The Cost Of Offering Employees Health Insurance
The cost of providing health insurance to your employees depends on factors such as:
- Insurance carrier
- Type of plan
- Demographics of your employees
- Network of providers in the plan
- Your contribution amount
In 2020, the average annual premiums for employer-sponsored coverage were $21,342 for family coverage and $7,470 for individual coverage. After taking into consideration the costs that workers pay, the average cost of group health insurance becomes about $15,754 for an employer to cover a family and $6,227 for an employer to cover one employee.
|Average Cost for Employer of Single Individual
|Average Cost for Employer of Group
The True Cost Of Employee Benefits Explained
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Generous employee benefits can be a great differentiating factor for employers looking to recruit and retain staff – and so most employers strive to offer the best possible benefits they can afford. Typical employee benefits costs include the resources that companies will have to spend on insurance premiums AND benefit enrollment and administration.
Of course, when selecting benefits, companies should also consider the amount employees will be contributing to coverage. Companies may want to have employees offset some of the cost, but at the same time ensure that they will find the cost affordable and still a good value. Today, most employees do expect to contribute towards premium costs, but they may gripe if they have to spend too much. To understand this delicate balance, lets consider some examples of average costs and how much other employers are spending on benefits.
According to a Bureau of Labor Statistics press release from 2015, the average American worker cost just about $33 an hour. The majority of this cost is salary, however, benefits accounted for over $10 of the total. So, just under a third of employment costs are typically allocated to employee benefits.
Health Insurance Average Costs
The chart below was taken from a Kaiser Family Foundation 2015 study of employer health insurance.
These are some significant statistics from that report:
The Cost of Administering Benefits
How Much Do Employers Pay For Health Insurance
Whether youre exploring cost-effective health plans for your organization, researching health reimbursement arrangements for the first time, or looking into health stipends, a common question business owners have is, how much does health insurance cost per employee?
Rising healthcare costs can make organizations second-guess offering an employer-sponsored health plan. However, the cost of losing employees by not offering health benefits can surpass the cost of supporting your employees well-being, so offering a comprehensive health benefit is vital.
This article will break down the average employer health insurance cost per employee and the average cost of employer-sponsored health insurance. Well also explain how you can use an HRA or health stipend to control your budget.
Use the table contents below to jump to a specific section:
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How Much Does Small
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- $7,813 for single coverage, of which employers contributed $6,485, or 83%.
- $21,804 for family coverage, of which employers contributed $13,737, or 63%.
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Employees Pay Bigger Share Of Health Benefits
Health insurance premiums surged an average of 12.7% last year, the largest increase since 1990, leading more employers to scale back benefit coverage and increase employee’s share of the costs, according to an annual employer survey released by the Kaiser Family Foundation.
Premiums for individual coverage in group health plans cost an average of $3,060 this year, while family coverage averages $7,954, according to the survey of 750 employers. Employee costs for single coverage average $454 per year. The employee share of premiums for family coverage averages $2,084. Deductibles for in-network providers in PPO plans rose 37% to $276, up from $201 in 2001.
One of the most alarming findings is the continued growth of underlying health care expenses, which indicates that we can expect double-digit inflation for the foreseeable future, observes Jon Bagel, vice president at the Health Research and Educational Trust , which co-sponsored the survey.
The use of three-tiered cost sharing in prescription drug benefit plans has nearly doubled since 2000, increasing to 57% of the responding employers. The costs of drugs within the tiers is also higher, with brand name drugs with generic substitutes costing an average of $26, compared to $20 per prescription in 2001.
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Benefits Breakdown Per Industry
The average benefits package is just that, an average. So, how much do benefits cost across industries? Different industries will often emphasize various types of benefits. There are large variations between industries when it comes to where they invest the cost of employee benefits. Lets compare and contrast some of the differences in how much benefits cost to employers across industries, according to the same annual Bureau of Labor Statistics Report.
How Do I Find Affordable Health Insurance
Group plans are generally cheaper than individual plans. So if you are eligible for onethrough your employer, your union, or some other associationthat’s your best bet, in terms of coverage for the money. If that’s not an option, the public health marketplaces established by the Affordable Care Act offer affordable health insurance for individuals. In most of the U.S., you can sign up for a plan offered through the federal government via the HealthCare.gov site. However, 12 states run their own marketplaces, and residents sign up via their sites.
