If you’re reading this, it’s probably because your health insurance rates are going up, you feel like you’re out of options, and you’re considering pushing more costs onto your employees. Don’t do it. Why? For starters, lets remember why you offer benefits in the first place — to attract and retain talent, right? That said, pushing additional costs onto your employees will undermine your efforts to attract and retain talent, and according Employee Benefits News, it can cost as much as 33% (in direct costs, alone!) of an employee’s annual salary to replace them. Second, we need to understand why your rates are going up in the first place. Has your broker explained the underlying factors and provided you with proven risk management strategies to address them? If your rates are going up, it’s most likely because you don’t have the right pieces in place. With the right strategies in place, there is no need push more expenses onto employees. In fact, many companies are able to reduce costs without reducing provider choice or raising deductibles or copays. Contact us if you’d like learn how our high-performance health plans bend the cost curve.
Is your plan new, or are you revamping your benefits program? The first step is to identify your purpose: what is the goal of our program? Why do we offer benefits? Most companies offer benefits because it’s the most economical way to attract and retain talent. If talent acquisition and retention is your goal, then you’ll want to understand what your competitors are doing and make a calculated decision about what your contribution should be. To help us get a general idea of how much employers contribute to health plans, we turn to the the annual Kaiser Family Foundation (KFF) Health Benefits Survey for insight.
Employer vs. Employee Contributions to Health Insurance
In 2019, employers contributed an average of:
- $5,946 for single coverage. Employees contributed $1,242.
- $14,461 for family coverage. Employees contributed $6,015.
The numbers above reflect all plan types, but there’s a fair amount of variety between each plan type:
- For HMOs, the average employer contributed $6,180 for single coverage, while employees contributed $1,058. For family coverage, the split was $14,668 and $6,009, respectively.
- For PPOs, the average employer contributed $6,222 for single coverage, while employees contributed $1,454. For family coverage, the split was $15,045 and $6,945, respectively.
- For POSs, the average employer contribution was $6,112 for single coverage, while the employee contribution was $1,072. For family coverage, the split was $12,894 and $6,945, respectively.
- For an HDHP with a savings option, the average employer contribution was $5,341 for single coverage, while the employee contribution was $1,071. For family coverage, the split was $14,114 and $4,866, respectively.
When determining how much you’ll contribute to your employees’ health insurance premiums, remember that the Affordable Care Act (ACA) sets specific affordability standards. The law says that, for health coverage to be deemed “affordable,” the lowest-priced individual plan offered by the employer must cost “9.78 [percent] or less of the employee’s household income.” Note that this figure not only includes the employee’s income, but also the total income for those contributing to the household.
This standard does not include employee plus spouse, employee plus children, or family coverage, nor any other out-of-pocket expenses, like deductibles, coinsurance, or copays. Of course, this is referring to the employee-paid portion of the premium — not the entire premium.
If your health coverage is deemed “affordable” and also meets the minimum value standard, employees who choose to purchase a plan on the ACA marketplace instead of enrolling in your employer-sponsored plan, would not qualify for any tax subsidies.
Your employer-sponsored plan meets the minimum value standard if both of the following requirements are met:
- The plan covers at least 60 percent of the total cost of healthcare services
- The plan includes “substantial coverage of physician and inpatient hospital services”
What Can You Contribute to Health Insurance Premiums?
These numbers are averages — there will be many employers who pay less than this, but plenty who pay more.
When making these decisions, be sure to check the average contribution your local peers are making to their employees’ health insurance premiums. Because you’ll be competing for the same talent pool, you’ll want to be sure your benefits are on par with other companies in your geographic area.