Offering health benefits to your employees can make your business more competitive and boost retention. In 2023, annual premiums for employer-sponsored family health coverage reached $22,221, with workers paying $5,969 toward the cost of their family coverage, on average. For single coverage, the deductible averaged $1,669.
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The Cost of Employer-Sponsored Health Insurance
The cost of employer-sponsored health insurance varies depending on numerous factors and increases each year. In 2021, annual premiums rose 4 percent from last year to $22,221 for employer-sponsored coverage. Of those premiums, covered workers contributed 17 percent of the cost for single coverage and 28 percent for family coverage, amounting to an average of $5,969 for their annual premiums. Deductibles for single coverage averaged $1,669.
Companies with more than 50 full-time workers must offer minimum essential coverage or face tax penalties. While small businesses don’t have to provide health benefits, healthcare can boost the workers’ productivity and missed days due to illness and injury. Businesses see the benefit regardless of company size, as 58 percent of small firms and 99 percent of large firms offer health benefits to at least some of their workers.
Factors that Influence the Cost of Employer Health Insurance
The cost of employer-sponsored health insurance varies depending on numerous factors. Below are just a few examples of the types of influences on the cost, such as the demographics, the plan type, the location, and the group size of the business.
- Employee Demographics
- Insurance carrier
- Type of plan (PPO or HMO)
- Features (deductibles, copays, out-of-pocket maximums)
- Network of providers in the plan
- Your contribution amount
Demographics help estimate the medical needs of the employees and the expected level of coverage to anticipate. The average age of your group will be one of the most significant factors impacting the price of your premiums. For example, the average monthly premium for a 21-year-old is $374, whereas the average monthly premium for individuals over 64 is $1,123. If the average age of your group is older, then there will typically be higher premiums to be paid which will increase the overall cost of the health insurance plans. The chart below demonstrates how monthly premiums increase as age increases.
The type of plan you decide to purchase for your employees may also impact your employees’ overall cost of providing health insurance. The health plan determines the flexibility in choosing physicians. Some types of plans include:
- Health Maintenance Organization (HMO): HMOs tend to cut the total cost of monthly premiums by 20 percent and are more cost-contained. With these lower costs of premiums also comes lower monthly premiums that employers have to pay. HMOs generally won't cover out-of-network care except in an emergency. The cost of family coverage for an HMO in 2021 is $22,342.
- Preferred Provider Organization (PPO): PPOs may offer more flexible plan options; however, they can cost more than HMOs because there is no cost containment. With a PPO, you pay less if you use providers in the plan’s network. You can use doctors, hospitals, and providers outside of the network without a referral for an additional cost. The average cost of family coverage for a PPO plan is $23,312 for 2021.
- Point of Service (POS): POS plans are a type of plan where you pay less if you use doctors, hospitals, and other health care providers that belong to the plan’s network. POS plans require you to get a referral from your primary care doctor in order to see a specialist. The average cost of family coverage is $20,724.
- High Deductible Health Plan (HDHP): An HDHP is a health plan with a higher deductible than a traditional insurance plan. The monthly premium is usually lower, but you pay more health care costs yourself before the insurance company starts to pay its share (your deductible). Because of the high deductible, federal law allows employers to offer HDHPs with a Health Savings Account (HSA), a means to cover your premium and other costs with tax-free dollars. An HDHP combined with an HSA allows you to pay for certain medical expenses free from federal taxes.
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The location, such as the city and state of your business, plays the main role in determining the cost of employee health insurance. In some areas where the cost of living is more, such as New York City or Chicago, the cost of healthcare may also be greater. Because these services may be more expensive in certain areas, premiums will also be higher.
