this transition from a group plan to an individual policy highlights the differences in risk spreading and cost-sharing between the two types of coverage, helping to explain why an individual's premium would increase.