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Group coverage vs. individual health insurance cost

Written by: Elizabeth Walker
October 25, 2021 at 9:23 AM

Deciding whether to enroll in a group health insurance plan through your employer or to purchase your own individual health insurance plan can be a confusing decision to make. With significant differences in flexibility, benefit options, and costs, you need to know you’re making the right call for you and your family.

Many people assume that individual health insurance is more expensive than group health insurance, but is that really true? How exactly do individual health insurance premiums compare to group health insurance premiums?

In this article, we’ll compare the cost of group health insurance and individual health insurance, as well as discuss another budget-friendly health insurance option to make your insurance even more affordable.

Read five advantages of individual health insurance for employers and employees.

Want to skip ahead? Pick a section below!

How much does group health insurance cost?

About 157 million people are covered by employer-based health insurance. But how much do companies pay for employee health insurance?

For a look into trends and costs over the years, the Kaiser Family Foundation conducts an annual survey.

In their recent findings, in 2020, the average monthly premiums for group health insurance increased from previous years to:

  • $622 for individual coverage
  • $1,778 for family coverage

Since 2019, average employer-sponsored individual premiums increased 4% and family premiums increased 4%. Moreover, the average premium for family coverage has increased 22% over the last five years and 55% over the last ten years.

How much does individual health insurance cost?

Due to the Affordable Care Act (ACA), premiums aren’t determined by gender or pre-existing health conditions.

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

  • Age
  • Income
  • Location
  • Dependents
  • Healthcare use
  • Chosen policy plan, either bronze, silver, or gold

According to eHealth’s recent study of ACA plans, in 2020 the national average monthly health insurance premium for an ACA plan was $456 for an individual plan and $1,152 for a family plan.

Individual health insurance vs. group health insurance cost

When you put them 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 a personal health insurance plan.

Individual health insurance

Group health insurance

Individual

$456/month

$622/month

Family

$1,152/month

$1,778/month

Individual health insurance and health reimbursement arrangements (HRAs)

Group and individual health insurance plans are popular choices but there’s another option that can benefit employees and employers called a health reimbursement arrangement (HRA) that is growing in popularity and works in conjunction with individual health insurance.

HRAs allow employers to reimburse employees, tax-free, for healthcare, including individual health insurance premiums and qualifying out-of-pocket medical expenses.

With an HRA, employers set their own budgets by offering an allowance amount for each employee. Employees win big on flexibility by being able to choose their own individual health insurance plan that’s tailored to their specific needs.

Let’s take a look at two of the most popular HRAs which are the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA).

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, health insurance 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 a group health insurance policy to any employee.

Individual and group health insurance premiums and deductibles typically vary on a yearly basis, but 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.

Check out our comprehensive guide to the QSEHRA

Individual coverage HRA (ICHRA)

With an ICHRA, employers of any size can offer employees an HRA without maximum reimbursement limits. Similar to the QSEHRA, employees receive a monthly allowance for employees to spend on their individual health insurance coverage and other qualified medical expenses. After their expense is submitted, reviewed, and verified, employers reimburse them up to their allowance amount.

Unlike the QSEHRA, employers have an added option of setting ICHRA eligibility guidelines and allowance amounts for their employees 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.

Learn more about the ICHRA with our comprehensive guide

Conclusion

In the past, nearly every employee in the U.S. had a group health insurance policy they got through their employer, but a lot has changed in recent years. A growing trend for employees is to purchase their own individual health insurance that meets their unique healthcare needs. What’s more, employers are finding the addition of an HRA to be an even greater benefit to help cover the cost of their employees’ individual health insurance.

If you’re an employer deciding between group coverage and HRA for your employees, PeopleKeep is here to 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 October 25, 2021.

Topics: Individual Health Insurance, Group Health Insurance, Qualified Small Employer HRA, Healthcare Costs

Additional Resources

Which is better for you—the QSEHRA or the ICHRA? Get our chart to find out.
Want to get your healthcare costs reimbursed? See how in our webinar.

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