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Group coverage vs. individual health insurance cost

Written by: Elizabeth Walker
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Originally published on June 6, 2022. Last updated June 9, 2022.

Many individuals rely on an employer-selected group health plan for insurance coverage, but what if that isn't the case? If you aren't able to participate in a group health plan or have the option to choose between group and individual coverage, you need to know you're making the right call for you and your family.

Most assume that individual health insurance is more expensive than group health insurance, but is that true? How exactly do monthly premiums and other costs compare from group health insurance to individual health insurance?

In this article, we’ll go over the cost of both group and individual health insurance and cover additional benefit options that can make your insurance more affordable.

Find out how much health insurance costs in your state with our comparison chart

How much does group health insurance cost?

About 155 million people are covered by employer-based health insurance, making it the most popular health insurance option today. Providing group health insurance can help businesses gain a competitive edge during hiring, retain their best employees, and enhance overall workplace satisfaction and productivity. But how much do companies pay for employee health insurance?

To offer a look into trends and costs over the years, the Kaiser Family Foundation1 conducts an annual survey that provides some insight on employer-sponsored health insurance.

In 2021, the average monthly group health insurance premiums paid for by employees reached:

  • $645 for individual coverage
  • $1,852 for family coverage

Since 2020, average employer-sponsored individual and family premiums have increased by 4%. Additionally, the average premium for family coverage has increased 22% over the last five years and 47% over the previous ten years. In 2021, employers are contributing roughly $16,000 a year towards premiums while employees were contributing $6,000 a year.

Increases in group premiums not only impact employers, but employees as well. In addition to factoring in how much premiums will cost, employees should also consider their annual deductible amount when estimating the cost of health insurance. The average deductible amount for single coverage in 2021 was $1,669, which was similar to 2020’s average deductible. However, the average annual deductible has increased 13% over the past five years and 68% over the past ten years.

How much does individual health insurance cost?

If your employer doesn’t offer you health insurance as part of an employee benefits program, you may be looking to purchase your own health insurance through a private health insurance carrier.

It’s normal to be concerned about how much an individual health insurance policy will cost. Health plan premium rates can be unpredictable, and each insurance company is different. Luckily, due to the Affordable Care Act (ACA), the cost of monthly premiums are a bit more predictable because they are no longer determined by factors such as gender or pre-existing health conditions.

However, the cost of individual health insurance varies depending on certain factors like:

  • Age
  • Annual income
  • Location
  • Dependents
  • Healthcare use
  • Metal tier policy type—either bronze, silver, gold, or platinum plans

According to eHealth’s study of ACA plans2, in 2021 the national average monthly health insurance premium for an ACA silver plan without premium tax credits was $450 for an individual plan.

Family plan costs will vary based on family size, of course. But, a family of four can expect to pay an average of $1,437 for an unsubsidized family plan.

Depending on your annual income level and other necessary information, you may qualify for health insurance subsidies and other cost-savings through the federal health insurance marketplace, which can help you purchase affordable health insurance coverage on your own.

Individual health insurance vs. group health insurance cost

When you put the results side by side, it’s easy to see that individual health insurance tends to be more affordable than employer-sponsored group health insurance, particularly for those with an individual health insurance plan.

Individual health insurance premiums costs for employees

Group health insurance premiums costs for employees

Individual

$450/month

$645/month

Family

$1,437/month

$1,852/month

However, there are other factors to consider when choosing health insurance. Outside of cost, you should choose your plan based on all pertinent information such as where you live, plan type, your preferred doctor, provider network, covered services, and medical care that you specifically need.

The right plan for you isn’t just affordable—it should also suit you and your family’s individual healthcare needs.

How a health reimbursement arrangement (HRA) can save you money on your premiums

Group and individual health insurance plans are popular choices. But to save even more money on your group or individual health insurance premiums, you can implement a health reimbursement arrangement (HRA). HRAs are growing in popularity, and can coordinate with both individual and group health insurance policies.

