How Much is Health Insurance? Decoding Health Insurance Costs for Employers (and Employees)

Almost half of HR professionals consider retention to be one of their biggest workplace challenges. This is a complex issue, but one critical piece of the puzzle is offering your employees the benefits they want — and the benefit employees request most is healthcare coverage. Providing your team with this perk can be highly beneficial for talent acquisition (and help you meet legal requirements). 

Offering health insurance does come with a cost, and the exact amount will vary. Here’s how much health insurance typically costs both employers and employees, and levers you can pull to lower your corporate healthcare costs.

How Much Is Health Insurance for an Employer? 

Offering health insurance usually involves paying for a group policy. You will then cover a portion (or the entirety) of the premiums for employees and dependents. On average, employers cover about 83% of the premium for a single employee and 73% for family coverage. That amounts to $16,357 annually for family coverage and $6,584 annually for single coverage per employee. 

What Affects Health Insurance Costs for an Employer

Your insurance rates are determined by a variety of factors, such as: 

• The insurance provider. The provider you choose can affect how much you pay for your group plan health insurance. Each insurance company has a unique way of calculating premiums. That method will determine what your insurance costs.  
• The plan type. Companies also have the choice between a preferred provider organization (PPO) plan or a health maintenance organization (HMO). HMOs have the lowest premiums, and PPOs have the most flexibility. 
• The network of providers in the plan. The medical facilities and providers in the plan also determine how much the plan will cost your company every year.
• Plan features. How much the annual deductibles are, the copayments, or out-of-pocket maximums will all affect how much it costs. Higher deductibles translate into lower premium costs. 
• Your location. Where your business operates is going to affect how much it costs to provide insurance to your employees. There are a few reasons why this happens. The population is one — there is a greater chance of illness or injury in a high density area, which drives up rates. Individual states and cities also have their own regulations that can also change how much you pay. The most expensive region in the U.S. is New York. 
• The employer contribution amount. Paying 83% for single employees and 73% for family coverage is an average. You can cover more or less of employees’ premiums. Passing more of the premium onto your employees by decreasing your percentage contribution decreases the costs incurred by the company.
• The demographics of your employees. When you buy a group plan, the insurance provider will give you rates for the “risk pool” at your company. For example, if you have an older workforce, you’ll likely have higher rates. 

Ways Employers Can Decrease Health Insurance Costs

Paying $6,584 to $16,357 annually per employee adds up quickly. Fortunately, there are ways to mitigate how much you spend on this important employee benefit.

Facilitate Prevention

As the saying goes, an ounce of prevention is worth a pound of cure. Providing your employees with a wellbeing program can help them take care of their health, ultimately reducing your healthcare spending. Initiatives to consider include: 

• Fitness programs. Get your team up and moving! Facilitating access to physical activities, like team sports or gym memberships, can help reduce healthcare spending. Companies that give employees access to Wellhub, for example, see healthcare costs decrease by up to 35% in a single year. 
• Mental wellness programs. Your employees’ mental wellbeing contributes to costs too. Implementing programs like yoga classes or meditation apps can help reduce stress and anxiety, both of which can drive up a company’s healthcare spending. 
• Sleep programs. Buying your employees sleep trackers or a sleep app subscription empower employees to get a full night’s rest. As sleep is a foundational part of overall health, this targets an important factor in your health insurance costs.

Consider Your Plan Options

All employees want great benefits, but not everyone wants — or needs — the same level of care. You may want to offer different plans for varied needs. For example, you may let healthy employees choose a high-deductible plan with an HSA. Those types of plans save your company money by shifting some burden to the employees. This package also helps your employees save money on premiums. For those with more medical needs, you could offer a low-deductible plan with an FSA. 

Consider surveying your employees to find out what coverage they need. Ultimately, the goal is to find the best value plans for your team.  

Encourage Lower Cost Services

Lower cost healthcare options like telehealth, which gained prominence during the COVID-19 pandemic, can be just as effective and more economical. These services offer convenient and affordable care, with remote consultations costing around $50. Compare this to over $170 for in-person visits. This affordability encourages employees to take a more active role in their health and opt for high-deductible plans with Health Savings Accounts (HSAs), leading to lower costs for employers. 

How Much Is Health Insurance for an Employee? 

Health insurance premiums cost, on average, $8,435 for a single person and $23, 968 for a family. Premiums are the amount of money you pay toward a health insurance policy to guarantee coverage. These figures are the annual averages, but premiums are paid monthly. If an employer offers health insurance benefits, the average cost for premiums drops. The average in 2023 for covered employees is $7,753 for single coverage and $22, 344 for family coverage. 

