Health insurance is one of the most expensive benefits a small business can provide. It’s also one of the most sought-after by employees. So how much does health insurance cost?
Group health insurance typically costs thousands of dollars per employee per year.
We’ll break down the average cost of employer-sponsored health insurance, factors that affect pricing, and practical ways to keep your costs under control.
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Should you offer health insurance?
Whether you should offer insurance is one of the top questions about health insurance you might have. According to one survey, 86% of private-sector employees worked for businesses that offered insurance.
But “everyone else is doing it!” may not be enough of a reason to offer health insurance in your small business. So, here’s a list of reasons why many employers offer health insurance.
1. It might be required. Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees must offer health insurance or face penalties.
2. It boosts morale, retention, and recruitment. Did you know that 88% of workers consider health, dental, and vision insurance coverage when choosing a job?
3. Employer-paid premiums are tax-deductible. Your payments to your employees’ health insurance premiums are considered a tax-deductible business expense.
4. You may qualify for health insurance tax credits. If you have fewer than 25 full-time equivalent employees and provide health insurance, you may qualify for the Small Business Health Care tax credit.
What are the total costs for health care?
Unfortunately, the cost of health insurance is only one healthcare expense. Even with insurance, plan holders typically pay a significant amount for healthcare.
Before diving into how much you can expect to pay for offering group health insurance to employees, let’s review the total healthcare costs of a plan.
| Total Health Care Costs | What It Is |
|---|---|
| Monthly Premium | The amount you withhold from an employee’s pay to cover their portion of health insurance coverage. Employers and employees typically split the monthly premium. |
| Deductible | The amount the policyholder spends for covered health services and prescription drugs (excluding free preventative services) before the plan begins to pay. |
| Copayment | The amount the policyholder pays the health care provider when receiving care (e.g., $50). |
| Out-of-pocket Maximum | The maximum amount the policyholder spends for covered services in a year (e.g., $11,000) before insurance pays 100%. |
How much does health insurance cost?
On average, employers spend $7,584 (single coverage) and $19,276 (family coverage) annually per employee.
But how much you pay for each employee’s health insurance depends on several factors, including:
- Plan type
- Single vs. family coverage
- How much you cover
- Health insurance carrier
1. Plan type
The type of health insurance plan you offer (or the one an employee selects) determines premiums.
Plan types include:
- High-Deductible Health Plan (HDHP): Lower monthly premiums and higher out-of-pocket costs before coverage begins. HDHPs are often paired with a Health Savings Account (HSA).
- Point of Service (POS): Requires members to choose a primary care physician and get referrals for specialists but allows out-of-network care at a higher cost.
- Health Maintenance Organization (HMO): Requires members to use in-network providers and obtain referrals from a primary care physician for most services.
- Preferred Provider Organization (PPO): Offers coverage for both in- and out-of-network care without requiring referrals, but using in-network providers costs less.
Here’s a comparison of annual premiums per employee for single and family coverage from KFF:
| HDHP | HMO | POS | PPO | |
|---|---|---|---|---|
| Premium Cost | $ | $$ | $$ | $$$ |
| Average Annual Premium Per Employee (Single) | $8,275 | $8,745 | $8,911 | $9,383 |
| Average Annual Premium Per Employee (Family) | $24,196 | $25,203 | $24,340 | $26,678 |
2. Single vs. family coverage
Employees can have single or family coverage. The cost difference between the two levels is substantial, with family coverage often costing around three times as much as single coverage.
Here’s an average breakdown between single vs. family coverage, according to KFF:
| Single Coverage | Family Coverage | |
|---|---|---|
| Who Is Covered? | Employee | Employee plus spouse and/or child(ren) |
| Average Annual Premium Per Employee (Total) | $8,951 | $25,572 |
| Average Annual Employer Cost Per Employee | $7,584 | $19,276 |
3. How much you cover
There is no federal law that requires employers to cover a certain amount of the health insurance premium.
However, you must consider the following:
- The Affordable Care Act (ACA) requires that companies with 50 or more employees (aka “applicable large employers”) provide “affordable” coverage. A plan is considered “affordable” if the employee’s premium is less than a set percentage of their household income (9.02% in 2025 and 9.96% in 2026).
- Most insurance companies require that employers cover at least half of an employee’s premium.
Typically, employers cover well over 50% of the health insurance premium, which meets the ACA’s “affordable” coverage requirement.
According to the U.S. Bureau of Labor Statistics, employers foot the bill for 78% – 80% of the total health insurance cost. More specifically, the amount of health insurance premiums that employers cover varies slightly on company size:
| Company Size | Employer’s Share | Employee’s Share |
|---|---|---|
| Less than 50 workers | 78% | 22% |
| 50 – 99 workers | 78% | 22% |
| 100 – 499 workers | 79% | 21% |
| 500 workers or more | 80% | 20% |
4. Health insurance carrier
The health insurance carrier you go through also impacts costs. Big players in the health insurance game include Blue Cross Blue Shield, Aetna, Cigna, and United Healthcare.
The fees and costs you pay depend on which carrier you choose for your business. Carrier costs also vary by location.
How to control your health insurance costs
Health insurance is a standard, yet expensive, employee benefit. You can easily pay hundreds of thousands of dollars per year, depending on your employee headcount. What can you do to provide the highly-demanded benefit while managing your costs?
There are a few ways to control your health insurance costs. You can:
- Shop around: Compare health insurance plans and carriers to find the best fit and get the best rate for your business. Consider using a health insurance marketplace and administration platform, like SimplyInsured (which integrates seamlessly with Patriot’s online payroll!) to easily compare coverage.
- Take advantage of tax incentives: Look into how health insurance can lower your health bill. Determine if you’re eligible for the Small Business Health Care tax credit. If not, no worries; you should be able to deduct what you pay as a business expense.
- Offer multiple plans: Consider offering employees different plans, such as a lower-cost HDHP and higher-cost PPO.
- Use online payroll with integrated health insurance: Time is money. Look for a payroll system, like Patriot Software, that integrates with health benefits for automated payroll deductions.
Understand how to choose health insurance plans while managing costs to pick the best option for your small business.
Offering health benefits has never been easier
Looking for payroll software that integrates seamlessly with health insurance benefits?
Patriot Software has partnered with SimplyInsured to help employers offer health benefits. You can explore thousands of medical, dental, and vision insurance plans from top carriers across the country.
Through Patriot’s partnership with SimplyInsured, you can:
- Shop for health insurance plans and compare costs and coverage
- Simplify benefit management under your payroll login
- Get automated payroll deductions, enrollments, and terminations
- Enjoy one-click renewals and online open enrollment
- Access dedicated support from licensed agents
Sign up for a free trial of Patriot’s payroll here to get access to this health benefit integration, plus unlimited payrolls, free USA-based support, free direct deposit, 401(k) integration, and more!
This is not intended as legal advice; for more information, please click here.
