5 advantages of individual health insurance

With so many health insurance options to choose from, how do you know what's best for your business? Group health plans have long been a popular choice for employer-sponsored health insurance coverage. However, more employers are embracing reimbursement models, like health reimbursement arrangements (HRAs), to provide quality essential health benefits to their employees.

HRAs let you reimburse employees tax-free for the individual health insurance plans they choose for themselves. This approach offers advantages for both employers and employees, from greater plan choice to more predictable budgeting. But what exactly makes individual health insurance such a compelling option?

In this article, we’ll go over the top five advantages of individual health insurance for employers and their teams.

In this blog post, you'll learn:

• The importance of offering medical coverage.
• How individual coverage compares to group coverage.
• How PeopleKeep by Remodel Health makes offering an HRA easy.

Why provide health benefits?

Before we get to our list of advantages of individual health coverage, let's cover why your organization should provide health benefits.

Providing employee benefits helps you attract and retain employees. Our 2024 Employee Benefits Survey found that 81% of employees said the benefits package an employer offers is an important factor in whether they accept a job with an organization. Another 92% of employees consider health benefits important, making it the most important perk you can offer.

Health benefits can boost employee morale and decrease absenteeism due to illness by promoting overall employee health.

What are the benefits of health insurance?

Health benefits help protect your employees from the financial strain of rising healthcare costs. Whether they’re enrolled in a group health plan or an individual policy, having coverage ensures they can access essential medical services without taking on the full cost themselves.

For employees who choose an individual health plan through the Affordable Care Act (ACA) marketplace, federal law requires these plans to cover a comprehensive set of services, including:

• Ambulatory patient services
• Emergency services
• Hospitalization, such as surgery
• Pregnancy, maternity, and newborn care services
• Mental health services
• Substance abuse disorder services
• Prescription drugs
• Rehabilitative services
• Habilitative services
• Laboratory services
• Preventive care services
• Pediatric services

The federal government doesn't require individual health insurance programs to provide adult vision coverage or adult dental coverage, but it does require carriers to include coverage for children's dental and vision costs in their plans. Employees can purchase separate adult dental and vision plans from the marketplace if available in their area.

All marketplace plans must provide additional benefits such as birth control and breastfeeding coverage.

Advantages of individual health plans

There are many advantages to covering the cost of employees' individual health insurance plans over providing traditional group health insurance. We'll cover the top five advantages in the following sections.

1. Cost of individual health plans compared to small group plans

Over the years, the cost of group health plans has continued to rise. As group health insurance premiums get more expensive, it becomes more difficult for small- and medium-sized organizations to afford this type of health benefit for their employees.

Group plans work by spreading the insurer's risk across the entire group. Therefore, the larger the group, the lower the risk and, consequently, fewer costs per employee. It can be tough for small and midsize organizations to meet the minimum participation requirements for fully-insured group plans. Even if you do, the costs are often higher than individual health insurance plans or larger group plans.

Fully-insured group plans have annual rate hikes that come once it's time to renew your employer-sponsored plan. PwC¹ projects an 8.5% rise in medical costs for employer-sponsored health plans in 2026, the same jump employers saw in 2025. However, it’s not uncommon for groups with high utilization to see rate increases of 20% or more.

Individual policies are generally more affordable. According to PwC, the individual market is seeing a 7.5% increase in 2026. So, how can you take advantage of this? By offering your employees an HRA. With an HRA, you can provide employees with a set monthly allowance to put toward their health insurance premiums and other eligible out-of-pocket costs, giving you an easier way to budget each month. You set your contribution for the year, and your employees can’t exceed it.

Some HRA-eligible medical expenses include:

• Individual monthly premiums for health, vision, and dental coverage
• Doctor visits
• Preventive care
• Emergency care
• Prescription drugs
• Over-the-counter medication

2. Availability of discounts

Not only are individual health insurance premiums usually more affordable, but employees can also qualify for additional financial assistance on their premiums.

These discounts on health insurance, known as health insurance subsidies or premium tax credits, help low-income Americans get affordable health coverage through the health insurance marketplaces.

If you offer a group health insurance policy that your employees can't afford, there are no subsidies available to help them cover the monthly cost. That means their only option is to opt out of the employer-sponsored coverage, leaving them uninsured and less likely to stay working at your organization. However, if your group plan doesn’t meet federal affordability or minimum value standards, your employees can enroll in an individual plan instead and get premium tax credits. If this occurs, your organization could face steep financial penalties under the employer shared responsibility provisions of the ACA.

