Providing health insurance is one of the wisest investments you can make as an employer. Doing so can help businesses attract and retain top talent. According to PeopleKeep by Remodel Health’s 2024 Employee Benefits Survey, it’s the most sought-after employee benefit.
Traditionally, group insurance plans have been the preferred choice for health benefits. However, the growing popularity of individual coverage health reimbursement arrangements (ICHRAs) has led to more employees having individual insurance plans.
In this article, we’ll go over the key differences between group and individual health insurance, and how ICHRA makes individual plans a strong option for employers.
In this blog post, you’ll learn:
- How group health plans compare to individual health plans.
- How an ICHRA supports employee healthcare costs.
- Why employers are choosing ICHRAs for their employer-sponsored plans.
How does ICHRA differ from other healthcare options? Read on to find out.
What is group health insurance?
Group health insurance is a type of health coverage that employers or organizations provide to a group of people, most often employees and their dependents. Unlike individual health insurance, which people buy on their own, group plans pool risk across the entire group. Risk pooling often results in lower premium costs and broader coverage options for healthy populations, but it can result in high rate increases based on utilization.
With a fully-insured plan, employers and employees share the group health insurance premium costs. Employers typically pay a larger portion of the premium to make coverage more affordable for employees. KFF’s 2024 Employer Health Benefits Survey1 found that the average annual premiums for employer-sponsored health insurance were $8,951 for self-only coverage and $25,572 for family coverage.
Many large employers provide a self-insured group plan. With this type of plan, the organization directly covers employee medical claims. While this can save employers money on premiums, it also creates a lot of risk for the organization.
What is individual health insurance?
Individual health insurance is coverage that people buy for themselves and their family members rather than through an employer or organization. These plans are available through the public exchanges, private exchanges, directly from an insurance agent, or with the help of a licensed broker.
Since individuals choose their own plan, they have the flexibility to select coverage that best fits their healthcare needs, preferred doctors, and budget. Premiums, deductibles, and benefits can vary widely, but financial help in the form of subsidies or tax credits may be available to lower costs depending on income.
While employers can’t offer individual health coverage directly, they can contribute tax-free money to employees’ individual plan premiums through an ICHRA.
How individual coverage with an ICHRA outperforms group coverage
Several factors make contributing to individual plan premiums through an ICHRA more appealing than offering a one-size-fits-all group health insurance plan.
1. Individual plans are major medical plans.
Many believe that individual health insurance plans, often referred to as Marketplace plans or ACA plans, offer lower-quality coverage than traditional group plans. In reality, individual plans come from the same well-known insurance providers. Individual health insurance plans are high-quality with various coverage levels and nationwide provider networks. The key distinction is that these plans are tailored for individuals and families rather than a collective workforce. While some plans offer narrow networks, employees ultimately get to choose the plans that work best for them.
2. Individual health insurance plans are guaranteed issue.
Guaranteed issue ensures that individual health plans are available to everyone who applies, regardless of their pre-existing medical conditions or other factors, such as age or gender.
Additionally, having an individual plan ensures that future changes in your medical condition won’t affect the cost of your insurance. This stability began in 2014, following key reforms from the Affordable Care Act (ACA) that bolstered the value of individual health insurance plans. As a result, countless Americans now benefit from this protection, as their medical history no longer impacts their ability to secure quality health coverage.
Conversely, traditional group health insurance plans for large groups are subject to medical underwriting. This means employees who have a higher level of healthcare usage may result in more charges for employers.
3. There are individual health insurance options for your employees’ unique needs.
Perhaps the most compelling reason why individual health insurance plans are far greater than traditional group plans is the fact that individual plans are made for individual people and families.
Managed individual coverage through an ICHRA is the most sensible method for offering employees what they actually want for group health benefits. With this method, instead of offering a group plan, employers simply give their employees the funds to buy individual health plans on their own.
How to take advantage of individual health insurance with an ICHRA
Employers can leverage individual health insurance through an ICHRA to offer flexible, cost-controlled benefits that better meet the needs of their workforce. A new data report from the HRA Council2 shows ICHRA adoption increased by 21% from 2024 to 2025.
An ICHRA is an employer-funded health benefit for employers of all sizes. Employees need their own qualifying individual health policies to participate. Group coverage through a spouse’s or parent’s plan doesn’t qualify.
With an ICHRA, employers set a defined contribution amount for employees to put toward individual health insurance plans, rather than purchasing a traditional group health plan for their entire workforce.
Here’s how the process works:
- You set a tax-free contribution for your employees. According to Remodel Health’s 2024 ICHRA Report, the average monthly allowance offered by applicable large employers (ALEs) is $448. With no annual limits on employer contributions, you can offer your employees as much as you would like. You can also vary allowances by age, family size, and employee class. For example, you can offer your full-time employees $500 a month, and your part-time employees $300 a month.
- If you have 50 or more full-time equivalent employees, you must offer an affordable health plan. For 2026, this means that employees shouldn’t pay more than 9.96% of their household income for the self-only lowest-cost silver plan on the Marketplace. Employers can use safe harbors to calculate affordability. When working with Remodel Health, we can help you determine an affordable allowance for your employees.
- Your employees buy their own individual health insurance plans. Using the same example as above, if you offer a $500 monthly contribution and a full-time employee picks a health plan with a $500 monthly premium, it’s completely covered by their allowance. If the plan they buy is more expensive, they have to pay the difference.
This approach allows employees to shop for coverage that fits their personal healthcare needs and preferences, while employers maintain full control over their benefits budget. ICHRAs can also scale across different employee classes, making it easier for organizations of all sizes to provide competitive benefits without being tied to the rising costs and limited options of group health insurance.
Improve your benefits package with help from Remodel Health
You don’t have to wait for the next Open Enrollment Period to offer an ICHRA to your team. Offering an ICHRA is a qualifying event that triggers a special enrollment period (SEP) for employees. This allows them to enroll in health coverage right away.
Leaping from group coverage to an ICHRA may feel overwhelming. Remodel Health is here to offer a seamless transition. We’re dedicated to providing white-glove service through our ICHRA+ platform and growing team of experts.
Our team handles:
- Onboarding and support
- Plan design
- Legal plan documents
- AutoPay for employee individual health insurance premiums
- Required ICHRA plan notices
- Providing necessary data for compliance filings
We also simplify the shopping experience for your employees who need individual health plans. Instead of navigating this process on their own, they can easily compare their options for off-exchange health plans directly through Remodel Health.
Conclusion
By understanding the ins and outs of group and individual insurance plans, you can make a strategic decision that aligns with your business goals and meets the needs of your workforce. Offering an individual coverage health reimbursement arrangement (ICHRA) to your employees allows you to leverage the cost-effectiveness and flexibility of individual plans.
This article was originally published on September 7, 2022. It was last updated on September 4, 2025.
Can employers offer both ICHRA and group health insurance? Find out in our article.