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What a bargain: Employer-sponsored health plans

A recent study in Health Affairs compared individual plans to employer-sponsored plans in terms of scope of benefits, cost-sharing provisions, premiums, expected out-of-pocket costs, and actuarial value. But while premiums in an individual plan may be attractive for those who are young and healthy, with some plans offering guaranteed renewal without risk-rating, most Americans find employer-sponsored plans a much more attractive alternative.

Employer group plans cover 90 percent of the nonelderly population with private insurance, while individually purchased health insurance covers only 10 percent.

Roland McDevitt, PhD, director of health care research at Watson Towers (the combination of Watson Wyatt and Towers Perrin) and lead author, says the researchers set out to “quantify the difference in the plans in the individual and group market. We wanted to be a little more systematic in comparing the value of the plans from the perspective of a single adult.”

The data suggest that for a young, healthy adult, individual insurance might be attractive in terms of premium. But McDevitt points out that “a lot of people with individual market coverage don’t have coverage that’s as comprehensive as employer-based insurance. Individuals are faced with higher out-of-pocket costs, and there are more health conditions that might not be covered — for example, maternity, mental health services, or pre-existing conditions.”

McDevitt says employer-based coverage “is a benefit to the employee and to the employer. Employers gain an advantage as a result of tax policies and the employee sees he is only paying a $693 premium — albeit offset by wage adjustments.”

*Does not include employer contribution to premium
Source: Adapted from R. McDevitt, et al., “Group insurance: A better deal for most people than individual plans,” Health Affairs; 2010:29(1)156–164.

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