Business owners, as well as employees, want to know how much they can expect to pay for group health insurance. For employees, it impacts their “take-home” pay, and for their employers, it affects their bottom line and profit margins.
Fair enough and, while there are other critical considerations when deciding on a coverage plan, costs are often a major deciding factor.
A Pattern of Rising Costs
To anyone who has been working and paying for health coverage for more than 10 years, it’s no surprise that premiums, along with other insurance and healthcare costs, have steadily risen year after year.
For example, according to research from HealthAffairs.org,
“For workers covered by their own firms, the average annual premium in 2018 was $6,896 for single coverage and $19,616 for family coverage. Compared to premiums in 2017, the average single premium increased by 3 percent, and the average family premium increased by 5 percent (all premiums are in nominal dollars—that is, unadjusted for inflation). The average premium for family coverage has risen 20 percent over the past five years and 55 percent over the past ten years.”
This is, of course, just a sliver of the timeline of cost increases.
The Kaiser Family Foundation (KFF.org) has some insightful data on this trend:
- The average premium for single coverage increased by 4% since 2018 and the average premium for family coverage increased by 5%.
- The average family premium has increased by 54% since 2009 and 22% since 2014.
They go on to note that in 2019:
- The average premium for single coverage was $7,188 per year.
- The average premium for family coverage was $20,576 per year.
- The average annual premium for family coverage for covered workers in small firms was $20,236.
- The average annual premium for family coverage for covered workers in large firms was $20,717.
Advantages of Employer-Sponsored Group Health Coverage
On average, individual employees as well as employees with their families, can save on premium costs and benefit from lower deductibles with group health insurance.
According to research from eHealth revealed:
- The average per-person premium for small group health insurance was $409 per month in 2018, compared to $440 for an individual plan.
- Small group health plans had an average deductible of $3,140 per year, compared to $4,578 for individual plans.
The average cost of small business health insurance is lower than that of individual coverage, in part, because of the principle of “risk pool advantage.” This simply means that the larger the group of covered members, the larger the spread of costs to provide coverage for medical care.
An explanation of this concept from the Small Business Administration (SBA) states,
“The larger the group of people, the more monthly payments there are coming in, and the more money the insurance company has for when one of the enrolled members needs care.”
In addition to being able to participate in the group health insurance plan themselves, employers benefit in other ways.
Employers can realize additional reduced costs in areas such as workers’ compensation, the ease in recruiting and retaining workers, and increased productivity due to reduced absenteeism. Workers and families of workers who were previously uninsured can have greater access to medical care services and better health outcomes.
Employer Considerations With Group Health Insurance
Keep in mind that employers with less than 50 full-time employees (defined as employees who work 30 or more hours per week) are not required to offer health insurance coverage. However, statistically, most small business employers do and the advantages far outweigh the costs in most cases.
How much does an employer have to contribute?
There is no federal rule determining the minimum employer contribution for health insurance. For 2019, the Kaiser Family Foundation found that 15 percent of employees paid for more than half of their family coverage premiums.
However, according to information provided by BenefitsCafe,
“California health insurance companies require that an employer contribute at least 50 percent of the employee only monthly cost or ‘premium.’ So, for example, if the monthly cost for one employee (not including dependents) is $300, then the employer must pay at least $150. Some
insurance companies allow a lower employer contribution amount using a ‘defined contribution’ arrangement.”
The bottom line is that, while there are average costs that can give you a good idea of your potential costs, choosing group health insurance involves a number of factors, all of which will determine your actual costs.
For example, as a small employer, you can offer a wide range of plans to employees. You can tailor the benefits to meet your company’s needs as well as your employee’s preferences. You can offer a single plan to all employees, or offer a single HMO and a single PPO plan.
Some companies may offer up to six different medical plans and allow the employees to select the one that best fits their needs, and insurance companies will allow small employers to offer 20 or more plans to their employees, all while controlling the cost to the employer.
Your Local Group Health Insurance Partners
California Group Health Insurance is a great way to keep and reward valued employees by providing medical protection for them and their families. J.C. Lewis Insurance Services offers a variety of affordable and flexible options allowing companies to choose portfolios and contribution options suited to their specific needs.
We are a family-owned and operated California health insurance agent licensed to do business in California, and we specialize in medical insurance plans for small businesses, as well as for individuals and families, and people with Medicare.
At J.C. Lewis Insurance Services, we can tailor our recommendations to your particular needs since we are licensed with most major carriers in California. You save time and money, and we can quickly define your particular needs and recommend the best products and prices to meet those needs.
Exploring Health Reimbursement Arrangements (HRAs)
Ever heard of HRAs? These are an underrated option for businesses looking to provide health benefits without the full cost of traditional group health insurance. With an HRA, employers can reimburse employees for medical expenses or individual insurance premiums on a pre-tax basis. This approach gives businesses flexibility and allows employees to shop for the coverage that fits their unique needs. Think of it like giving employees a “healthcare allowance” to spend wisely.
Tax Benefits of Offering Group Health Insurance
Did you know group health insurance doesn’t just help your employees? It can lighten your tax load, too. Employer contributions toward premiums are typically tax-deductible as a business expense. Plus, employees’ share of premiums is often paid with pre-tax dollars, reducing their taxable income. These tax advantages can significantly offset the overall cost of providing health coverage—an often-overlooked perk for businesses.
Customization Options to Boost Employee Satisfaction
Offering health insurance isn’t one-size-fits-all anymore. Employers now have access to an array of customizable options. For instance, you can offer tiered coverage levels, allowing employees to choose plans based on their healthcare needs and budget. Want to go the extra mile? Pair high-deductible health plans with Health Savings Accounts (HSAs) to give employees more control over their healthcare spending while saving on premiums. This added flexibility can go a long way in boosting employee morale and retention.
