Employer Health Insurance Vs. Individual Plans (2024)

FAQs

What are the disadvantages of employer-based health insurance? ›

Lack of flexibility

Because the employer chooses group insurance, employees don't have a say in what network they'll be on, the deductible they'll need to meet, or the premium they'll have to pay.

In summary, individual health insurance comes with higher costs, potential coverage limitations, and limited employer contributions, which can pose financial challenges for individuals.

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 and family health plans can be impacted by income and where you live, while employer-sponsored group coverage depends on employment status and if your employer offers a health plan. The premium cost is usually shared between your employer and you, which helps you save money.

Even if you never change jobs, your employer could easily decide to change insurers or adjust your benefits. Workers find this lack of control frustrating. Many recent labor disputes have hinged on health benefits, as employees get fed up with being asked to pay more and more of their own money for medical care.

Your employer chooses the plan, so you may not have as many options for coverage and benefits. If you leave your job, you may lose your health insurance coverage, which could leave you without coverage if you have a gap between jobs.

Those pushing single-payer care, for now or later, say it would cover everyone, streamline an unwieldy bureaucracy and bring down costs. Opponents say it could lead to unacceptably high taxes, a flight of doctors to other states and a rationing of care as patients' needs overwhelm providers.

A California single-payer plan doubles down on this issue because it would eliminate virtually all incentives for consumers to control costs. No co-pays and no deductibles mean increased demand for virtually all healthcare, and extraordinary rationing of healthcare.

Administrative Overhead: Health insurers often have substantial administrative overhead, including marketing, underwriting, and claims processing. These costs are passed on to consumers in the form of higher premiums, which can contribute to overall healthcare expenditure.

Most people know these plans as traditional group health plans or “fully-insured plans.” According to KFF's health benefits report, in 2023, the average cost of employee health insurance premiums for family coverage was $23,968. The average premium for a self-only plan was $8,435 annually¹.

What percentage do most employers pay for health insurance? ›

For single coverage plans, employers paid 78 percent of medical premiums, and employees paid 22 percent. Employers paid 76 percent of premiums for workers with the lowest 10 percent of wages and 80 percent of premiums for those with the highest 10 percent of wages.

Platinum health insurance is the most expensive type of health care coverage you can purchase. You pay low out-of-pocket expenses for appointments and services, but high monthly premiums. Plans typically feature a small deductible or no deductible and cheap copays or coinsurance.

Benefits of employer sponsored health insurance plans include a discount based on your employer's contribution to the premium. Another benefit is that you save time and money researching health insurance on your own. Typically, you can include your dependents, including your spouse, in your plan for an additional cost.

Here are key employee benefits of employer-sponsored health coverage – and why you should be offering it: It can reduce absenteeism. A healthy employee is present and more productive. And the more physically sound workers are, the less prone they are to injuries and less likely they are to miss workdays.

An employer-sponsored plan is a type of benefit plan offered to employees at no or relatively low cost. These plans, such as a 401(k) or HSA, cover an array of services including retirement savings and healthcare. Employees who enroll in such programs capitalize on the benefit of receiving discounted services.

Workers may fall prey to job lock, required to stay in a job because insurance may not be available if they quit. Voluntary and highly varied job-based insurance guarantees that coverage is inequitable and unreliable, in contrast to the equity and universality of single payer.

Con: Lack of Freedom to Choose Own Providers

For many, the primary drawback of a managed care arrangement is the fact that employees are unable to choose their own care provider. They may select their own care provider from within the network and switch their doctor at least once if they feel the care is insufficient.

There is more flexibility in customizing the self-funded plan to the employer's goals and the employee population. The employer retains funds when health claims are lower than expected. Self-funding a health plan is often less costly because: There are no profit or risk margins to pay to an insurer.