As a small business owner, providing healthcare benefits to your employees can be one of the toughest decisions to make, as the costs are high; but so are the benefits. It is important to be well-informed before deciding on a healthcare package for your workers, and one of the first things you’ll want to ask before making a decision and working the cost into your budget is how much do employers pay for health insurance.

The answer to that can vary greatly, but we’ll talk about how you, as an employer, can keep the costs down while still providing excellent healthcare benefits to your team.

How Much Do Employers Pay for Health Insurance? 

Health Insurance Packages

Health insurance packages provided by a company to employees are often referred to as group health insurance, as a company will typically purchase a single plan from an insurance provider to cover all employees as opposed to selecting individual plans for each worker. As such, although the cost of employer-provided health insurance can vary greatly from company to company (more on this later), the amount that you’ll pay for each employee will be the same.

A 2021 study by the Kaiser Family Foundation (KFF) found that the average cost of group health insurance premiums for family coverage was $22,221, and the average annual premiums for a “self-only” plan, or a plan covering only the individual employee, was $7,739.

What Percentage Is Paid by Employers?

As an absolute minimum, most states require employers to cover at least 50% of the cost of group health insurance self-only plans. But in practice, most employers cover a much larger sum than this, with a sizable number of companies going as far as to cover the entire premium.

The same 2021 study found that 83% of the cost of self-only insurance plans and 73% of family insurance plans were covered by the employer. So how much do employers pay for health insurance in dollars? Combining these stats together, the average company pays $6,423.37 per employee per year, insuring the employee only, and $16,221.33 per year for each family insured.

What About Small Businesses?

The numbers only go up when you focus on smaller companies; almost a third of covered employees at firms with less than 200 workers had their entire premium covered.

However, larger companies tend to be more generous with family coverage; a full 95% of companies with over 1000 workers included the employee’s dependents as well, compared to only 71% of small companies. One possible explanation for this is that smaller companies tend to attract younger workers looking for career growth who are less likely to have dependents, while larger corporations attract an older workforce looking for a higher level of stability.
 

What Can Impact How Much My Company Pays for Health Insurance?

All the numbers we’ve thrown at you so far are merely averages; the actual costs of employee-sponsored healthcare plans and how much employees must pay can vary immensely from company to company.

The insurance agency will ultimately determine the premium you’ll pay after examining a number of different factors about your company, your desired plan, and your workers. While the exact formula insurance agencies use is a close-guarded secret determined by teams of highly-trained actuaries, we can outline a number of factors that any insurance agency will be taking into consideration when determining the premium for your group insurance plan.

The Plan’s Features

As with individual insurance plans, the cost of a group insurance plan can vary massively depending on how much you want to be included. Factors such as deductibles, copays, and the out-of-pocket maximum can massively increase (or decrease) the premium you’ll need to pay.

Size of Your Company

As with everything in business, it saves to buy insurance in bulk. The more employees that are insured through your company, the better rate you’ll get on a per-employee basis.

Demographics

Although the Affordable Care Act regulates the extent to which insurance providers can charge individual customers more based on risk factors, they still can (and will) take the demographics of your company’s workforce into account when calculating your group insurance premium.

The most common demographic indicator that providers will consider is the age of your employees. If you have an older workforce, the premium for everyone will be higher.

Location

As healthcare and insurance are primarily regulated on the state level in the United States, where your company is located (or rather, where your employees are located) will also be a determining factor. If you have multiple locations spread throughout different states or your employees work remotely, this can get a bit complex.

Healthcare costs are also tied to the general costs of doing business in a state, such as rent, minimum wage, and state taxes. As such, you’ll find that, on average, you can expect a higher premium if you have more employees working in states with higher taxes and higher living costs, such as New York, California, and Massachusetts.

The Insurance Provider

Just like when buying consumer products, the cost of a group insurance premium can also depend on whom you’re buying it from. They are seeking a profit just like you are, after all.

No two insurance providers are equal; they all have different networks, different levels of customer service and reliability, and different levels of coverage for out-of-network treatment. It is important to do your research thoroughly before choosing a plan to make sure you know what you’re getting. Getting advice from professionals on the matter can not only save your company tens of thousands of dollars but also help you get higher-quality insurance coverage for your employees.

Do All Companies Have To Offer Health Insurance Benefits?

The Affordable Care Act all but requires all companies with over 50 full-time employees to provide health insurance coverage to their workforce, and upwards of 99% of large companies in the United States currently do.

While small companies are not obliged to offer group insurance to their workers, most do. Around 50% of companies with fewer than ten full-time employees offer insurance benefits, and that number increases to almost three-quarters for companies with between 10 and 100 workers.

Why Offer Health Benefits as a Small Business?

With the skyrocketing healthcare costs in the United States (family premiums have increased by nearly 50% over the past decade), it can be tempting to forgo the costs of health insurance benefits, especially if you are a small business. As a small company, you probably have tighter profit margins and a smaller budget to work with, so these costs can be difficult to stomach.

Even knowing how much employers pay for health insurance, there are some clear cost-worthy benefits to providing group medical packages as an employer.

Taking a Burden Off Your Employees

Under the Affordable Care Act, if you do not provide group health insurance packages to your workers, they will most likely be required to purchase health insurance on the individual market. Insurance plans on the individual market are almost always going to be more expensive, less comprehensive, and of lower quality.

So while you might think that you’re doing a favor for your employees by forgoing healthcare benefits and instead offering a higher salary, it rarely works out that way when they’re forced to take their extra cash (and then more) and spend it on their own healthcare premiums. In short, it’s a win-win for your employees, and they’re bound to be satisfied.

Guarantee of a Healthy Workforce

Statistics show that individuals without insurance or with low-quality insurance plans with high deductibles and copays consistently forgo preliminary and preventative medical treatment and end up paying the cost later.

As an employer, the last thing you want for your small business is to have a critical employee out of work for a month as they recover from a surgery that could have easily been prevented with quality healthcare.

Attracting Qualified, Long-Lasting Professional Workers

Healthcare benefits are typically cited by workers as the most important benefit when considering a job offer and when considering whether to stay with a company or seek a new job. In today’s economy, it goes without saying that very few skilled professionals will even consider accepting a job offer that doesn’t include a decent insurance package.

With larger companies now mandated to provide employer-sponsored healthcare packages, if you want to compete for the best workers with the big fish, you will inevitably need to match their offer.
 

What Do I Need To Know To Choose the Right Healthcare Plan for My Business?

Understanding how much employers pay for health insurance is absolutely critical for choosing an insurance plan that will benefit your company, your employees, and their families. We understand that providing healthcare benefits is a costly decision, especially for a small business, and that’s why our professionals are here to guide you. Schedule a free consultation with Health Compass Consulting today to learn more about how we can help you find the best group insurance policy for your business.

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