Nearly 50% of Americans1 rely on an employer-selected group health plan for insurance coverage. However, many Americans purchase their own individual health policy, either because they aren’t eligible for an employer-sponsored group plan or for other reasons.
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 the differences to make the right call for you and your family.
In this article, we’ll go over the average cost of both group and individual health insurance and cover additional benefit options that can make your insurance more affordable.
How much does group health insurance cost?
About 159 million people are covered by employer-based health insurance, making it the most popular coverage option today. Providing health insurance is a great way businesses can gain a competitive edge for hiring, boost employee retention, and improve workplace satisfaction and productivity.
To look into trends and the cost of health insurance over the years, the Kaiser Family Foundation2 conducts an annual survey that provides some insight into employer-sponsored health insurance.
In 2022, the average amount that employees contributed toward the cost of health employer-sponsored insurance premiums was:
- $659/month for self-only coverage
- $1,871/month for family coverage
Average premium costs for employer-sponsored individual plans have been roughly the same over the past few years. However, the average premium for family coverage has increased by 20% over the last five years and 43% over the previous ten years.
In 2022, employers contributed roughly $6,500 each year towards individual premiums and about $16,300 towards family premiums.
Increases in group premiums impact not only 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 for single coverage in 2022 was $1,763, which was similar to 2021’s average deductible. However, the average annual deductible for single coverage has increased by 13% over the past five years and 61% 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 or a public exchange, like the federal health insurance marketplace.
Being concerned about how much an individual insurance policy will cost is normal. In the past, average health insurance premium rates could be unpredictable, and each health insurance company differed.
Luckily, due to the Affordable Care Act (ACA), your monthly premium is more predictable because a health insurer can no longer determine your price based on certain factors like gender or a pre-existing condition.
Plus, your health plan includes certain covered services. Plans must cover the ten essential health benefits like preventive care, hospitalization, and mental health services.
However, the average monthly cost of care with individual health insurance varies depending on certain factors like:
- Annual income
- Healthcare use
- Metal tier policy type—either bronze, silver, gold, or platinum health insurance plans
According to recent data4, in 2022, the national average monthly health insurance premium for an ACA silver plan without premium tax credits was $541 for single coverage.
Family plan premium rates will vary based on family size, of course. But, a family of three3 can expect to pay an average of $1,362 for an unsubsidized family silver plan.
Depending on your annual income level and other necessary information, you may qualify for premium tax credits and cost-saving federal government subsidies through the marketplace, which can help you purchase affordable health insurance coverage on your own.
Individual health insurance vs. group health insurance cost
When you compare individual and group plan costs, it’s easy to see individual health insurance plans tend to be more affordable than employer-sponsored group health insurance.
Individual health insurance premiums costs
Group health insurance premiums costs
However, there are other factors to consider when choosing health insurance. Outside of monthly costs, you should search for exchange plans based on all pertinent information. This includes where you live, plan type, preferred doctor, network provider, covered medical services, and specific healthcare needs.
The right type of plan for you isn’t just affordable—it should also suit your and your family’s healthcare needs. If you need help choosing a health insurance plan, you can always work with a licensed insurance agent or a broker to help you review your health plan options and find the medical plan that best meets your needs.
How personalized health benefits can help you with monthly premium costs
Whether you participate in an employer-sponsored group plan or an individual plan, if your employer offers a health reimbursement arrangement (HRA), you can leverage that benefit to save money on your healthcare costs.
HRAs allow employers to reimburse employees, tax-free, for qualifying out-of-pocket costs and, sometimes, individual health insurance monthly premium payments.
With an HRA, employers control their monthly costs by determining how much of an allowance to offer their employees. After submitting, reviewing, and verifying employee-submitted expenses, employers reimburse employees up to their allowance amount.
The type of HRA you are eligible for depends on the type of medical coverage you have. 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.
Qualified small employer HRA (QSEHRA)
With a QSEHRA, employees purchase their own health insurance and get reimbursed for medical costs, monthly premiums, and other qualified out-of-pocket 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 individual health insurance premiums, deductible expenses, and other actual expenses will typically vary yearly, the QSEHRA has annual contribution limits that the IRS sets annually. This means employers are limited in how much tax-free money they can offer their employees through the benefit.
If an employer offers a QSEHRA, the law requires that they offer it to all full-time W-2 employees. However, employers can also provide the benefit to part-time employees as long as they receive the same allowance amount as full-time employees, per compliance regulations.
Individual coverage HRA (ICHRA)
With an ICHRA, employers of any size can offer employees an HRA without maximum reimbursement limits. Like the QSEHRA, the ICHRA enables employers to offer their employees a monthly allowance for individual health coverage and other qualified medical costs, like prescription drugs and over-the-counter items.
Unlike the QSEHRA, the ICHRA allows employers to define eligibility guidelines and allowance amounts based on 11 employee classes. Employees must also attest to having individual health insurance coverage each month before they can collect reimbursements.
An important factor to remember with the ICHRA is that it is only available to workers with an individual plan. This means if you have any staff members covered by a family member's or spouse’s employer plan or a healthcare sharing ministry, they won’t be able to participate in the ICHRA benefit.
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, employees can’t receive reimbursements on their monthly premium payments.
There are no allowance limits with an integrated HRA, so they are budget-friendly and flexible. Like the ICHRA, the GCHRA allows employers to offer different allowance amounts based on seven employee classes to better customize and meet employees’ needs.
Health and wellness stipends
Whether your employer chooses group health insurance or encourages you to get individual health insurance, you'll reap even more benefits if they offer a health or wellness stipend. Better yet, stipends can work alongside an HRA and group health insurance if your employer offers both.
A health stipend is a flat amount of money employers give to employees to help them pay for health insurance and other out-of-pocket expenses. Stipends are an informal but beneficial perk as they’re flexible enough to meet every employee’s needs.
Stipends are essentially extra money added to an employee’s paycheck for them to use on whatever they choose, and employers reimburse them for the cost after the fact. It’s important to note that employers can’t require employees to use their stipend money on healthcare items, nor can they ask for proof that they used the money to buy a health insurance policy.
Employers can also offer wellness stipends to reimburse their employees for expenses like gym memberships, wellness mobile apps, and more. This allows organizations to create a holistic health and wellness program.
Stipend money is considered taxable income for the employee, and employers are subject to payroll taxes. However, stipends still offer great personalization for employees wanting to control their healthcare and finances even more.
While the majority of employees in the U.S. have a group health insurance policy, a lot has changed in recent years. A growing trend for employees is browsing coverage options or working with an insurance agent and purchasing their own individual health insurance policy.
Whether you have an individual policy from the health insurance marketplace or are participating in a group health policy, if your employer offers an HRA or health stipend, you can leverage that to save on health costs.