Consider the table below from the Kaiser Family Foundation that displays the difference in average costs of monthly and annual premiums for single and family coverage across all plant types in 2021. Prices in one area are not necessarily cheaper than the others across all plans but provide insight into estimating the cost of your care depending on where your business and employees are located.
|Single Coverage||Family Coverage||Single Coverage||Family Coverage|
The overall number of employees, and dependents (family members), who will be participating in your health insurance plan impacts the cost of the health plan. For example, if you have a larger group, the price will tend to be lower. In 2021, workers at larger firms tend to pay 24 percent of the cost of their family plan compared to workers at smaller firms paying 37 percent of the premiums for their family coverage.
Health plans at larger firms tend to be lower-cost on the employee because the overall health risk is distributed between healthy and unhealthy people. Because of this larger pool of individuals on one plan, the health risk of the healthy individuals can help balance the costs of those who tend to utilize the insurance plan more and therefore have more claims.
Employer Health Insurance Frequently Asked Questions (FAQs)
When considering health insurance options for your business, consider the following answered questions.
Are employers required to provide health insurance?
Small employers of less than 50 employees are not required to offer health insurance. Still, large employers with more than 50 or more full-time employees must provide minimum essential coverage to at least 95 percent of the workforce and their dependents. Otherwise, the employer will face a tax penalty. For 2021, the penalty is $338.33 a month or $4,060 annually for each employee who declines an offer of coverage and obtains a Premium Tax Credit (PTC) while purchasing health insurance on a state or federal exchange.
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Where can an employer shop for employer-sponsored health insurance coverage?
While the cost of health insurance varies by plan type, those are not the only options for offering health benefits for your workers. As a small business, other options exist. Consider these top 5 best health insurance options for small business owners:
- Small group health insurance: These are private, ACA-compliant plans chosen by the small business owner, who decides how much of the premium the business will pay.
- Qualified Small Employer Health Reimbursement Account (QSEHRA): Allows the employee to choose their health insurance coverage and get a portion of the premium reimbursed.
- Individual Coverage Health Reimbursement Accounts (ICHRA): Provides maximum flexibility to the employer and allows the employee to get reimbursed for a certain amount of their premium.
- Small Business Health Options Program (SHOP): For businesses with 1 to 100 full-time employees in New York State.
- Health Insurance Alternatives: Employers pay a small monthly fee per employee. The most affordable, convenient, and simple health coverage option for small business owners.
What is the difference between a premium and a deductible?
A deductible is the amount of money you are required to pay out-of-pocket before your insurance begins to pick up the cost of your health services. Deductibles can range anywhere from $0 to over $8,000 for an individual. A premium is a monthly fee you must pay to maintain your coverage throughout the year. You need to pay your monthly premium both before and after meeting your deductible.
If an employer does not offer health insurance, where can an employee get coverage?
You can get health insurance through the Marketplace for just themselves or your family. Employer-sponsored health insurance is not the only source of health insurance. Depending on income, you may also qualify for federal programs such as Medicaid or additional savings such as cost-sharing reductions or premium tax credits. Alternatives to health insurance also exist, such as Mira for low-cost access to urgent care, primary care, and behavioral health services.
Health insurance premiums for employer-sponsored health insurance continue to rise over the years, increasing 4 percent from 2020, offering health insurance coverage for just one family averages $22,221. While small businesses with less than 50 full-time employees are not required to provide health insurance, providing health benefits to full-time, part-time, and contracted benefits can positively impact your business. Affordable alternatives exist to provide coverage for all types of employees at a low cost.
Mira offers a novel health coverage alternative to ensure even the smallest of businesses can still enable employees to manage their health. With Mira, employers can provide access to preventative, primary, and behavioral health care at a low cost to both the employer and employee. The employer pays the low monthly payment while the employee takes care of their copayment. Mira is available for full-time, part-time, and contracted workers! Sign up today!
Ashley Brooks works in Healthcare Consulting and graduates with her MPH in September of 2022 from George Washington University, but graduated with her B.S. in Health Science from James Madison University in 2019. Ashley has been with Mira since June of 2021 and shares the passion for creating affordable healthcare coverage for all!