Group vs individual health insurance: what changes when the employer buys it.
Group coverage is bought by the employer for a set of employees. Individual coverage is bought by each person for themselves. The difference shows up in price, tax treatment, who chooses and what happens when someone leaves. CFH is an independent employee benefits consulting firm. See group benefits in Michigan.
Three things separate the two, and price is only one of them.
Who Chooses
With group coverage the employer selects the carrier and plans, and employees choose within that set. With individual coverage each person shops and enrolls alone.
How It Is Priced
Small group rates are filed with the state and Michigan rates each member by age, area and tobacco use. Individual rates are set separately, so the two markets move differently from year to year.
Who Pays
Employers usually pay part of the premium for group coverage. Individual buyers pay it all themselves, apart from any subsidy they qualify for.
The employer contribution changes the comparison.
A premium comparison on its own misses the part of group coverage that matters most to the people enrolled.
Pre-Tax Premiums
Premiums an employer pays are generally deductible to the business and not taxed to the employee. Employees can pay their share pre-tax through a cafeteria plan.
Different Markets, Different Increases
For 2027, Michigan small group rates were filed at an average of about 9.6%. The individual market was filed at about 14.2%. They are not the same number.
Participation Matters
Group coverage depends on enough employees enrolling, and carriers set participation rules. A group with thin enrollment can be priced differently.
If a group plan no longer fits, employees can still be reimbursed.
An ICHRA lets an employer reimburse employees for coverage they buy on the individual market. It sits between the two and can suit groups that find a traditional plan too costly or too rigid.
ICHRA
A set monthly allowance toward coverage each employee chooses, with the employer controlling the budget.
QSEHRA
A reimbursement arrangement for small employers, with annual limits set by the IRS.
Model It First
Compare the options against your own census before you decide, so the choice rests on your numbers.
Group vs individual health insurance: common questions.
Is Group Coverage Cheaper?
Often per person, once the employer contribution and tax treatment are counted, but not always. The honest answer comes from comparing both on your own census.
Do We Have to Offer Group Coverage?
Employers with fewer than 50 full-time equivalent employees are not required to offer it. Larger employers generally must offer coverage or face penalties.
How Small Can a Group Be?
A group can be as small as one W-2 employee, at any time of year, and no minimum employer contribution is required.
Can We Just Pay Employees’ Premiums?
Not simply by paying their individual premiums outside a plan. An ICHRA or QSEHRA is the compliant way to reimburse them.
What Happens When Someone Leaves?
Group coverage ends under the plan’s rules, and the employee may be offered COBRA or an individual plan. The employer’s plan continues for everyone else.
Who Helps Us Compare?
An independent benefits consulting firm can price both on your census. A second opinion on a renewal costs you nothing.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
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