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Q

My company has open enrollment right now for health insurance. Is it always cheapest to buy insurance through work?

A

Yes, workplace health insurance is usually cheaper than an individual health plan. An employer-sponsored health plan helps pay for your health costs. Federal law demands that large employers must pay at least half of health plan premiums. Businesses usually exceed that percentage.

In recent years, workplace health insurance has seen modest annual premium increases. Employer-sponsored plan premiums have increased 3% annually for individual plans and about 5% for family plans. Those increases are much more modest than what you’ll find for individual health plans most years. That said, the individual marketplace's annual premium increases have stabilized after years of double-digit jumps. 

The average annual premium for an employer-sponsored plan is $1,242 for an individual. Compare that to the individual market, which has an average individual premium of more than $5,000 annually.

Plus, workplace health insurance plans may offer other perks, such as health care savings accounts. You won’t find that with an individual health plan.

On the other hand, employer-sponsored health insurance limits your health plan options. Your job might offer only one plan. Individual coverage may give you a dozen different plan options. So, you’ll find better rates with your employer’s insurance, but your options are limited.

Also, the individual market is more costly than employer-based plans, but there's an exception. People whose family income is less than 400% of the federal poverty limit receive subsidies from the federal government if they buy a health plan on the Affordable Care Act (ACA) exchange. In that case, you might be able to find an ACA plan cheaper than an employer-based plan. Otherwise, individual insurance will likely cost you more than a workplace plan. 

Now, we’ve gone over how employer-sponsored health plans are usually cheaper than individual insurance. However, workplace plans are still more expensive than Medicaid or Medicare. If you’re eligible for Medicare or Medicaid, you should explore that option to see how much money you’d save going with a government plan.

If you’re still unsure which path to choose, check out our What’s the Best Health Insurance Option for You? We provide all possible options for your situation, descriptions about each avenue and how much you could pay for the coverage.

Last updated: Oct. 24, 2019
By
Ask the Insurance Expert
Penny Gusner Consumer Analyst
Penny Gusner has been working in the insurance business for more than 10 years. She researches your questions, from the routine to the bizarre, with equal enthusiasm. Read More

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