Would I be better off buying an individual medical insurance plan?

By Pete Brately

As an insurance professional, friends often ask me for advice on their personal medical insurance. The most common question is: "My company offers medical insurance at work, but premiums and cost sharing are high. Would I be better off buying an individual/exchange medical insurance plan?"
​Answer:
While there's no 100% definitive answer, in most cases your employer-sponsored plan will be a better financial choice.

Why? Here are a few factors:

• Employer-sponsored medical insurance is purchased with pre-tax dollars. This is a huge advantage. You must add in your net effective tax rate into any individual policy cost analysis.
• Group rates are lower. Carriers can price groups lower because: (1)There is a spread of risk and higher likelihood of profitability for multiple members compared to individuals. (2)Administrative costs are lower for groups due to economies of scale. (3)The ACA guarantee issue individual/exchange regulation mechanism has a serious flaw that effectively allows members to sign up during open enrollment then drop their plan after receiving care, which impacts carrier profitability.
• Employers are customarily required (by carriers) to contribute the lesser of 50% or $100 per month of the employee-only premium which substantially reduces employee cost.
• The main non-premium drawback of individual/exchange plans is provider networks. Benefits are similar to group plans for their corresponding metallic tier(bronze, silver, gold, platinum), but some individual/exchange plans have limited provider networks and prescription drug formularies.

3 scenarios where an individual policy might make more sense:​

• Young employees(in your 20's) might find a better deal with an individual plan if their company has over 100 employees and the composite medical rate is high(due to a high average employee age and/or high claims experience).
• Healthy employees who rarely see a doctor might benefit from purchasing an individual/exchange narrow network and/or high-deductible plan if one is not offered at work.
• Spouse & children might get a better deal by purchasing an individual/exchange plan if: (1)Your spouse & children are eligible for exchange subsidies. (2)Your company does not contribute to the family portion of the premium. (3)Your spouse & children do not mind narrow provider networks.

Bottom line:
In most cases, the medical plan your employer offers will be the best financial deal, but it is always a good idea to look at all of your options.