How much does an employee pay for health insurance

As an employer, being able to provide health insurance to your employees can give your company a competitive edge, as it can enhance your employees’ overall satisfaction and productivity. Health insurance costs can fluctuate greatly; however, the average annual costs for employers are $6,227 for single coverage and $15,754 for family coverage.

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The Cost of Offering Employees Health Insurance

By offering health insurance to your employees, your company may be able to attract more employees, have happier employees overall, and save on taxes. After an employer decides that they want to offer health insurance to their employees, they will purchase a plan to cover all eligible employees and dependents. This is commonly known as a group health insurance plan.

The cost of providing health insurance to your employees depends on factors such as:

• Insurance carrier
• Type of plan (PPO or HMO)
• Location
• Features (deductibles, copays, out-of-pocket maximums)
• 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. 

Factors that Affect the Cost of Offering Employees Health Insurance

As mentioned above, there are several factors that can impact the cost of offering health insurance to your employees. Some of the main factors that can cause the price to fluctuate include your employee demographics, your location, the size of your group, other healthcare inflation factors, and the type of plan you decide to purchase for your company.

Employee Demographics

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 the age of 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. 

Location

The location also plays a main role in dictating the cost of employee health insurance, as some states, such as Arkansas, California, and New York, may have laws that require employer-sponsored insurance to have certain coverage such as mandatory reproductive health benefits. These added benefits will contribute to an increased cost of employer-sponsored health insurance. For example, in California, it costs employers an average of $597 to buy health insurance for a single individual and $1,634 for a family.

Additionally, in some areas such as New York City or Chicago, access to healthcare may cost more. Access to healthcare can include both consulting with a physician or having a procedure done. Because these services may be more expensive in certain areas, premiums will also be higher. 

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Group Size

The overall number of employees, family members included, who will be participating in your health insurance plan can impact the cost as well. For example, if you have a larger group, the cost will tend to be lower. 

This is because the overall health risk will be distributed over more people, and with more individuals comes a mix of both healthy and unhealthy individuals purchasing the plan. Because of this greater 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. 

Healthcare Inflation Factors

This aspect of the premiums is determined by the overall cost of healthcare services by all members. This means that the number of total claims and how expensive they were will be used to figure out how much your premium will be in the next year. Thus, employers who have employees with more medical issues or who frequent their physicians may have higher premiums. 

Type of Plan You Purchase

The type of plan that you as an employer decide to purchase for your employees may also impact the overall cost of providing health insurance to your employees. Some types of plans include:

• Health Maintenance Organization (HMO): HMOs tend to cut the total cost of monthly premiums by 20% and are more cost-contained. With these lower costs of premiums also comes lower monthly premiums that employers have to pay.
• Preferred Provider Organization (PPO): PPOs may offer more flexible plan options; however, they can cost more than HMOs because there is no cost containment.
• Mira: Mira is an affordable healthcare alternative that enables employers and employees to receive access to urgent care visits, lab testings, and a discount on prescriptions for just $45 per month. Find out more about the prices to purchase Mira for your company. 

Employee Health Insurance Frequently Asked Questions (FAQs)

Below we breakdown frequently asked questions when it comes to employee health insurance.

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Can an employer lower the cost they pay for health insurance?

As an employer, having to pay high insurance premiums can be very daunting. However, there are ways to combat the high costs and monitor your expenses. Some of these tactics include:

• Encourage individuals over the age of 65 to apply for Medicare: If you have qualified older workers to have Medicare coverage, it will enable you to have a lower average age of your group. This is because if the average age of your group is older, you will typically have higher premiums to be paid.
• Limit coverage to employees: While coverage for children up until the age of 26 is required, spousal coverage is not. By not covering spouses, some employers are able to lower their premium costs. Some companies though are also implementing a surcharge for spouses who would then be allowed to gain coverage through an employer.
• Increase deductibles: You can also lower the premiums by raising deductibles, which causes the costs to fall more on the employee as opposed to the employer.
• Choose an HMO plan: Although some individuals may opt for a PPO plan due to their benefits, HMO plans are usually cheaper to purchase than PPOs.
• Promote wellness programs: Healthier individuals will have fewer claims. Thus, by promoting workplace exercises and healthy lifestyles in general, your employees will tend to be healthier and fewer claims will need to be made.
• Negotiate with your insurance broker: For bigger groups, insurance rates can be negotiable. It then becomes important that you talk with your broker so that you can advocate for a more reasonable rate, especially if you have been with the same provider for a while.

How much does group health insurance cost for employees?

For employees in 2020, the average cost to be included in group health insurance was $5,689 to cover a family, which was 29% of the premium. To cover an individual in 2020, the average cost was $1,242, which was 17% of the premium. Typically, these annual costs are taken via a payroll deduction by the employer.

As an employer, how do I select the right insurance plan for my company?

The first step in determining which insurance plan you will want your company to have is to do sufficient research to find a plan that would best suit the needs of your company. If you have several young employees, a higher deductible plan may be best for you. However, if your company has lots of employees who have college students out of state, a PPO may be more suitable. After you do adequate research, you can connect with brokers to make final decisions.

Bottom Line

As an employer, purchasing health insurance plans for your employees can be expensive. On average, the annual cost for an employer to pay for a single coverage plan was $6,227 and $15,752 for family coverage. By paying this expense though, companies may be able to grow their successes by drawing attention from more potential employees, having higher rates of satisfaction within their employees, and by being able to save on their taxes.

If your employer does not offer health insurance, Mira may be a great option for you. With Mira, you can receive access to medical services such as lab testings and urgent care visits. In addition, you can also receive up to 80% off on various prescriptions. All of these benefits come with Mira for just $45 per month.