HRAs allow employers to reimburse employees, tax-free, for qualifying out-of-pocket costs and, sometimes, individual health insurance monthly premiums.

With an HRA, employers set their own budgets by offering an allowance amount for each employee. After submitting, reviewing, and verifying their expense, employers reimburse them up to their allowance amount.

Employers can control the rising cost of health insurance, and employees can choose the medical care and provider network tailored to their specific needs.

Let’s look at three popular HRAs that PeopleKeep offers to employers: the qualified small employer HRA (QSEHRA), the individual coverage HRA (ICHRA), and the integrated HRA.

Download our comparison chart on group health insurance vs. HRAs

Qualified small employer HRA (QSEHRA)

With a QSEHRA, employees purchase their own health insurance and get reimbursed for medical expenses, monthly premiums, and other qualified costs with tax-free dollars from their employer. To qualify, a company must have fewer than 50 full-time employees and can’t offer any employee a group health insurance policy.

While health insurance premiums, deductible expenses, and other actual expenses will typically vary every year, the QSEHRA has annual contribution limits that the IRS sets annually. This means that employers are limited in how much tax-free money they can offer their employees through the benefit.

QSEHRAs are immediately available to all full-time W-2 employees. However, employers can offer the benefit to part-time employees as long as they receive the same amount of allowance as full-time employees, per compliance regulations.

Check out our comprehensive guide to the QSEHRA for more information

Individual coverage HRA (ICHRA)

With an ICHRA, employers of any size can offer employees an HRA without maximum reimbursement limits. Like the QSEHRA, employees receive a monthly allowance to spend on their individual health coverage and other qualified medical expenses.

Unlike the QSEHRA, employers can set ICHRA eligibility guidelines and allowance amounts based on 11 different employee classes. Employees must also attest to having an individual health insurance policy at the beginning of each month before they can collect reimbursements.

An important factor to keep in mind with the ICHRA is that they are only available to workers with an individual health insurance plan. This means if you have any staff members covered by a family member's or spouse’s group health plan or a health sharing ministry, they won’t be able to participate in the ICHRA benefit.

Learn more about the ICHRA with our comprehensive guide

Integrated HRA

If you’re an employer that wants to keep their group health plan, there is an HRA for you too. The integrated HRA, or group coverage HRA (GCHRA), is available to businesses of all sizes that specifically offer a group health insurance policy. In this case, only employees who opt into the employer-sponsored health plan can participate in the HRA.

With an integrated HRA, employers can offer monthly allowances for employees to pay for any eligible expense not fully paid for in their group health insurance policy, such as deductibles, coinsurance, and other healthcare items listed in IRS Publication 502. However, allowances can’t be used on their policy’s monthly premiums.

Integrated HRAs work with any group health plan. But for employers and employees looking to save even more money, you can offer a high-deductible health plan (HDHP), pay cheaper premiums, and use the integrated HRA to offset the higher deductible.

There are no allowance limits with an integrated HRA, so they are budget-friendly and flexible. Like the ICHRA, employers can offer different allowance amounts based on seven employee classes to better customize and meet employees’ needs.

See how an integrated HRA can work for your organization with our guide

Conclusion

In the past, many employees in the U.S. had a group health insurance policy, but a lot has changed in recent years. A growing trend for employees is browsing coverage options and purchasing their own individual health insurance policy.

But whether you have employees with an individual policy or want to keep your group health policy, employers are finding an HRA to be an even greater benefit in providing affordable health insurance coverage to their employees.

If you’re an employer thinking of providing HRA coverage to employees, PeopleKeep will get you started! Schedule a call with one of our personalized benefits advisors, and we can help get you set up with the HRA that fits your needs.

This article was originally published on July 29, 2020. It was last updated on June 6, 2022.

1 https://www.kff.org/report-section/ehbs-2021-summary-of-findings/

2 https://www.ehealthinsurance.com/resources/affordable-care-act/much-health-insurance-cost-without-subsidy

Originally published on June 6, 2022. Last updated June 9, 2022.
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