Employee Health Insurance Cost

How much does employee health insurance cost? 

This question is something that every business owner must ask. 

More workers seek benefits with the rising cost of healthcare. Employers must choose how to invest in offering these employee benefits. Employee health insurance can be a deciding factor in keeping employees. It also can be a factor in attracting new hires.

On top of your list should be, “how much will employee health insurance cost me?” Business owners have many opportunities to provide insurance for their employees. Offering employee health insurance comes with a lot of questions for business owners. You may be researching health reimbursement arrangements (HRAs) or health stipends. You likely have many questions.

Some business owners may second guess offering health insurance. With the rising cost of health care, this is understandable. Yet, healthcare expenses are nothing compared to the loss of employees. Some employees may need these benefits. Supporting your employees’ well-being does a lot for their peace of mind. It is a key to employee retention. Also, it would help if you offered some insurance options for your employees by law.

Cosmo Insurance Agency insurance brokers can help you find the right employee insurance plan. We can help to find a plan that will fit your budget while also being affordable and beneficial to your team.

In this article, we break down the employee health insurance cost. We will look at the cost per employee and healthcare packages. We will also explain how you can use these healthcare plans and options to manage your budget.

Employee health insurance should not be a burden for you or your team. We will help you find the best option that works for you.

How Much Does Group Health Insurance Cost?

When an employer purchases health insurance for employees, they must consider coverage. They must buy a plan that covers all employees and their dependents. This type of plan is called a group health insurance plan. These types of plans are the most common. Yet, they can also be the most expensive.

Employee health insurance costs continue to rise year to year. In 2021, the average cost of employee health insurance premiums was around $22,221. The average premium for individual insurance plans was about $7,739.

Employers can also offer options to their employees. These options include prescriptions, mental health, and Covid-19-related wellness offerings. Costs can vary between employer and provider, and the expenses trend higher each year.

How Much Do Employers Pay for Health Insurance?

You need to divide funds in your budget to provide health insurance coverage. It is an essential factor in employee retention. It is also attracting potential new employees.

The average employee health insurance cost for family coverage was about $16,253. Individual coverage was about $6,440. These premium costs are expected to go up. Providing coverage options can reduce these costs for employees.

How Much Does Group Health Insurance Cost for Employees?

There are several factors in how much your employees will have to pay for their insurance. This includes what plan you choose. It is also what health conditions your employees may have. The average healthcare cost per employee fluctuates through the years.

Group health insurance costs per employee averaged $5,969 for families last year. For individuals, the average price was $1,200. Most employee health insurance costs are collected as payroll deductions. This process can be helpful, as it can help employees to budget their pay better.

Premium costs tend to increase year to year. To cut these fluctuations, employers can do a few things. Insurance for employees costs more and more each year. But, some actions can help ease these costs. Employers can change contribution strategies or plan features. This strategy can help control the cost of benefits for employees.

Controlling Group Health Insurance Costs

Healthcare is one of the most expensive costs of running a business. But, it is one of the most important investments you can make for your business. Employee health insurance can decide when potential employees look at your company. These benefits impact your growth.

You need to understand what factors affect your employee health insurance cost. Then you can better control your budget and set your employees up for success.

These factors include:

  • The insurance carrier
  • The type of plan you choose
  • Preferred provider organization (PPO)
  • Health maintenance organization (HMO)
  • The network of providers in the plan
  • Plan features
  • Deductibles
  • Co-pays
  • Out-of-pocket maximums
  • Your location
  • Your contribution amount (you can move more or less of the cost burden on your employees)
  • The demographic of your employees or your plan rates for the “risk pool” at your company
  • For example, older employees tend to have higher healthcare costs. This fact can cause an increase in your rates.

Health Reimbursement Arrangements (HRAs) can Help Manage Your Budget

Employee health insurance costs can get adjusted by using health reimbursement arrangements (HRAs). You can use an HRA to reimburse your employees for out-of-pocket expenses and premiums. You do not need to buy a costly group insurance plan.

Several options would work great for any small business owner. These include qualified small employer HRA (QSHRS) or individual coverage HRA (ICHRA). These are simple and less expensive solutions perfect for small businesses. Employers can decide if they want only to reimburse premiums. They can also choose premiums and out-of-pocket expenses.

The Affordable Care Act (ACA) created the QSHRA specifically for small businesses. It is designed for companies with fewer than 50 full-time equivalent employees.

There is also the option of a group coverage HRA (GCHRA), a hybrid of a group plan and HRA. This plan offers a traditional group plan while lowering the cost of premiums.

An HRA has many advantages for employers and employees. These include:

  • Employers can set annual or monthly allowances. They agree to reimburse employees for medical costs.
  • Employees buy their health insurance plans on a private exchange. They can also use the health insurance market.
  • Employees can choose a plan from a provider with the most desired features.
  • The employee pays for premiums and other medical costs. The employer can reimburse them for eligible expenses on their allowance balance.

This approach also allows employees much flexibility in choosing the right plan. For example, a young employee may decide on a high deductible health plan (HDHP). This strategy helps to cut out-of-pocket expenses and premiums.

Meanwhile, an older employee may choose a lower deductible. They may want a higher out-of-pocket maximum plan. This approach allows for a better employee health insurance cost catered to the individual. These options are essential to many people when choosing an employer.

HRAs can reduce employer health care costs. This strategy makes health insurance more affordable for their employees. The cost saving from an HRA is significant for an employer. The employer decides the allowance they will offer. In turn, this makes the cost of the reimbursement amount affordable and customizable.

This approach also helps your budget by making money go further. All reimbursements are free of payroll tax for both the employer and the employee. It is also free from income tax for the employee. The plan must qualify as minimum essential coverage (MEC).

Health Stipends Can be a Cost-Effective Option

HRAs are an excellent option for small businesses to reduce costs. But, it is not ideal for everyone. Several factors must affect the expense of employee health insurance.

It would help if you considered premium tax credit eligibility. Some employees may be eligible for these credits and cannot take advantage of an employer-sponsored group health insurance plan.

If an employee has an HRA, then they must adjust their tax credits to meet their HRA allowances. Their advanced premium tax credit cannot exceed their allowance. Sometimes, the employee must choose between their tax credit or the HRA benefits.

Employees must choose between employee-sponsored health benefits or premium tax credits. They cannot do both, so this choice often comes down to affordability.

Health stipends can ease these concerns. These work like HRAs, except they are taxable, flexible, and have few regulations. This option allows employees to keep their premium tax credits.

Health care stipends can be a great option if you have employees in other countries. It allows them to take advantage of health benefits with your company. They can also take advantage of their local healthcare offerings.


Today, many employees expect some form of health insurance from their employer. But, health insurance offerings can be a pricey investment for employers. Employee health insurance cost depends on several factors.

Knowing the available options can help you make the best for your budget. Options such as HRAs and health stipends can help to reduce some of these costs. You will also be able to find the best choice for your team.

A good health insurance plan can be a deciding factor in attracting new employees. You also want to keep current employees. Do your homework to select the best option for your business.

Cosmo Insurance Agency can help you find the best plan for you. We will help you decide the best choice for your budget.