When you’re looking for health insurance, you have options. For many of us, that means insurance through work. Depending on the size of your organization, health insurance may be part of a group health insurance plan.
But what if group insurance isn’t an option for you, or it doesn’t fit your health and financial needs? What if you’re self-employed? Sometimes, individual insurance can be the best fit.
Learn more about the benefits and drawbacks of both group and individual insurance, so you can make the best choice for you and your family.
The differences between individual and group health insurance
There are many differences between group and individual health insurance – and one big one is how you obtain them. Group insurance is typically offered through an employer to a group of employees. Individual insurance is purchased directly from an insurance provider, like HealthPartners.
Another important aspect is cost. Group insurance is often less expensive, because employers usually help pay for insurance premiums. There are differences involving preexisting conditions, networks and other factors as well.
Both options have their pros and cons – it’s all about what will work best for your health needs and budget.
Let’s talk about group health insurance
With group health insurance, your employer chooses a plan option (or several) to offer employees. These types of plans typically include a monthly premium, which is the amount you pay for coverage, and possible copays, coinsurance and other cost-sharing features depending on the plan.
Why group health insurance might work for you
There are plenty of benefits to enrolling in a group plan, especially financially. Your employer will contribute to your premium, making payments more affordable.
Also, group coverage tends to be very comprehensive. A group plan often features a broad network of doctors, specialists and hospitals. Group plans can provide additional health benefits other plans might not, like access to hearing, vision and dental coverage, and perks like wellness programs and gym memberships.
The drawbacks of a group health plan
While there are many features that make group insurance plans an attractive option, they’re not without drawbacks. You don’t get to customize or control your plan – your employer chooses what’s offered, and that’s a plan that best meets the needs of a company’s whole workforce. That means there’s a chance that your plan might not serve your unique health care needs.
Also, you often don’t get to choose your network. While most group plans provide access to a network of doctors, depending on your location, you’re still required to get care within that specific network. You might have limited options or flexibility when choosing a doctor or specialist.
And group insurance can change from year to year. As an employee, you won’t have much say in coverage premium adjustments. Plus, when you leave your job, you may lose your group coverage.
Let’s talk about individual health insurance
Unlike group health insurance, individual plans are purchased directly from a private insurance company or the health insurance marketplace. These plans aren’t connected to your employment in any way, and they can be purchased for a specific individual or the whole family. Individual insurance is a good choice for those who aren’t eligible for employer-sponsored coverage, like contractors, early retirees, part-time workers and the self-employed.
Why individual health insurance might work for you
One of the most attractive elements of an individual health insurance plan is flexibility and customization. As the person choosing the plan, you get to select which health insurance provider you work with based on coverage offerings and the networks they work alongside. You also get a good idea of cost-sharing expectations, like copays, coinsurance and deductibles.
And since your insurance isn’t tied to employment, you can take it with you when you leave or change jobs. Also, if you get your insurance through the health insurance marketplace, you may be eligible for a premium tax credit, also known as a subsidy, that can help lower the cost of coverage.
Individual health plans: The drawbacks
With an individual health plan, an employer doesn’t contribute, so the cost of coverage is your responsibility. And since you’re not working within a group plan that divides a premium, costs are often higher. Unlike with group plans, which can use collective bargaining power, you won’t be able to negotiate rates and coverage options.
Also, if you live in an area with limited choices for health services, you might have fewer plan and network options to choose from. If you’re choosing among individual plans that aren’t qualified health plans (QHPs), which are required by law to meet requirements set by the Affordable Care Act (ACA), you might have to face exclusions for preexisting conditions. This can result in claim denials or higher premiums – something that doesn’t happen with a group plan.
Group and individual insurance at a glance
| Group coverage | Individual coverage | |
|---|---|---|
| Provides coverage for an individual or family | Yes | Yes |
| Coverage is tied to employment | Yes | No |
| Coverage is purchased directly from an insurance provider or the health insurance marketplace | No | Yes |
| You can shop around for health insurance options | Sometimes – it depends on what your employer offers | Yes |
| Care is typically tied to a network of providers | Yes | Yes |
| Plans include cost-sharing features like deductibles, copays and coinsurance | Yes | Yes |
| Average premium rates | Tend to be lower cost | Tend to be higher cost but possible tax subsidies via ACA/QHPs |
| Plans include an individual coverage health reimbursement arrangement (ICHRA) | Some offer a premium reimbursement benefit | No |
The cost of individual health insurance vs. group health insurance
When choosing the type of plan that will work best for you, there are a couple things to consider. You’ll want to examine your health needs (like chronic conditions and frequency of care), your employment status and, of course, your budget.
For many people, finances end up becoming one of, if not the biggest, determining factor in what kind of coverage they choose. Between these two options, group health insurance is often the more cost-effective. Your employer contributes, and the more employees who are a part of your group, the more costs are mitigated. More and more employers offer Health Reimbursement Arrangements for employees – these are plans that offer possible premium reimbursements or decreased cost-sharing amounts.
While individual insurance can be more expensive, it’s a good option for those who need a plan that’s more specific to their needs and isn’t tied to their jobs. There’s no wrong answer between the two – there’s just what will work best for you.
Have more questions about individual health insurance?
Our experts will help you find a health plan you’re confident in – no matter your situation.
