The End of Employer-Provided Health Insurance: Why It's Good for You and Your Company

Chapter 5How Much Does Individual Health Insurance Cost?

On average, individual health insurance coverage costs 20 to 60 percent less than comparable employer-provided coverage—that is $4,000 to $12,000 in savings per year for a family of four for the same hospitals, same doctors, and same prescriptions. Additionally, depending on your family size and income, you may be eligible for a federal subsidy (or premium tax credit) to further reduce your costs. In this chapter, we will walk through how your individual health insurance costs are determined.

Under the Affordable Care Act, the rates for individual health insurance are kept artificially low through three mechanisms—risk adjustment, reinsurance, and risk corridors—especially during the first three years of the ACA. Basically, the government is paying insurance carriers who take on higher-risk people by covering carriers for catastrophic cases through reinsurance, and collecting money from some carriers who insure primarily healthy individuals and giving it to carriers who take on high-risk cases (Kaiser Family Foundation 2014).

For families earning less than $100,000 a year, the cost for each individual is heavily subsidized by the federal government. In 2014, 70 percent of the 7 million people who enrolled their family through the federally-run Health Insurance Marketplaces paid less than $100 per month for their entire family.

How Individual Health Insurance Premiums Are Determined

The premium is the amount you ...