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How Much Should Health Insurance Cost a Month?

Most individuals assume that the average individual health insurance cost per month is high than group health insurance.

An individual buys individual insurance for themselves or their family, and an employer buys group health insurance for employees.

So, how much does individual health insurance cost? And how does it vary from a company-based group health insurance?

Data indicates that individual health insurance is, on average, more affordable than group coverage. Additionally, a third health insurance option exists for small businesses to provide their employees that can help enterprises to control their health benefits budget better.

How Much Does Company-Based (Group) Health Insurance Cost?

The National Business Group on Health report provides crucial insights into group health insurance trends and costs. According to their news release:
In 2020, the average group health insurance cost per worker per year is $15,375 ($1281.25 per month). This stipulates that the cost of the average employer-sponsored premium increased 5 percent from 2019.

How Much Does an Individual Health Insurance Policy Cost?

While the cost of individual health insurance has increased by 123 percent for single coverage from 2008 (and 174 percent for family coverage), individual health insurance remains more affordable on average as compared to group coverage through a company. This makes an individual plan to be low-cost health insurance.

According to data collected by AARP, the average health insurance cost for single coverage premiums in 2020 is $388 per month. For family coverage, the cost of premiums in 2018 was $1,520 per month.

Individual Health Insurance Cost and HRAs

Group-based and individual health insurance plans are common choices, but there is also a third option that can benefit employees and employers alike: a health reimbursement arrangement (HRA).

Formed in the 1970s, HRAs enable employers to reimburse employees tax-free for healthcare, including individual health insurance policies. With an HRA, businesses can set their budgets by providing a set allowance amount for each employee. This enables businesses to control their budget while employees receive insurance tailored to their specific requirements through the individual market.

There is a handful of HRAs available to business, but the most common are the Qualified Small Employer HRA (QSEHRA, and the individual coverage HRA (ICHRA)

The Qualified Small Employer HRA

With a QSEHRA, employees buy their health insurance and get reimbursed for medical expenses, health insurance premiums, and other qualified costs with tax-free dollars. To be eligible, a company must have fewer than 50 full-time employees and can’t provide a group health insurance policy to any employee.

Prices for Individual and group health insurance premiums and deductibles normally differ from year to year, whereas the QSEHRA has annual reimbursement caps that the IRS sets every year.

The Individual Coverage HRA (ICHRA)

Starting in January 2020, employers have access to the individual coverage HRA (ICHRA). With this HRA, businesses of any size can provide employees an HRA without maximum reimbursement limits, and they are not limited by company size. The ICHRA also enables businesses to set eligibility guidelines and offer different allowance amounts to different employees based on 11 different employee classes.

Conclusion

Individual health insurance health policies are by far the fastest-growing type of U.S. health insurance. As employers see the cost-savings and advantages of new individual health insurance, they utilize individual health insurance—not group health insurance—with an HRA as the basis of employee health benefits.

Resources and References:

• National Business Group on Health
• Purchasing Individual Health Insurance