There are two primary types of health insurance:
- Individual: Individual insurance plans are purchased directly from insurance providers, from the Health Insurance Marketplace, or through agents and brokers. They are designed to cover either the purchaser alone or the purchaser and their family.
- Group: Group plans are purchased by employers from insurance providers and offer coverage for individual employees. These plans have their premiums subsidized by the employer, and coverage for employee spouses and dependents can often be added.
Group plans remain the largest market segment, with 49.6% of all Americans enrolled in group plans as of 2019. But individual plans are also on the rise thanks to the Affordable Care Act (ACA). In 2023, an all-time high of 20 million Americans enrolled in health plans from the Health Insurance Marketplace or state-based marketplaces.
However, many people may wonder if they’re better served with employer-sponsored or individual healthcare plans. Read on to take a closer look at group vs. individual health insurance to decide which option would be best for you.
Table of Contents
Group vs. Individual Insurance At a Glance
Group | Individual | |
|---|---|---|
Premium cost | Typically lower or “free” | Typically higher |
Option availability | Provided by employers | Any available plans within federal or state Health Insurance Marketplace |
What is Group Health Insurance?
Group health insurance, also called employer-sponsored healthcare insurance, is qualifying health coverage provided to a group of people — such as employees — on behalf of an agency or employer. Eligible employees can choose to opt into one of the group plans offered by their employer.
Employers subsidize these plans, which means group health insurance often features significantly lower premiums than individual health insurance plans. On average, workers contributed 17% of the total premium for single coverage and 28% of the premium for family coverage in 2021, while employers paid for the rest. You can typically add your spouse and dependents to a group plan at an additional cost, ensuring they receive the same health insurance coverage.
Because group health insurance is offered by employers, enrollees are limited to only the options offered by their employer. In addition, plans are generally not portable, meaning plan coverage typically terminates once you leave the employer.
Eligibility and Enrollment
Group health insurance is generally available through employer-sponsored plans. Eligibility is typically based on specific criteria set by the employer, such as:
- Being a full-time employee
- Working a minimum number of hours
- Achieving a certain tenure at the workplace
In many cases, enrollment in group plans occurs during a designated period each year, known as open enrollment. Each group plan may have a different open enrollment period.
Exceptions are commonly made for qualifying life events, such as marriage or childbirth. When a qualifying life event occurs, you can make coverage adjustments outside of the designated open enrollment period.
Coverage Specifics
Group health insurance plans are required to be Affordable Care Act (ACA)-compliant, meaning they must conform to regulations. ACA-compliant plans must not deny coverage or charge more due to pre-existing conditions. They also must provide comprehensive coverage that includes:
- Outpatient care
- Emergency services
- Hospitalization
- Pregnancy, maternity, and newborn care
- Mental health and substance abuse treatment
- Prescription drugs
- Rehabilitative services and devices
- Laboratory services
- Preventive and wellness services
- Pediatric services, including oral and vision care
Dental and vision plans for adults are typically not included in group health insurance plans. However, many employers offer separate dental and vision plans, allowing employees to choose additional coverage that meets their needs.
It’s important to note that group health insurance is directly tied to employment, so coverage typically ends when you leave the company. A period of unemployment or a transition period between jobs may leave you with a coverage gap. This makes it critical to understand your options for continuing health insurance through programs like COBRA or exploring individual insurance plans.
Pros and Cons of Group Health Insurance
- Lower premiums
- Lowered taxable income
- Lower cost to add dependents
- Coverage tied to employment
- Limited to employer offerings
- Challenging claims
Pros
- Lower premiums because employers subsidize costs. In group health insurance plans, employers contribute to a portion of the premiums. While there’s no fixed percentage for coverage, employers may pay upward of 50% of the total premium per month, in turn helping defray the cost of health insurance for employees.
- Premium contributions can lower your taxable income. Premiums paid on group plans may be deducted from your pre-tax income, which means they’re not subject to federal or state income taxes. This can help lower your overall taxable income.
- Dependents and spouses can be added to plans at lower costs. Adding dependents and spouses to group health insurance plans is typically more cost effective than having individual policies for each family member. Group plans are negotiated by employers, so families can enjoy comprehensive coverage at reduced rates.
Cons
- Coverage is tied to employment. If you lose your job or choose to take a new position with a different company, your employer coverage no longer applies. While options such as COBRA make it possible to continue group coverage for a limited period, you may be required to pay up to 102% of the premium coverage cost.
- Options are limited to employer offerings. The employer chooses the benefits offered with a group plan. Because you do not have access to every plan available in your area, you may find a mismatch between what your group plan offers and your desired coverage.
- Claims can be challenging. Depending on the type of coverage provided, it may be challenging for employees to file claims. Although the ACA requires insurance companies to offer an appeal process for coverage problems, group insurance plans may take longer to process claims because of the multi-layered nature of the plan structure.
What is Individual Health Insurance?
Individual health insurance is a plan purchased through the Health Insurance Marketplace, through working with licensed health insurance agents or brokers, or directly from insurance companies. You can purchase individual health insurance for yourself, or for yourself and your family to ensure your spouse and children are also covered.
You can purchase an individual health insurance plan regardless of whether your employer offers a group plan. Self-employed individuals and those who do not have access to group plans also primarily rely on individual plans for their health insurance coverage.
