Health insurance coverage can help protect you and your family members from high medical costs. Getting a health plan through your employer is often less expensive than purchasing health insurance outside of your job. This is because your employer will contribute to some of your health coverage and medical care expenses. If you are unemployed or don’t have insurance coverage, you can apply for a health plan by using our services. 

What is employer-sponsored health insurance?

Employer-sponsored health insurance or group health insurance is a medical coverage plan chosen and purchased by your employer. Employers first select the policy and then offer the health insurance coverage to eligible employees and their dependents.

There are several advantages to getting employer-sponsored health insurance. For example, you and your contractor will typically split the cost of your premium. Furthermore, your employer will perform all necessary research to choose a health plan. 

Your employer’s premium contributions are not subject to tax deductions, and your tax liability will be lower because your offerings are made pre-tax. See the table below for a more detailed explanation of the differences between an individual and an employer-sponsored health insurance program.

How group health insurance works

FactorIndividual Health PlanEmployer-Sponsored Health Insurance
Who chooses the policy?YouYour employer
Coverage remains if you switch jobsYesLimited
Coverage for pre-existing medical conditionsYesYes
Premiums can be paid before taxesNoYes
You have the option of selecting a plan that includes your preferred medical providers.YesLimited

Why is group health insurance less expensive than individual health insurance?

Employer-sponsored health insurance is typically less expensive than individual health insurance because your contractor will assist you in paying for your medical coverage and other healthcare expenses. According to federal legislation, large employers must cover at least 50% of the costs of insurance premiums, and enterprises will usually exceed this percentage.

For Example:

In 2016, the average annual premium for a single person on an individual health insurance plan was $4,632. Nevertheless, the average yearly costs of a group health insurance program for an individual were $6,436. Although this figure appears to be higher with employer-funded health insurance, the $6,436 is split at least 50 percent between the organization and the employee. As a result, the cost of employer health insurance is lower. 

Furthermore, premium increases in group health insurance plans have been less than those in individual health plans. In fact, with employer-based health insurance, individual premiums have only increased by 3%, while family premiums have increased by about 5%. The average premium with group health insurance for individual care and coverage was approximately $1,644. In comparison, the average premium for individual care with the individual health insurance plan was around $5,000. 

Frequently asked questions about employer-sponsored health insurance

Understanding employer-backed health coverage and whether or not you should buy a plan through your employer can be complex. Check out these frequently asked questions to learn more about group health insurance plans.

Should I get health insurance through my employer?

The table above illustrates the key differences between employer-supported health insurance and individual insurance plan. Assuming you prefer to choose your insurance company, change or renew your health plans, not be bound to your job, and want to qualify for a state government subsidy (or Obamacare subsidy) to pay for your insurance. In that case, an individual health insurance policy might be the best option for you.

However, if you want to share the cost of premiums with your contractor and have your program selected by your employer, then employer-sponsored health insurance may be the best option. 

What are some examples of popular group health insurance plans?

Standard group health insurance plans include health reimbursement arrangements (HRAs), small group health insurance, and salary bonuses. Small health group insurance is the most common type of health program offered. This plan is available to businesses with two to fifty full-time employees. Also, these plans provide coverage for all essential health benefits specified by the Affordable Care Act. 

HRAs’ plans are IRS-approved, group health insurance that can be used to reimburse employees for out-of-pocket medical expenses as well as their health insurance premiums. An HRA enables small businesses to manage their benefit costs by settling their spending plan and budget. 

Only small business owners who do not provide health insurance to their employees are eligible for salary bonuses. As a result, they can provide extra money, such as a raise or salary bonus, as compensation for certain employer-provided health benefits.

Are there any exceptions to group insurance being less expensive than individual insurance?

There are a few exceptions to group health insurance being less expensive than individual health plans though. Some of these examples include: 

  • If your employer only provides one health coverage policy, this will limit your ability to select a plan and its coverage. On the other hand, individual health insurance gives you the freedom to choose from various programs and find the most cost-effective strategy for you.
  • If you qualify for Medicaid or Medicare, your insurance premiums will be lower than those of other market plans. Group health insurance will always be more expensive than Medicare and Medicaid if you are eligible for these plans.
  • Suppose your household earnings are less than 400% of the federal poverty line. In that case, you might qualify for government subsidies if you purchase a plan through the Affordable Care Act (ACA) exchange. These subsidies will function similarly to premium tax credits in that they will reduce the cost of your health insurance plan in the ACA marketplace. 

Why should a company provide health insurance?

There are numerous advantages to providing health insurance to your employees. Offering health insurance to your employees can give your company a competitive advantage in recruiting and retaining quality employees. By providing health insurance, you can ensure that your employees’ health and wellness are maintained, and thus they can continue to work well. Furthermore, if you own a small business, you may qualify for premium tax subsidies by purchasing health insurance for your employees.

Final Verdict

In general, employer-funded health insurance will be less expensive than getting a plan outside of your workplace. This is because employers will often share the overall cost of premiums with you, making the payment that you need to pay smaller. Nevertheless, there may be exceptions to the generalization that employer-sponsored health insurance is less expensive than other marketplace plans. Check out Insurance Shopping to explore more about employer-sponsored health insurance plans.