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Employer health insurance vs. individual health insurance: What you need to know

Staff Writer

July 15, 2019

Today, it’s nearly impossible for a family to survive the financial blow of a hospital stay without health insurance. This is why, for many American families, having good health insurance benefits is almost as important as earning a strong salary.

In the past, most families had employer health insurance, also known as group coverage or group insurance. With employer health insurance, employers do the research, choose the insurance company and pick plan options for their employees. However, the landscape of health care has evolved greatly over the past few years:

• A turbulent economy has forced many employers to reduce spending and cut health insurance benefits.
• The rising cost of health care has made it difficult for companies to pay for health insurance, resulting in more of the financial burden being placed on employees.
• Advanced treatments, drugs and technologies are helping people stay healthier, but they come at a steep price.

These changes have sparked a growing trend: More and more Americans are choosing individual health insurance, also known as personal health insurance. With individual health insurance, you have the freedom to do your own research, select your own insurance company and choose your own plan. For many families, individual health insurance is a better fit, even if employer-based coverage is an option.

Are you trying to decide if employer-sponsored health insurance or personal health insurance is a better fit for your family? Keep reading for the information you need to know about these different types of plans. Understanding the pros and cons of these options will help you make an educated decision that’s right for your family.

Employer-sponsored health insurance

As mentioned earlier, employer health insurance is chosen by your employer. Your employer does the research, chooses the insurance company and selects your plan options. Typically, your employer shares the cost of your premiums, which is the money you pay every month for your health insurance. Usually, your share of the premium will be automatically deducted from your paychecks. Employer-sponsored health plans can have many advantages, including:

• Your employer contributes to your premiums.
• Your employer does all the research and work choosing plan options. This can be a time-consuming and possibly confusing task if you aren’t familiar with health insurance.
• Your medical insurance premiums are likely deducted from your pre-tax pay, which means you’re paying for your medical insurance before any federal and state taxes are deducted, lowering your taxable income.

Individual health insurance

On the other hand, personal health insurance puts the ball in your court to do the research, choose an insurance company and select your plan. This option gives you more control over your family’s health insurance options.

There are a couple different ways to purchase individual health insurance. One option is to purchase a health insurance plan from the Marketplace, which is operated by the federal government. Depending on your income and household size, you may be eligible for a subsidy, which can make your health care more affordable. Marketplace plans are only available for purchase during Open Enrollment, or if you experience a qualifying event. Check out our Open Enrollment Q&A to learn more.

Another option for getting individual health insurance is to select a private health insurance plan. Private health insurance can be purchased directly from insurance companies, or through agents, brokers, or online.

Here are some advantages of personal health insurance:

• You have the power to choose the best company and plan to meet your needs.
• Your health insurance isn’t tied to your job, so you can change jobs without losing coverage.
• You can choose a plan that includes your preferred doctors and hospital.
• If you’re eligible, you may get a subsidy from the government, making your coverage more affordable.

Employer-sponsored health insurance vs. individual health insurance

Now that you know the advantages of both group coverage and individual coverage, let’s examine them side-by-side, so you can compare the differences and make an informed decision for your family.

Cost of employer health insurance vs. personal health insurance

You now have a good understanding of the differences between employer-sponsored health insurance and individual coverage. However, you likely still one big question: Which costs less?

It’s hard to give a firm answer because there are many factors that can influence how much you’ll pay. Your income, family size and where you live are just three considerations. However, to give you an idea, here are some annual premium averages:

Employer-sponsored health insurance: Average annual premium cost for one person¹

Individual health insurance: Average annual premium cost for one person with Marketplace health plan²

While these averages can give you an idea of costs, keep in mind that what you pay for health insurance depends entirely on your unique circumstances.

Add extra protection with supplemental health insurance

No matter if you choose employer-sponsored coverage or individual health insurance, you will likely still face many out-of-pocket medical costs. The costs of deductibles, copays, coinsurance and non-covered treatments can add up quickly with a critical illness, accident, disability or hospitalization.

You can help protect your family from high out-of-pocket medical costs with supplemental health insurance. Supplemental health insurance is intended to be used in addition to your group or individual major medical insurance. It is intended to help pay for those costs which may not be covered by major medical insurance. With supplemental health insurance, benefits are paid directly to you or your beneficiaries, not doctors or hospitals, which means you can use the money however you choose. Benefits are paid regardless of any other insurance you have, whether you have employer-sponsored or individual health insurance.

If you’d like to learn more about supplemental health insurance policies, contact us here.

¹Kaiser Family Foundation, Average Annual Single Premium per Enrolled Employee For Employer-Based Health Insurance, 2017 Timeframe, https://www.kff.org/other/state-indicator/single-coverage/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D, 2019.

²Kaiser Family Foundation, Marketplace Average Premiums and Average Advanced Premium Tax Credit (APTC), Open Enrollment 2019, https://www.kff.org/health-reform/state-indicator/marketplace-average-premiums-and-average-advanced-premium-tax-credit-aptc/?currentTimeframe=0&selectedRows=%7B%22wrapups%22:%7B%22united-states%22:%7B%7D%7D%7D&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22desc%22%7D, 2019.