Instead, you can offer a stand-alone HRA to help employees with their individual health insurance premiums.

It's important to note that if you offer an HRA, your employee may need to coordinate their premium tax credit with their HRA allowance or choose between the two, depending on the type of HRA you're offering and if your employee's allowance is unaffordable.

If you have 50 or more full-time equivalent employees (FTEs), you must offer an affordable health benefit that meets minimum essential coverage (MEC) and minimum value standards to at least 95% of your full-time employees to satisfy the ACA's employer mandate. If you have fewer than 50 FTEs, you don't have to meet the affordability standards.

You can also offer a health stipend to your employees if you have workers who receive advance premium tax credits. However, employee stipends are taxable for employers and employees, making HRAs a better coverage option for most organizations.

3. Individuality

While most employees are thankful for the group plan their employer offers, they don't get any say in what kind of plan they end up with. They're often lumped into a one-size-fits-all plan without any choice on their network, coinsurance, or monthly premium cost.

By reimbursing your employees for their individual health insurance instead, they can choose a personalized plan that works with their preferred doctors, provider networks, and budget. If your employees need chronic condition management or special medical equipment, they can choose the type of plan that best fits their needs.

4. Flexibility

Traditional group plans are full of strict requirements that can be hard for small and medium-sized business owners to meet.

For example, many health insurance companies require that a minimum number of employees enroll in the plan. If you have employees who are on a spouse's or parent's plan, enrolled in Medicare, or don't want the medical coverage, you may not meet the participation requirements, which means you can't offer the plan to those who do want it.

Group health insurance plans also generally require employers to pay a minimum share of the premium to meet affordability, usually at least 50%. If you can’t afford to cover that amount, you won't be able to offer a group plan at all.

Reimbursing your employees for their individual health insurance policies keeps you from following these strict group requirements. This gives you the flexibility to contribute what you can afford and allows you to offer the benefit to any number of employees, depending on the plan you choose to set up.

5. Portability

Unlike group health insurance, individual health insurance policies are portable, meaning your employees can take their policy with them even after they leave your organization. With a group plan, your employees would lose coverage after leaving your organization (though COBRA can extend coverage for a limited time).

Reimbursing your employees for their individual health insurance with an HRA allows you to offer a formal health benefit that takes care of your employees. It also empowers them to make their own informed decisions about their healthcare that aren't dependent on their employment.

Offering an HRA through PeopleKeep by Remodel Health

If you’re new to HRAs, administering one on your own can feel overwhelming. PeopleKeep by Remodel Health makes it simple. As your HRA administrator, PeopleKeep helps you set up and manage your health benefit in just minutes each month, giving you back valuable time to focus on what matters most in your business.

Our team of experts streamlines the entire experience by:

• Creating compliant plan documents
• Guiding you through plan design
• Reviewing and processing employee reimbursement requests
• Organizing and storing required documentation
• Delivering award-winning customer support

Offering an HRA triggers a special enrollment period (SEP) for your employees. They can shop for plans directly from their PeopleKeep accounts. This saves them time and eliminates the hassle of navigating the ACA Marketplace or reaching out to insurance companies on their own.

The two most popular stand-alone HRAs you can offer are:

• The individual coverage HRA (ICHRA): The ICHRA is the most flexible HRA available. It works for employers of all sizes and has no annual limit on allowances. You can also vary allowances based on 11 employee classes, age, and family size. Employees need their own individual health insurance plans to participate in the ICHRA. Coverage through a spouse's or parent's group plan doesn't qualify.
• The qualified small employer HRA (QSEHRA): The QSEHRA is for employers with fewer than 50 FTEs. You can vary allowances based on employee age and family size, but there is a limit to how much you can offer. Employees need MEC to participate in the QSERHA. Coverage through a spouse's or parent's group plan qualifies.

Conclusion

Employer-sponsored health insurance is a sought-after employee benefit. However, a group plan isn't your only option for coverage. You can take advantage of individual health insurance, which is often more affordable, by offering your employees an HRA. With this tax-free health benefit, you can offer them a monthly allowance for their individual health insurance premiums and other out-of-pocket costs.

If you want to offer personalized health benefits to your employees, PeopleKeep by Remodel Health can help. Schedule a call with an HRA specialist today to get started!

This blog article was originally published on October 2, 2013. It was last updated on December 9, 2025.

1. PwC