Can health insurance premiums increase because of claims?

Yes, for certain types of group health plans. An insurance company can consider a group’s claims experience when setting rates for some fully-insured large-group plans, while claims directly affect costs for self-funded plans. However, ACA-compliant individual and SHOP plans can’t use employer claims history to determine premiums.

Can an employer’s health insurance premium go up at renewal?

Yes. Group health insurance premiums can change at renewal based on factors such as healthcare costs, utilization, the group’s risk profile, and, for plans subject to experience rating, the group’s claims history. Employers commonly review these changes during their annual renewal period.

Does an employee with high medical claims increase everyone’s health insurance premiums?

Potentially. For a fully-insured group plan subject to experience rating, high-cost claims can result in premium increases for the whole group. In a self-funded plan, high claims can directly increase the employer’s claims expenses and may affect future stop-loss costs. Insurers can’t charge an individual employee a higher premium because of their personal medical history.

How can employers reduce health insurance costs after a high-claims year?

Employers can compare alternative plan designs, evaluate level-funded or self-funded options where appropriate, review stop-loss coverage, or consider an HRA such as a QSEHRA or CHOICE Arrangement (formerly ICHRA). An HRA can give employers more predictable costs because the employer sets a defined contribution amount, known as an allowance, rather than assuming the claims risk of a traditional group plan.

Is a CHOICE Arrangement a good alternative to group health insurance?

A CHOICE Arrangement, formerly known as ICHRA, can be a useful alternative for employers that want more predictable healthcare costs and less exposure to group claims. Instead of sponsoring traditional group coverage, the employer provides their employees with a fixed monthly allowance that they can use to purchase individual health coverage and qualified expenses. This allows employers to control their budget and gives employees the freedom to choose their own health plan.

5 advantages of individual health insurance

By Holly Bengfort on October 7, 2026 at 8:00 AM

With so many health insurance options to choose from, how do you know what's best for your business? Traditional 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 health benefits to their employees.

HRAs let you reimburse employees tax-free for the qualifying 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 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 cover the advantages of individual health coverage, let's talk about why your organization should provide health benefits.

Employee benefits help 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. Another 92% of employees consider health benefits important, making it the most important perk you can offer.

Health benefits can boost employee morale and reduce illness-related absenteeism 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, coverage ensures they can access essential health benefits without paying 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, including¹:

Ambulatory patient services
Emergency services
Hospitalization, such as surgery
Pregnancy, maternity, and newborn care services
Mental health services
Substance abuse disorder services
Prescription drug coverage
Rehabilitative services
Habilitative services
Laboratory and diagnostic services
Preventive care services, including wellness programs
Pediatric services

The federal government doesn't require individual health insurance programs to provide adult vision coverage or adult dental coverage. However, 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. Employers can also still offer a group dental plan with certain types of HRAs.

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, group health plan costs have continued to rise. As group health insurance premiums rise, it becomes harder for small- and medium-sized organizations to afford this benefit for their employees.

Non-SHOP group plans spread the insurer's risk across the entire group. Therefore, the larger the group, the lower the risk and, consequently, the lower the costs per employee. Small and midsize organizations can struggle 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 because of your employment size.

Fully-insured group plans have annual rate hikes when it's time to renew your employer-sponsored plan. Luckily, reimbursing individual policies up to your defined contribution limit through an HRA is generally more affordable than a traditional group plan.

With a stand-alone HRA, you can give employees a set monthly allowance to put toward health insurance premiums and other eligible out-of-pocket costs, making monthly budgeting easier. You set your employer contribution for the year, and employees can’t exceed it. Once your employees incur an eligible medical expense and provide claim documentation, often a receipt or explanation of benefits (EOB), you reimburse them for the cost, tax-free, up to their set allowance amount.

Some HRA-eligible medical expenses include:

Individual monthly premiums for health, vision, and dental coverage
Healthcare provider visits
Preventive care
Emergency care
Prescription medication
Over-the-counter drugs
Annual deductible costs
Ambulance services

2. Fewer geographic limits

Individual health insurance can be a better fit for employers with remote or geographically distributed workforces. Group health plans often rely on a single network, which may not provide the same level of coverage in every state or local market.

With individual health insurance, each employee chooses a plan based on where they live. This gives employees access to local provider networks and plan options without your organization having to piece together multiple group health plans to accommodate workers in different locations.

