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Employer Health Insurance Vs. Individual Coverage

by John Stebbins on Mar 2, 2020 3:31:54 PM

As an employer, one of the biggest financial decisions you’ll likely face is whether to offer employer health insurance. Company-sponsored coverage used to be the norm. However, with rising premiums and a changing economy, many companies opt not to offer group coverage or have cut their benefits. In these cases, employees may need to consider individual insurance.

So what’s the difference between these two approaches?

Employer Health Insurance

Many companies offer their employees coverage to attract and keep the best workers. And depending on the offerings, they may be successful.

With employer-sponsored health insurance, the employer offers one or more plans that they’ve selected after doing their research. Workers can choose from among the options based on their budget and coverage needs. And that means taking into account any life changes that may impact them in the coming year, like having a baby.

In terms of cost, there’s typically a minimum the employer must contribute to the employee’s premium. That means the employer and employee generally share the cost of the health insurance for the worker and their dependents. Depending on the plan, workers may also be responsible for out-of-pocket expenses like deductibles and co-pays. To help, many employers add a Section 125 plan and FSA for the employees to pay their portion of the health insurance premium, deductible and co-pays on a pre-tax basis.

Individual Coverage

Whether or not you offer employer health insurance, workers still have the option to purchase individual coverage. And they may want to for a couple of big reasons. First, with an individual plan, employees are free to choose the carrier and plan they want. And, since the coverage isn’t tied to their job, it’s portable in case of a career move.

In these situations, the employee can buy directly from an insurance carrier or marketplace Exchange. Moreover, depending on their income, they may be eligible to get a subsidy to purchase insurance on the Exchange and make coverage more affordable.

Another way to save employees money is by offering an Individual Coverage Health Reimbursement Arrangement (ICHRA). With the newly-approved individual HRA plans, an employer can pay for employees’ individual premiums as long as they don’t have the option to participate in a group plan. These plans not only offer pre-tax benefits but give companies more flexibility so they can be more competitive with their benefits. In addition, they give employees more control over their healthcare, boosting satisfaction.

What’s Right for Your Small Business?

When it comes to small business health insurance, there’s a lot to consider. For help finding the right solution for your company and employees, contact Complete Payroll Solutions at 877-253-9020.


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