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Small Business Employee Benefits and HR Blog

Comparison of Individual Health Insurance vs. Group Health Insurance

Comparison of Individual vs. Group Health Insurance for Small EmployersWhen small businesses consider health insurance options, it's common to weigh offering a traditional group health insurance plan with offering individual health insurance reimbursement.

How do individual and group health insurance compare? Here's a concise overview.

Individual Health Insurance vs. Group Health Insurance

  • Individual health insurance is a type of health policy an individual purchases for himself and/or his family. Individual health insurance policies are often purchased with the guidance of an insurance agent to help navigate plan choices and premium costs. Insurance companies may no longer deny or charge more based on medical conditions and premium tax credits are available to those qualify (based on income).

  • Group health insurance coverage is a type of health policy purchased by an employer and offered to eligible employees of the company, and to eligible dependents of employees. Currently (2016), the majority of non-elderly Americans (56%) have group health insurance coverage through their employer, or the employer of a family member. With group health insurance, the employer selects the plan (or plans) to offer to employees. The premium cost is often split between the employer and employee, and there is a minimum percentage rate the employer must contribute.

Here are the main characteristics of individual health insurance and group health insurance, and how they work for the employee and employer. 

  Group Health Insurance Individual/Family Health Insurance
Protection when Job is Lost (Employee) Limited Yes
Protection When Changing Jobs (Employee) Limited Yes
Choice of Medical Providers (Employee) Limited                         Yes
Coverage of Pre-existing Conditions (Employee)                                                            Yes Yes
Who Purchases the Plan? Employer Employee
Tax-Deductible? Yes Yes, if a health reimbursement plan is set up by the employer.

Individual Health Insurance vs. Group Health Insurance - Cost 

The average national annual premium costs for health insurance with a group health insurance plan and with individual health insurance were as follows.

  Single Coverage
Group Health Insurance Plan, 2016 $6,435/year
Individual Health Insurance Plan, 2016                 $4,632/year
Individual Health Insurance Plan, 2016 (with Premium Tax Credits)                       $1,272/year

Sources: KFF 2016 Annual Health Benefits Survey and U.S. Department of Health & Human Services

What questions do you have about individual health insurance vs. group health insurance? Let us know in the comments below.

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Editor's Note: This article was originally posted on August 8, 2013. It has been updated with the most recent health insurance information.

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