Comparing health insurance plans can feel like comparing apples to bananas. Every plan offers something different: you’re balancing employee contributions, cost-sharing provisions, wellness programs, and employer costs.
Choosing the right plan can feel impossible, so for many employers, it comes down to one thing: affordability. Health insurance premiums have increased by 20% in the last five years. Employee premiums have only increased by 7% in that time, with companies making up the difference.
This pressure is not showing any sign of easing: Healthcare costs are expected jump another 8.5% in 2024, the biggest increase in a decade
So how much of your company’s health insurance costs do employers cover?
It depends on your plan. Let’s unpack the different rates.
How Much Does Health Insurance Cost?
According to the Kaiser Family Foundation (KFF), annual premiums for employer-sponsored health insurance cost $7,911 for individual coverage last year. For family coverage, which also covers employees’ dependents and other family members, the average cost was $22,463. This was relatively unchanged from the previous year.
Of course, this is just an average. For example, employees at small firms (with 3 to 24 workers) paid an average of $8,049 for individual coverage. In contrast, employees at large firms (5000+ employees) paid an average of $7,683.
How Much Control Do Employers Have Over Health Insurance Costs?
When it comes to what percentage of health insurance companies should pay, several factors come into play, such as:
- Plan type (PPO, HMO, POS, HDHP/SO)
- Company size
- Monthly premiums
- Percentage of full-time vs. part-time employees
- Cost-sharing provisions
- The network of providers in your plan
- Your location(s)
- Plan features such as deductibles, copays, and out-of-pocket maximums
- Coverage level (single or family plan)
- Employee demographics (e.g., older workers normally have higher healthcare costs)
- Number or level of services provided
By understanding these different elements and what they mean for your business’s bottom line, you can make an informed decision about the health benefits you’ll offer your employees.
Employer vs. Employee Healthcare Contributions
For single plans, the overall average cost was $7,911 last year. This cost is split between employers and employees:
- Employer costs: $6,584
- Employee costs: $1,327
That means employer contributions made up an average of 83% of health insurance costs for single plans.
For family plans, the cost is split differently. The average total cost was $22,463, divided as follows:
- Employer costs: $16,357
- Employee costs: $6,106
This means employers paid just under 73% of health insurance costs for family plans.
Insurance Costs Vary by Plan Type
Employers will pay different percentages of health insurance costs depending on their plan type. But on average, you should expect to pay between 82 and 85% of health insurance costs for individual coverage and between 67 and 75% of insurance costs for family plans.
Let’s break it down by plan type to give you a better idea of these costs.
PPO (Preferred Provider Organization) Plans
PPOs are the most common type of group health plan, with 49% of covered workers enrolled in this type of plan. This plan builds a network of preferred providers such as hospitals, doctors, and specialists. Employees pay less when they use providers that are part of the program's network. If they opt to go outside the coverage area, they may face extra costs.
PPO plans cost a little more than HMOs, but they give the employee more options for what doctor or hospital they can use, which is why they’re a popular choice.
For PPOs, employers paid an average of 82% of health insurance costs for single coverage and 73% of insurance costs for family plans last year. As a dollar amount, these were the most expensive options for employers—for both single and family plans.
HDHP (High Deductible Health Plans)
HDHPs are another common type of health insurance plan — 29% of workers were enrolled in HDHPs in the last calendar year. Sometimes, HDHPs come with a savings option (HDHP/SO).
An HDHP means that employees need to spend a certain amount of money (a deductible) on healthcare before their insurance starts paying for it. For example, their deductible might be $1,500, meaning they have to pay $1,500 before insurance kicks in. In spite of this, HDHPs can be helpful to employees because they often have lower premiums than other types of plans.
At this time, employers paid an average of 84% of health insurance costs for single plans and 75% for family plans.
HMO (Health Maintenance Organization) Plans
HMOs are a less popular choice for health coverage, used by 12% of workers. An HMO usually limits coverage to doctors who work for or contract with the HMO.
HMOs generally won't cover out-of-network care except if it's an emergency. These plans may also require people to live or work within its service area to be eligible for coverage. This is a more restrictive plan and may not be suitable for all your employees — for example, if you have a remote team.
On average, employers covered 85% of health insurance costs for single plans. And for family plans, they covered 73% of the costs.
POS (Point of Service) Plans
POS (Point of Service) plans were used by 9% of workers last year. With a POS plan, you can save money by using the network of doctors, hospitals, and healthcare providers that are part of the plan. But if an employee wants to see a specialist, they’ll need a referral from their doctor.
Under POS plans, the average employer contribution was 82% of health insurance costs for individuals and 67% for family plans. As a dollar amount, these were the cheapest options for family plans, while single plans were comparable to the average cost.
Alternative Health Insurance Options for Employers
When healthcare charges are high and uncertain, it can be difficult for small businesses to meet the minimum health insurance contribution requirements. Employers may be able to offer alternative health benefit options instead.
You can customize your contribution to these arrangements to make them more affordable and predictable.
HRA (Health Reimbursement Arrangement) Plans
An HRA is an alternative type of health insurance plan. It allows employers to give their employees money to help pay for medical costs like doctor visits and prescriptions. The employer sets aside what they want to spend on the employee's healthcare and then reimburses them for what they spend on healthcare up to that set amount.
HRAs are helpful for companies aiming to reduce their health benefit expenses. However, they may be unsuitable for some employers. For example, since HRAs are formal benefits, they can affect team members’ eligibility for tax credits or other employee benefits.
Health stipends are a more flexible option. They are tax-deductible and can be used for various purposes with fewer regulations than an HRA. Plus, they're an easy way to offer health benefits to employees in other countries - perfect if you have a global or largely remote workforce.
A health stipend is a payment made by companies to help offset medical costs. Employers will provide their team members a certain amount to spend on healthcare each month. This could be things like medical appointments and other health-related expenses like virtual therapy.
Reduce Your Healthcare Costs with Gympass
You can’t completely avoid healthcare costs. Health insurance is among the most sought-after benefits, and — even with rising costs — it costs less to provide healthcare than it does to replace an employee.
But you can pay less with Gympass.
In a study of more than 19,000 employees, Gympass clients saw their healthcare costs drop by up to 35% for active users. Gympass users also report better overall wellbeing than non-users across all eight dimensions of wellness.
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- Charaba, C. (2023, February 2). Employee retention: The real cost of losing an employee. PeopleKeep.com. Retrieved October 21, 2023.
- 2022 Employer Health Benefits Survey. KFF. Published Oct 27, 2022. Accessed October 21, 2023 via https://www.kff.org/health-costs/report/2022-employer-health-benefits-survey/
The Gympass Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.