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You already know the benefits of offering a group health plan, but if you’re here, you are understandably worried about the cost. While health insurance is the most sought-after benefit among workers, it is also the most expensive. Complete Payroll Solutions designs health benefit plans for employers of all sizes and industries throughout the Northeast, specializing in finding affordable coverage. In this article, we’ll explain the factors that impact the cost of health insurance so you can understand what will drive up your expenses as well as share potential ways to save. After reading, you’ll understand what you can expect to pay for coverage so you can decide if offering a group plan will fit your needs and budget. First, Do Employers Have to Offer Health Insurance?It may surprise you to know that we get asked this question all the time. Health insurance is a big expense. The good news is that you may not have to offer it. The requirements for offering health insurance differ based on your size.
There may be other situations that may require you to offer health insurance. For example, if an employee’s employment contract or union agreement guarantees it. However, even if you’re not required to provide health coverage, you may want to offer it on a voluntary basis for a number of reasons:
Is An Employer Required to Pay for Health Insurance?If you decide to offer health insurance to your team, in many cases, your responsibility doesn’t end there. In the majority of states, carriers will require you to cover 50% of the premium cost for employees. This requirement, however, only applies to premiums for the employee, not their covered dependents. For other tiers of coverage, such as employee and spouse, employee and children, or family, the insurers want employers to pay 33%.
Many employers even choose to contribute more than this amount. In fact, last year, on average, covered workers contributed only 17% of their premium for single coverage and 27% for family coverage. One reason for this, especially in companies with lower-wage workers, is that large employers covered by the ACA must offer affordable coverage or be penalized. For 2020, the affordability threshold is 9.78% of an employee’s income. How Much Does Health Insurance Cost a Company Per Employee?Health insurance costs vary widely but the average annual premiums for employer-sponsored coverage in 2020 were $7,470 for single coverage and $21,342 for family coverage. When you take into account the average contributions by workers, that brings the employer costs to $6,227 and $15,754 respectively. The actual amount you’ll pay is based on a number of different factors, which we’ll cover next. What Factors Impact the Cost of Health Insurance?While the costs we just described are averages, there are many factors that go into calculating your company’s actual premium costs. The 9 biggest components of your premium are:
How Can I Lower My Company’s Health Insurance Costs?If you’re like most employers, the high cost of insurance premiums is a big concern. You may be wondering if there’s anything you can do to help control your expenses. Fortunately, there are some strategies that can lead to lower costs:
By combining some of these strategies, you could see a double-digit reduction in your premium costs. How Do I Select The Right Health Insurance for My Business?Now that you understand the different factors that affect the cost of employer-sponsored health insurance, you’ll want to start by doing your research to find coverage that best fits your company’s needs. For example, a higher deductible plan may be best if you have young employees while a PPO would be good for employees with college students who are out of state. With multiple carriers and product options, learn more about how Complete Payroll Solutions can build you an affordable program that provides exceptional coverage. If you’re still weighing your options, learn more about what you should consider when choosing a broker. |