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How Much Does Individual Health Insurance Cost?

July 29, 2020
cutting costs, health insurance, health benefits

Many people assume that individual health insurance is more expensive than group health insurance.

(For quick reference: Individual insurance is purchased by an individual for themselves or their family, and group health insurance is purchased by an employer for employees.)

So how much does individual health insurance cost? And how does it stack up against company-based group health insurance?

Data shows that individual health insurance is, on average, more affordable than group coverage. In addition, a third health insurance option exists for small businesses to offer their employees that can help businesses better control their health benefits budget.

Download our chart to see how much health insurance costs in your state

How Much Does Company-Based (Group) Health Insurance Cost?

The National Business Group on Health report provides key insights into group health insurance trends and costs. According to their news release:

In 2020, the average group health insurance cost per employee per year is $15,375 ($1281.25 per month). This means that the cost of the average employer-sponsored premium increased 5 percent from 2019.

How Much Does an Individual Health Insurance Policy Cost?

While the cost of individual health insurance has increased by 123 percent for single coverage since 2008 (and 174 percent for family coverage), individual health insurance remains more affordable on average than group coverage through a company.

According to data gathered by AARP, the average health insurance cost for single coverage premiums in 2020 is $388 per month. For family coverage, the cost for premiums in 2018 is $1,520 per month.

Group Health Insurance Cost vs. Individual Health Insurance Cost

When you put them side by side, it’s easy to see that individual health insurance tends to be cheaper than a company-based policy—particularly for single coverage.

  Individual
Health Insurance
Group Health
Insurance
Self Only $388/month $574/month
Family $1,520/month $1,634/month

Individual Health Insurance Cost and HRAs

Group-based and individual health insurance plans are popular choices, but there is a third option that can benefit employees and employers alike: a health reimbursement arrangement (HRA).

Created in the 1970s, HRAs allow employers to reimburse employees tax-free for health care, including individual health insurance policies. With an HRA, businesses can set their own budgets by offering a set allowance amount for each employee. This helps businesses control their budget while employees receive insurance tailored to their specific needs through the individual market.

There is a small handful of HRAs available to business, but the most popular are the Qualified Small Employer HRA (QSEHRA, and the individual coverage HRA (ICHRA)

Download our comparison chart: Group health insurance vs HRAs

The Qualified Small Employer HRA

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 by their company. To qualify, a company must have fewer than 50 full-time employees and can’t offer a group health insurance policy to any employee.

Download our infographic to see how much employers offered with a QSEHRA last year

Prices for Individual and group health insurance premiums and deductibles typically vary from year to year, whereas the QSEHRA has annual reimbursement caps that the IRS sets each year.

Download our comprehensive guide to the QSEHRA

The Individual Coverage HRA (ICHRA)

Beginning January 2020, employers have access to the individual coverage HRA (ICHRA). With this HRA, businesses of any size can offer employees an HRA without maximum reimbursement limits, and they are not limited by company size. The ICHRA also allows businesses to set eligibility guidelines and offer different allowance amounts to different employees based on 11 different employee classes.

Download our comprehensive guide to the ICHRA

Conclusion

Individual health insurance health policies are by far the fastest growing form of U.S. health insurance. As employers see the cost-savings and benefits of modern individual health insurance, they are using individual health insurance—not group health insurance—with an HRA as the basis of employee health benefits.

Editor's Note: This post was originally published in February 2012 and has been updated with the most current health insurance cost information.

Do you have questions about how much individual health insurance costs? Join the conversation in the comment section below.

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