How does group health insurance typically differ from individual plans?

Group health insurance typically differs from individual plans primarily in that it offers lower premiums based on combined risk. When insurance is purchased for a group, such as employees of a company, the overall risk is spread across a larger number of individuals. This pooling effect generally leads to lower per-person premiums, as the insurer can anticipate and manage the collective health claims more effectively than with individual plans where risk is evaluated on a person-by-person basis.

In contrast, individual plans are often priced higher because they are assessing the risk of each applicant separately, and individuals with higher health risks may pay significantly higher premiums. The economies of scale found in group insurance provide significant cost benefits that are not as readily available in individual policies. Additionally, group plans often have benefits that can be more favorable due to this pooling of risk, making them generally appealing for both employers and employees.