Private Health Plans vs Group Health Insurance: How to Choose the Right Coverage for Small Teams

Choosing health insurance for your small team or family can feel confusing—but it doesn’t have to be.

In 2025, more small business owners and freelancers are taking control of their health coverage. In fact, KFF reports that employer-sponsored insurance is still the largest source of health coverage in the U.S. (KFF, 2025). 1

This guide breaks down the difference between private (independent) health plans and group health insurance—and helps you decide which one fits your needs best.

What Is a Private Health Plan?

A private health plan (also known as an independent health plan) is coverage you buy directly from an insurance company, broker, or the Health Insurance Marketplace—not through an employer.

These plans offer flexibility to choose your doctor, level of coverage, and monthly budget.

Best for: freelancers, small business owners, and families who want full control over their coverage.

Think of a private health plan like ordering a meal à la carte—you get to pick exactly what you want, but you also pay for each item.

What Is Group Health Insurance?

Group health insurance is a plan that a business provides to its employees. The employer pays part of the premium, while employees pay the rest—usually through automatic payroll deductions. Because the risk is spread across a larger group, these plans often cost less per person than buying coverage individually.

For small businesses, group health insurance can be a valuable benefit that attracts and keeps great employees. It also shows that you care about your team’s health and stability.

Best for: Small teams with 2–50 employees who want shared coverage and predictable monthly costs.

Many group plans also allow employees to add dependents, making them a convenient option for families. Some even include dental, vision, and life insurance as add-ons.

Key Differences Between Private and Group Plans

To make things clear, here’s a quick side-by-side comparison:

Feature

Private Health Plan

Group Health Insurance

Who it’s for

Individuals or families

Small businesses & teams

Cost

You pay full premium

Employer shares the cost

Flexibility

High

Moderate

Customization

Choose your own coverage

Limited to company’s plan

Enrollment

Open or special periods

Set by employer’s schedule

Private plans offer flexibility, while group plans provide shared savings. Your choice depends on whether you value independence or cost-sharing more.

How to Decide What’s Right for Your Small Team

Before choosing, ask a few key questions:

1. How many people are on your team?
   If you have just two or three people, group coverage might still be an option. Most insurers define a small group as 2–50 employees.

2. Do your team members need family coverage?
   If they have dependents, a health plan for family may offer more tailored benefits.

3. Can your business afford to share the premium costs?
   Group plans usually require an employer contribution—typically 50% or more of the employee premium.

4. How stable is your team?
   If you have part-timers, freelancers, or frequent turnover, private or independent health plans may offer more flexibility.

If your business is small but consistent, group health insurance could help you save long-term. However, if you mostly work with independent contractors or your family members, private plans might be the better fit.

Combining Coverage: The Best of Both Worlds

Some small businesses use a hybrid approach to balance flexibility and affordability. For example, instead of offering a traditional group plan, you might provide a health stipend or a Health Reimbursement Arrangement (HRA).

An HRA allows you to reimburse employees tax-free for the cost of their private health insurance. This lets each person pick their preferred plan while the company still offers support.

This approach can:

• Reduce administrative work for business owners

• Give employees freedom to choose their coverage

• Control costs while maintaining a strong benefits package

For teams with both full-time employees and contractors, combining both options may be the most practical solution.

Frequently Asked Questions (FAQ)

Can a small business with only two employees get group health insurance?
Yes! Most insurers define a “small group” as 2–50 employees. If both employees are eligible, your business can apply for a group plan.
What’s the best health plan for family coverage?
A private or independent health plan often works best for families since you can choose your own providers, coverage levels, and network type. You can also compare multiple insurers to find the right balance between price and benefits.
Can I switch from a private plan to a group plan later?
Absolutely. You can switch during open enrollment or after a qualifying life event, such as starting a new job or launching a small business that qualifies for group coverage.
What if my team includes freelancers or part-timers?
You can offer a health stipend or HRA, allowing them to buy private coverage individually. This gives flexibility without requiring a full group policy.

Final Thoughts

Private and group health insurance each have their strengths.

• Private health plans give you freedom, flexibility, and control over your healthcare choices.

• Group health insurance offers stability, lower costs, and shared responsibility between employer and employee.

There’s no single “right” answer—it depends on your team’s needs, size, and budget.

If you’re self-employed or managing a small team, it’s worth comparing quotes and coverage levels for both. A licensed health insurance agent or online marketplace can help you explore your options and find the best health plan for your family or small business.

Need help deciding? A licensed agent at Goodwin Insurance Advisors can walk you through your options, compare costs, and help you choose the best plan for your small team—at no extra cost to you. Book a meeting with us here!