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How Much Does Health Insurance Cost If You Are Self Employed
A recent study by eHealth found that for the first half of the 2021 Open Enrollment Period, these were the average national monthly costs for ACA-compliant plans: Average monthly premiums for individual coverage: $484. Average monthly premiums for families: $1,230. Average annual deductibles for individuals: $4,394.
How Much Is Health Insurance A Month For A Single Person
It depends on a variety of factors, ranging from your resident state to your age to the type of plan . Employer-sponsored plans average $622.50 a month, with individual employees paying $105 of that, for example. Individual plans on the healthcare exchanges range from an average of $648 to $273 monthly.
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Why Health Reimbursement Arrangements Are An Effective Way To Control Costs
Instead of purchasing a group health insurance policy and paying premiums set by the insurance company, an alternative strategy is to use an HRA to reimburse employees for premiums and out-of-pocket medical expenses.
Options such as a qualified small employer HRA or individual coverage HRA are simple and inexpensive solutions that work for any small business. Employers can choose whether they want to reimburse for health insurance premium costs or premiums and out-of-pocket expenses.
The Affordable Care Act created the QSEHRA specifically for small businesses with fewer than 50 full-time equivalent employees .
There is also the option of providing a group coverage HRA , also known as an integrated HRA, to help bridge the gap between offering a traditional group plan while minimizing premium costs.
With an HRA:
- The employer sets an annual or monthly allowance they will agree to reimburse employees for medical costs
- Employees purchase their own health insurance plan on a private exchange or the health insurance marketplace
- Employees are able to choose a plan from a provider of their choice that has the features they need most
- As employees pay premiums and associated medical costs, the employer reimburses the employee for eligible expenses up to their allowance balance
The cost savings from providing an HRA are significant. The employer controls the allowance they decide to offer, making the actual cost of the reimbursement amount affordable and customizable.
Struggling With Budgeting Your Employee Benefits Costs Use Our Calculator To Estimate How Much Different Offerings Will Cost Your Business
Compared to the difficult decisions businesses have to make every day, offering employee benefits is almost a comforting no-brainer. You either have to do it because the law requires it, or you are highly encouraged to do so because 97% of workers say their benefits are important to how they feel about their job and workplace.
How to budget for employee benefits costs, however, is less of a no-brainer.
Offering employee benefits is an increasingly expensive proposition for businesses , and a complicated one. You cant predict with absolute certainty whos going to opt in and pay for voluntary benefits, or how much allotted PTO workers will actually use.
Its a balancing act like no other to get the numbers just right, but its one that can be made much easier with the right knowledge and resources at your disposal.
With that in mind, lets look at the four major categories of employee benefits costs before we turn it over to you to actually estimate your annual benefits costs using our handy calculator.
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Shop Around With An Insurance Agent Or Broker
With so many different options, understanding and ultimately choosing the right health insurance plan can be confusing, Stahl said. The key is to work with an agent who is unbiased and can show you all the options.
These options may include group health-sharing plans, traditional group plans, ACA marketplace plans or even level-funded plans, which provide rebates at the end of the year if employees have made few health insurance claims.
By having the opportunity to learn and compare from multiple carriers, you can be sure you are getting the best benefits structure with the best rates available, Stahl said.
How Much Does Employee Health Insurance Cost
Annual premiums for both single and family coverage have been on a constant rise in the past several years. The following is the annual average cost of health insurance per employee.
Between 2019 and 2020, single coverage went from about $7,190 to just over $7,450 while family premiums rose from $20,570 to $21,340. By 2021, single premiums were around $7,740, while the average cost of family health insurance through employer was $22,220.
Of course, its still too early to have the numbers for 2022, but the previous years provide a good insight into the rising trend. The increase between 2020 and 2021 was about 4% and the average group health insurance cost will likely go up by around 4.7% in the current year.
Its important to note that the figures stated here are the total premium costs. This doesnt mean the company will cover the entire amount.
In fact, employees regularly participate in premiums with companies paying on average about 83% for individual and 73% for family health insurance. This brings the 2021 average company health insurance cost down to $6,440 for individual and $16,250 for family premiums.
Group health insurance rates will vary from one company to the next and dont necessarily have to reflect the average prices.
