Employer Health Insurance vs. Individual Plans: What helps me more?

Having health insurance is critical. In many cases, you end up paying less when you go for a doctor’s visit than you would if you didn’t have it. Your co-pay (aka the portion of the charges you cover) might be only $50 instead of hundreds of dollars. If you have a big family or pre-existing health conditions, those amounts add up quickly if you have to pay the full bill.

The difference for a hospital visit is even more significant. You could rack up a bill for many thousands of dollars if you have a baby or get injured in a car accident. Hospital charges like these could bankrupt you if you have no health insurance at all.

Where can you get health insurance? Aside from Medicare, Medicaid, and military programs, there are two possibilities.

Many employed Americans have employer-based health insurance coverage.

Alternatively, you might be able to buy an individual plan on your own, either through the Health Insurance Marketplace or directly from a health insurance company.

Here are the pros and cons of each:

Employer-Provided Health Insurance

Pros:

• Your employer might pay part of the cost of the premiums which makes the insurance much less expensive for you.
• Your premiums are taken out of your paycheck on a pre-tax basis, which means you’ll pay less in income taxes.
• Enrollment is easy; you sign up during your employer’s open enrollment period.
• Health insurance premiums are not taxed like your earned wages or bonuses.

Cons:

• Your employer might offer only a limited number of plans.

Individual Health Insurance Plans

Pros:

• A large selection of plans is available so you might have more choices.
• You can choose your plan from the Health Insurance Marketplace options or a health insurance company.
• If you meet the income standards, you might qualify for reduced premiums.

Cons:

• The premiums can be quite expensive because you have to pay the entire amount yourself.

How Much Does Health Insurance Cost?

There’s no easy answer to this question.

• Are you single or have a large family?
• Do you have existing health conditions that need treatment regularly?
• Do you take a lot of medications?
• Are you planning to have a hip replacement or other surgery in the upcoming year?
• Are you willing to pay larger regular premiums as a possible trade-off for lower annual deductibles?

Employers or health insurance providers sometimes offer helpful tools for you to evaluate the options. It might be easier to look at two or more plans side-by-side to quickly compare the variables.

Mandatory Health Insurance

You might wonder if health insurance is mandatory. Prior to 2019, part of the Affordable Care Act required everyone (including dependents) to have the minimum essential health insurance. If you didn’t have coverage or qualify for an exemption, the IRS might have charged you a shared responsibility payment, which is often referred to as a penalty.

To meet the requirement, you needed to be enrolled in and entitled to receive benefits under a qualifying plan for a minimum of one day during each month of the calendar year.

However, the calendar year 2018 was the last year you have to comply with the federal individual health mandate.

Starting on January 1, 2019, it once again became your choice whether you had healthcare coverage. However, you still may want to check the laws of the state where you live. Healthcare coverage might still be required

It’s an important individual decision for you and your family. However, many health insurance options are available. The sensible course of action is to get at least some minimum coverage. Even if you remain relatively healthy, you’ll want to be covered in case of a medical catastrophe that you didn’t expect

More to explore

• The 411 on the Self-Employed Health Insurance Deduction
• Living in a World Without Company Sponsored Health Care
• 7 FAQs about Form 1095-A, Health Insurance Marketplace Statement
• 5 of the Most Common Insurance Myths and Why They Aren’t True