A stand-alone HRA can make this approach even more flexible. Instead of tying employees to a specific group plan or provider network, an HRA can help them pay for eligible individual health insurance coverage wherever they live. This makes HRAs a useful option for employers with employees spread across multiple states or locations.

For example, a CHOICE Arrangement lets employers make tax-free contributions toward individual health insurance premiums while employees choose coverage that fits their location and needs. Because the benefit isn't tied to a single group health plan network, employers can offer a consistent health benefit across a geographically distributed workforce.

3. Individuality

While most employees are thankful for the group plans 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 with no choice over their network, coinsurance, or monthly premium.

By reimbursing employees for their individual health insurance instead, they can choose health coverage that fits their preferred healthcare providers, networks, and budget. The individual market offers various plan types, including health maintenance organization (HMO) plans, preferred provider organization (PPO) plans, high deductible health plans (HDHPs), and policies eligible to pair with a health savings account (HSA).

If your employees need chronic condition management, special medical equipment, or pre-existing condition options, they can choose the plan type that best fits their personal health needs.

4. Flexibility

Traditional group plans often come with 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 on a spouse's or parent's plan, enrolled in Medicare, or who 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 can't offer a group plan at all.

Reimbursing your employees for their individual health insurance policies keeps you from having to meet 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).

Employees can take their individual plans with them, but they can’t take any remaining HRA allowances.

Reimbursing your employees for their individual health insurance with an HRA lets you offer a formal health benefit that supports your employees. It also empowers them to make informed healthcare decisions 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 administration software provider, 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
Providing enrollment support and educational resources for employees
Reviewing and processing employee reimbursement requests
Organizing and storing required documentation
Delivering award-winning customer support

Offering a stand-alone HRA for the first time triggers a special enrollment period (SEP) for your employees to enroll in individual coverage. They can shop for plans directly from their PeopleKeep accounts. This saves them time and eliminates the hassle of navigating the ACA Marketplace or contacting insurance companies on their own.

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

The CHOICE Arrangement. Formerly known as the individual coverage HRA (ICHRA), the CHOICE Arrangement is the most flexible HRA available. It works for employers of all sizes and has no annual allowance limit. You can also vary allowances based on 11 employee classes, age, and family size. Employees need their own qualified 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 full-time equivalent employees (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 minimum essential coverage (MEC) to participate in the QSEHRA. 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 coverage option. You can offer your employees an HRA to take advantage of individual health insurance, which is often more affordable. With this tax-free health benefit, you can offer them a monthly allowance for their individual health plan premiums, whether Marketplace coverage or private health insurance, 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 October 7, 2026.

References

What Marketplace health insurance plans cover

Frequently asked questions

Individual health insurance gives employees more control over their health coverage. They can choose a plan based on their preferred doctors, provider networks, medical needs, and budget. Additionally, unlike group coverage, individual policies are portable, so employees can keep their coverage if they leave their employer’s company.

Individual health insurance can be less expensive than small group coverage, although costs vary by location, plan, age, and household. Employers can offer their staff a stand-alone HRA to provide a predictable contribution toward employees’ individual premiums and other eligible medical expenses.

Yes. Employers can use a formal HRA, such as a CHOICE Arrangement or a QSEHRA, to reimburse employees tax-free for eligible individual health insurance premiums. Eligibility, employer contribution limits, and reimbursable medical expenses depend on the HRA type and plan design.

With group health insurance, the employer selects the plan and employees generally enroll in the coverage offered. Coverage specifics depend on the plan, meaning employees have less control over their care options.

With individual health insurance, each employee chooses and enrolls in their own policy on public exchanges or through private insurance companies. An HRA allows an employer to contribute toward the cost of employees’ individual coverage instead of offering a traditional group plan.

Under the Patient Protection and Affordable Care Act (ACA), employees may qualify for premium tax credits when purchasing ACA Marketplace coverage, depending on their income and other eligibility factors. However, an HRA can affect eligibility for those credits.

Employees offered a CHOICE Arrangement must choose between the HRA and their tax credits. In most cases, employees should waive their tax credits and opt into their benefit if it’s affordable. With a QSEHRA, employees must reduce their HRA contribution by their subsidy amount if their benefit is unaffordable for one or more months. Those with an affordable QSEHRA can’t collect their tax credit for that month.