Workplace health insurance is usually cheaper than an individual health plan — but there are exceptions.

Employer-sponsored health plans are often cheaper because companies help pay for your health coverage and medical expenses. Federal law demands that large employers must pay at least half of health insurance premiums. Businesses usually exceed that percentage.

In recent years, employer-sponsored plans have seen modest annual premium increases. Employer-sponsored plan premium costs have increased 3% annually for single coverage 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. Also, while employer group plan premiums aren’t rising as much as a decade ago, health insurance deductibles and out-of-pocket costs have skyrocketed in that period.

The average annual insurance company premium for an employer health insurance plan is $1,644 for single coverage. Compare that to the individual market, which has an average individual premium of more than $5,000 annually. Family coverage often costs even more — with monthly premiums exceeding double the cost of single coverage.

Plus, employer’s health insurance plans may offer other health benefits and perks, such as employers contributing to health care savings accounts (HSAs). HSAs are connected to high-deductible health plans and let members save for future health care costs. Employers can also contribute money to HSAs.

On the other hand, employer-sponsored group health insurance limits your health plan options. Your job might offer only one plan. Meanwhile, individual coverage in your area may let you choose between multiple insurance companies and health plans. So, you’ll likely find better rates with your employer’s insurance, but your options are more limited than the individual market.

The individual plan market is typically more costly than employer-based plans, but there’s an exception. People whose household 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. Those subsidies come in the form of premium tax credits, which reduce the costs of health insurance plans in the ACA marketplace. The American Rescue Plan in 2021 also expanded those subsidies for two years to all Americans with marketplace plans. In that case, you might be able to find a cheaper health insurance marketplace plan than an employer-based plan. Otherwise, individual insurance will likely cost you more than a workplace plan. 

We’ve gone over how employer-sponsored health insurance coverage is usually cheaper than individual health insurance, but 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. Find out more about the differences between Medicare and Medicaid

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.

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