Factors Affecting Health Insurance Costs

The numbers above are averages. There are many factors that will affect how much an individual or family will pay. These are some of the factors to consider:

• Age. Premiums increase the older someone is. For example, the average monthly premium for someone who’s 21 is only $397. For that same plan, it costs someone who’s 60 $1,079 a month. 
• Location. Where someone lives in the U.S. also affects how much they pay in premiums. For example, the average cost for single coverage is lower in the South than the Northeast. And family coverage is cheaper in the West than it is in the Northeast. Prices can differ due to state regulations and competition. For example, areas with only one major insurance provider often have higher rates. Competitors can drive rates down. 
• Smoking Habits. Smoking can lead to health complications, so health insurance will typically cost more for smokers than non-smokers. In fact, insurance companies can charge up to 50% more for a smoker’s policy. 
• Metal Tier. If you’re buying insurance on the Affordable Care Act (ACA) marketplace, you’ll see the option for four metal tiers: bronze, silver, gold, and platinum. Bronze and silver tier plans have lower premiums and higher deductibles. Gold and silver tiers will lower out-of-pocket costs but come with a higher premium. 
• Number of People Covered. Single insurance is cheaper than family plans. Dependents, such as a spouse or children, can more than double your costs. 
• Health Plan Type. There are also several different types of plans to choose from. HMOs and EPOs generally have the lowest premiums, but you’re required to stay in-network. PPOs have more flexibility but come with higher premiums. 
• Household Income. People with household income at 400% of the federal poverty level or below are eligible for premium tax credits. 

Calculating an Employee’s Personal Health Insurance Costs

Health insurance costs include two main expenses: the premium and the deductible. The premium is how much an individual pays regularly to be guaranteed coverage. The deductible is how much they’re responsible for over the course of the year before health insurance will kick in and take care of the rest. 

The premium and deductible have an inverse relationship within a policy — one will increase when the other decreases. So if you have a high deductible, you have a lower premium. A higher premium usually means a lower deductible. 

Here’s a hypothetical example of how that might work. A health insurance plan might cost $500 a month in premiums, but it has a high deductible of $5,000. That would mean this individual would pay less in premiums than the average American, but they’d also be responsible for $5,000 of medical expenses before insurance covers the rest. On the flip side, that same individual could choose a higher premium, maybe $700 a month, but only have a deductible of $3,000. 

For some, having a lower premium is more important, while others prioritize a low deductible. 

Reducing Healthcare Costs with Wellness

Healthcare benefits are one way for you to help your employees stay well and working. When they have access to preventative care, they’re better able to get the help they need to stay healthy and be able to work. The money spent on health insurance as an employer can be money well spent. 

While healthcare can be a costly benefit to provide, wellness programs can help you reduce your expenses. Providing employees with access to physical health wellness programs—like with Wellhub—can reduce your healthcare costs by 35%. In addition, 78% of HR leaders say their wellness program reduces the cost of providing healthcare benefits, as revealed in Wellhub’ 2023 Return on Wellbeing report.

So keep providing great healthcare benefits and start creating powerful wellness programs! Get started by talking with a Wellbeing Specialist today. 

References

• Bengfort, H. (2023, July 6). Five tips to start offering employees health benefits. Retrieved November 14, 2023 from https://www.peoplekeep.com/blog/how-to-start-offering-employee-health-benefits
• Eden Health. (2021, September 7). Do Employers Have to Offer Health Insurance? Retrieved November 14, 2023 from https://www.edenhealth.com/blog/do-employers-have-to-offer-health-insurance/
• KFF. (2023, October 18). 2023 Employer Health Benefits Survey. Retrieved November 14, 2023 from https://www.kff.org/report-section/ehbs-2023-section-1-cost-of-health-insurance/
• Masterson, L. (2023, November 2). How Much Does Health Insurance Cost In 2023? Forbes. Retrieved November 14, 2023 from https://www.forbes.com/advisor/health-insurance/how-much-does-health-insurance-cost/. 
• Rau, J. and Appleby, J. (2013, September 29). Where You Live Determines How Much You Pay For Health Insurance. KFF Health News. Retrieved December 15, 2023 from https://kffhealthnews.org/news/premium-variation-intrastate-obamacare-marketplaces-exchanges/. 
• SHRM. (n.d.). Managing for Employee Retention. Retrieved December 13, 2023 from https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managing-for-employee-retention.aspx
• Walker, E. (2023, July 6). How much do employers pay for health insurance? Retrieved November 14, 2023 from https://www.peoplekeep.com/blog/cost-of-employer-sponsored-health-insurance.