Employer vs. Individual Health Insurance Plans

In the past, most people had employer health insurance. Their company did all of the research, chose the insurance company and picked plan options for employees. This is also called group coverage or group insurance. But, a lot has changed in recent years.

  • Challenging economic times have forced many employers to cut costs.
  • Rising healthcare costs have made it difficult for companies to pay for health insurance.
  • New and more expensive technologies, treatments and drugs have emerged, adding costs.

Due to these factors and others, a growing trend is for individuals to either partially or fully pay for their own health insurance.  Even if employer-based group health insurance is still an option for you, you may wonder if you should purchase health insurance on your own, buying what is called Individual Health Insurance, or Personal Health Insurance.

To help you understand your options, we’ll look at both individual and employer-sponsored plans, explaining and comparing them.

Individual Medical Insurance

Individual Insurance is a health policy that you can purchase for just yourself or for your family. Individual policies are also called personal health plans.  If you’d like, you can work with an insurance agent to help you go over different plans and costs.

You may be eligible for a subsidy from the government to purchase an Affordable Care Act-compliant individual plan. This can help save you money on your health insurance. You may be eligible for a subsidy if your employer does not offer affordable health coverage and your household income is no more than 400% above the federal poverty level. You can see if you might qualify and review Medical Mutual subsidy-eligible plans here.

Advantages of an individual plan:

  • You can choose the insurance company, the plan and the options that meet your needs.
  • You can renew or change health insurance plans, options and health insurance companies during the annual Open Enrollment period.
  • Your plan is not tied to your job, so you can change jobs without losing your coverage. 
  • You can choose a plan that includes the doctors and hospitals you trust.
  • You may be eligible for a subsidy from the federal government to help pay for your insurance.

Medical Mutual offers many affordable individual health plans that can meet your needs.

Employer-Sponsored Health Insurance

Employer-sponsored health insurance is a health policy selected and purchased by your employer and offered to eligible employees and their dependents. These are also called group plans.  Your employer will typically share the cost of your premium with you.

Advantages of an employer plan:

  • Your employer often splits the cost of premiums with you.
  • Your employer does all of the work choosing the plan options.
  • Premium contributions from your employer are not subject to federal taxes, and your contributions can be made pre-tax, which lowers your taxable income.

Individual vs. Group Health Insurance Comparison: Should You Buy Health Insurance on Your Own?

Deciding whether to enroll in a health insurance plan through your employer or whether to purchase an individual, major medical plan on your own can be confusing. There can be significant differences in flexibility, benefit options and costs.

The following table summarizes some similarities and differences that can help you figure out what will best fit your needs.

Comparing Employer Group Plans and Individual Health Plans

  Individual Plans  Employer-paid Group Plans 
Plan purchaser
You can choose a plan that includes your preferred doctors and hospitals
Coverage remains with you if change jobs
Coverage of pre-existing conditions
Premiums can be paid on a pre-tax basis
No Yes
Premium costs are subsidized/shared
Purchasers may be eligible for government subsidies
Employers often pay a portion of premiums

Which Costs Less - Personal Health Insurance or Coverage through Work?

The costs of an individual plan vs. an employer-sponsored group plan can vary depending on several factors. These include your income, where you live and whether your employer offers a group health insurance plan. Below are some averages for annual premium costs for employer and individual plans:

Average Costs for 2016 Plans

  Average Annual Premium Cost for One Person
Individual Plan $4,632.00 1
Individual Plan with Premium Tax Credits
$1,272.00 1
Employer-Sponsored Plan (Employer and employee typically share this cost)
$6,435.00 2

While averages can give you an idea of typical costs, the real story is often more complex.  In many states, individual plans are less expensive. That’s because individual health insurance spreads the risk over a large group – possibly millions of people depending on the plan and insurance company. Plus, as stated above, you may be eligible for a subsidy from the federal government to help pay for your individual insurance policy.

With employer-sponsored health insurance, the premium cost is usually split between your employer and you, which will help you save money. On average, employers paid 82 percent of the premium of single coverage in 2016.2

Ultimately, choosing the best avenue for you will depend on your unique circumstances and what your employer is able to offer.

Ready to Shop?

Use our online enrollment tool to get an instant quote. You can also call us at 1-844-583-3072 or call your licensed insurance agent.