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The Benefits Of Benefits
Attract and retain employees Today, most employees expect, and value, benefits. In fact, according to the 2020 Sanofi Canada Healthcare survey, 86% of plan members agree their health benefits plan is an important factor when deciding on a job offer. Thats why a benefits plan helps smaller employers compete with larger ones.
Healthier employees Benefits help keep your employees healthier by making health care costs easier to afford, which can lead to fewer sick days.
Morale boost Knowing you care about their well-being builds loyalty and appreciation.
Tax advantages The cost of many employee benefits can mean a tax deduction for the employer.
A foundation for success Offering employee benefits sets the stage for you to succeed and grow by attracting, hiring and keeping good employees. According to the 2020 Sanofi Canada Healthcare survey, 71% said their health benefits plan is a strong incentive for them to stay with their employer.
What Percentage Of Health Insurance Do Employers Pay
You decide what you want to contribute to your employees health insurance. You can choose a FixedPercentage of a specific plan and/or benefits. Or, you can select a Fixed Dollar Amount for each employee. Your employees can then apply your generous contribution to the health plan and benefits they like best.
You or an employee might pick choose from several options:
- An HMO plan from Anthem Blue Cross, Health Net, Kaiser Permanente, UnitedHealthcare, or a regional plan like Sharp Health Plan, Sutter Health Plus, or Western Health Advantage
- A PPO (Preferred Provider Organization plan from Anthem
- An EPO plan from Cigna + Oscar or Anthem
- An HSA qualified plan
With CaliforniaChoice, its the employees choice. If the plan an employee prefers costs more than your contribution, the employee pays the difference. Its that simple.
CaliforniaChoice offers greater access. You can choose from more doctors, specialists, and hospitals than any other health benefit option in the state. Our provider networks include 80,000+ doctors and 400+ hospitals.
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How Does Employer Health Insurance Work
Through employer health insurance, employees can receive substantial discounts on their health insurance premiums. Employers often subsidize the cost of the insurance plans they offer, making them significantly more affordable to their employees, who can usually sign up for the insurance plan through the companys HR department. Typically, employees have a limited range of employer health insurance plans, depending on the health insurance program chosen by the business owner. Companies can opt to provide health maintenance organization plans, preferred provider organization plans or both.
How Much Does Health Insurance Cost For Employees
According to HR consultancy Willis Towers Watsons Best Practices in Health Care Survey, as reported by SHRM, the average annual premium cost for an employee in 2021 for employer-sponsored health coverage was $3,331, up from $3,269 in 2020. Another survey from Mercer projected premiums will increase by 4.4% in 2022. However, the data indicates many employers arent raising their employees share of the cost its expected workers will continue to contribute 22% of their health plan premiums cost, unchanged from 2021.
At the same time, some employers are looking to decrease their employees healthcare expenses by covering treatments or expanding what they offer. These services could be considered fringe benefits:
- Health and wellness promotions within the workplace
- Access to centers of excellence
- Working spouses surcharges
Bottom Line: Even as insurance premiums rise, costs wont necessarily increase for employees in 2022 if employers take on more of the financial burden and cover more services.
What Factors Impact The Cost Of Health Insurance
While the costs we just described are averages, there are many factors that go into calculating your companys actual premium costs. The 9 biggest components of your premium are:
Is An Employer Required To Pay For Health Insurance
If you decide to offer health insurance to your team, in many cases, your responsibility doesnt end there. In the majority of states, carriers will require you to cover 50% of the premium cost for employees. This requirement, however, only applies to premiums for the employee, not their covered dependents. For other tiers of coverage, such as employee and spouse, employee and children, or family, the insurers want employers to pay 33%.
For 2020, the affordability threshold is 9.78% of an employees income.
Many employers even choose to contribute more than this amount. In fact, last year, on average, covered workers contributed only 17% of their premium for single coverage and 27% for family coverage. One reason for this, especially in companies with lower-wage workers, is that large employers covered by the ACA must offer affordable coverage or be penalized. For 2020, the affordability threshold is 9.78% of an employees income.
The Importance Of Affordable Employer
Understanding the average cost of employer-sponsored health insurance can help small business owners explore coverage options for themselves, their families, and their employees.
According to an of small business owners, the top two most important factors for small employers when choosing a group health plan are affordable monthly premiums and out-of-pocket costs.