When small businesses consider health insurance options, it's common to compare a traditional group health insurance plan with individual health insurance reimbursement.
How do individual and group health insurance compare? Here's a concise overview.
Individual health insurance and group health insurance defined
First, let’s define the two types of insurance plans:
- Individual health insurance, sometimes called employee-sponsored coverage or self-insured coverage, is a health insurance policy an individual purchases for themselves and/or their family. Individual health insurance policies are often purchased with the guidance of an insurance agent or broker to help navigate plan choices and premium costs. Insurance companies cannot deny coverage for preexisting medical conditions, and premium tax credits are available to those who qualify, based on income.
- Group health insurance, sometimes called employer-sponsored coverage or group coverage, is a type of health insurance policy purchased by an employer and offered to the employer’s eligible employees and their eligible dependents. In 2019, more than half of non-elderly Americans have group health insurance coverage through their employer or the employer of a family member. With group health insurance, the employer selects the plan, or plans, to offer to employees. The premium cost is often split between the employer and employee, and there is a minimum percentage rate the employer must contribute.
How group and individual insurance compare
Here are the primary characteristics of individual health insurance compared to group health insurance and how they work for the employee and employer.
| Group health insurance | Individual/family health insurance | |
| Coverage continues when job is lost | Limited | Yes |
| Coverage continues when jobs change | Limited | Yes |
| Choice of medical providers | Limited | Yes (you can choose any carrier) |
| Coverage of preexisting conditions | Yes | Yes |
| Who purchases the plan | Employer | Employee |
| Tax-deductible premiums | Yes | Yes, if a health reimbursement arrangement is set up by the employer. |
How group and individual insurance costs compare
In 2019, the average national annual premium costs for health insurance with a group health insurance plan and with individual health insurance were as follows.
| Single coverage | |
| Group health insurance plan, 2019 | $7,188/year |
| Individual health insurance plan 2019 | $5,472/year |
Source: KFF for employer-sponsored, eHealth for employee-sponsored
It’s important to note that the costs for individual health insurance plans are trending downward in many states, while the cost trends for group health insurance plans continue to increase. Employers also save time and money when employees purchase and manage their own plans.
Learn why individual health insurance is more affordable than group health insurance
What questions do you have about individual health insurance vs. group health insurance? Let us know in the comments below.