If the coverage offered by your employer does not meet your needs, you can choose to purchase individual health coverage instead. The cost and coverage options available with individual plans can vary widely, potentially providing an option to select a plan that more closely aligns with your financial situation and personal healthcare preferences.
Eligibility and Enrollment
You can purchase an individual health insurance plan whether you’re self-employed, cannot access employer-sponsored plans, or simply prefer a more comprehensive or specialized coverage option than what your employer offers.
Enrollment for individual plans is limited to the annual ACA Open Enrollment Period, which runs from November 1 to January 15 every year in most states. However, life events such as marriage, birth, or losing other coverage can qualify individuals for a Special Enrollment Period, allowing them to sign up or change coverage at other times.
It’s typically possible to add spouses and dependents to individual plans, ensuring coverage for the entire family. This is done during the enrollment process, or within a Special Enrollment Period. When adding a spouse or dependent to your plan, you may need to provide documentation, such as marriage certificates or birth certificates, to verify they are eligible for coverage under your plan.
Coverage Specifics
Individual plans purchased through the Health Insurance Marketplace are required to be ACA compliant. They cannot deny coverage or charge more based on pre-existing conditions and must offer a set of essential health benefits, including:
- Outpatient care
- Emergency services
- Hospitalization
- Pregnancy, maternity, and newborn care
- Mental health and substance abuse treatment
- Prescription drugs
- Rehabilitative services and devices
- Laboratory services
- Preventive and wellness services
- Pediatric services, including oral and vision care
Pros and Cons of Individual Health Insurance
- More plan options
- Broader network options
- Subsidies eligibility
- Higher premiums
- No vision or dental
Pros
- More options for plan types. Individual coverage lets you select the plan and network type that works for your medical needs and finances, depending on availability in your area. For example, you might opt for a health management organization (HMO) if you’re looking to balance premium costs with provider availability or a point-of-service (POS) plan if you want more flexibility.
- More options for plan networks. When shopping for individual coverage, you are not limited to only the options your employer selected. This means individual plans may give you the ability to access a wider range of benefits or preferred networks.
- Eligibility for health insurance subsidies. You may be able to get financial assistance, also known as subsidies, to help lower the cost of your health insurance premiums. Eligibility for subsidies depends on your income level and selected plan.
Cons
- Generally higher premium cost. Premiums for individual health insurance plans are typically higher because no portion of the premium is subsidized by your employer.
- Does not include vision or dental coverage. Individual insurance plans do not include dental or vision coverage. Instead, those seeking dental and vision benefits will typically need to purchase stand-alone dental or vision insurance plans.
Choosing Between Group vs. Individual Insurance
When it comes to weighing group insurance vs. individual insurance, it’s worth considering several factors:
- Health needs
- Cost
- Employment plans
Carefully comparing each of these components can help you make an informed decision about whether your employer-sponsored group plan is sufficient or an individual plan is more likely to meet your needs. If you need personalized guidance, consider consulting with a licensed insurance agent or broker who can help you sort through the details and select the plan that’s right for you.
Health Needs
As you evaluate your health needs, begin by listing the benefits you frequently use, such as regular medications, specialist visits, or specific treatments. Review your group plan’s coverage for each of these items.
Next, check whether your preferred doctors and healthcare facilities are included in the plan’s network. If not, see if you can find an individual plan with a more appropriate network. If you have ongoing medical conditions, verify whether the group plan offers adequate coverage for the necessary treatments and prescriptions.
Cost
As you compare plans, analyze cost-sharing features such as the plan’s deductible, copayments, coinsurance, and out-of-pocket maximums. It’s also important to consider premium costs, which can vary significantly between group and individual plans.
Once you have a full picture of the anticipated costs, weigh them against the coverage benefits to determine which plan offers the most value while still fitting into your budget.
Employment Plans
When comparing group vs. individual health insurance plans, it’s critical to consider your employment plans, such as whether you anticipate a job change or are considering becoming self-employed. While group plans are tied to your employment status, individual insurance provides continuity of coverage regardless of your job situation.
Another Option: Have Both Group and Individual Insurance
It’s also possible to have both group and individual health insurance. For example, if you have an employer-sponsored plan that covers the majority of your common medical needs, but you have a dependent with a condition that requires more costly and in-depth care, it may be worth purchasing an additional individual or family plan.
Consider both where your current coverage is lacking and what individual plans offer to help limit the amount of overlap. For example, if your employer-sponsored group plan’s network of specialists does not include those needed by your family on a regular basis, it may be worthwhile to purchase a family or individual health insurance plan that does.
Putting It All Together
Group health insurance is sponsored by employers and directly connected to the covered individual’s employment status. Their premiums are typically lower than comparable individual plans, and they offer the convenience of automatic payroll deductions. However, plan choices are generally limited.
While individual health insurance plans tend to be more expensive than group plans, they typically also provide more flexibility and choice, which can be particularly appealing to those with specific health needs. Since they are not connected to employment status, individual plans can also provide continuous coverage regardless of job changes.
Remember that it’s possible to combine individual and group plans as needed to meet your family’s healthcare goals. As you evaluate your options, consider each plan’s affordability, coverage, and costs. If you’re still not sure which plan may be right for you, consider consulting with an insurance professional.