<img src="//bat.bing.com/action/0?ti=5067266&amp;Ver=2" height="0" width="0" style="display:none; visibility: hidden;">
Request Demo

Small Business Employee Benefits and HR Blog

Business Health Insurance Costs: HRAs vs. Group Plans

Health care costs are projected to increase by 6.5 percent in 2017, which means theyBusiness Health Insurance Costs: HRAs vs. Group Plans will continue to expand more rapidly than inflation. As a rising number of businesses feel the pinch, many are abandoning traditional group health insurance in favor of alternatives like the Small Business Health Reimbursement Arrangement (HRA) to help manage their health insurance costs.

But just how much can a business save by switching to an HRA? We address that question in depth in our 2017 Annual Report, which finds that reimbursement plans help small businesses and employees alike by delivering cost savings to businesses while covering a greater percentage of employees’ premiums. You can download the full report for free here.

HRA Savings Nationally

In a national cost comparison of average group health insurance costs (measured by the Kaiser/HRET 2016 Employer Benefits Survey) versus average reimbursements under a reimbursement plan, Zane Benefits' Small Business Health Insurance Reimbursement Report found that businesses saved more with a reimbursement plan.

For 2016, businesses with a health reimbursement plan paid a national average of $322 per month for employees with self-only coverage and $517 per month for employees with families. By contrast, businesses with group health insurance paid a national average of $442 for self-only coverage and $1,072 for family coverage.

Health Insurance Cost by Region

Businesses in every area of the country saved more with a reimbursement plan versus group health insurance; however, average savings varied by region.

For employees with self-only coverage, businesses with a reimbursement plan instead of a group insurance plan saved:

  • Northeast: 23 percent
  • Midwest: 26 percent
  • South: 27 percent
  • West: 30 percent

For employees with a family, businesses with a health reimbursement plan instead of a group insurance plan saved: 

  • Northeast: 48 percent
  • South: 50 percent
  • West: 50 percent
  • Midwest: 53 percent

Sources: Small Business Health Insurance Reimbursement: Annual Report 2017; Kaiser/HRET 2016 Employer Benefits Survey

Health Insurance Cost by Industry

Businesses across various industries also saved with a health reimbursement plan versus a group insurance plan, but some saved more than others. For example, businesses involved in the government sector saved 49 percent on employees with self-only coverage, and businesses in the utilities industry saved a staggering 70 percent on family-coverage employees compared to costs for group health insurance.

Sources: Small Business Health Insurance Reimbursement: Annual Report 2017; Kaiser/HRET 2016 Employer Benefits Survey

Employee Health Insurance Cost Savings

The benefits of a health reimbursement plan aren’t limited to businesses. The data shows that employees also saved on the cost of their premiums both regionally and by industry. Nationally, reimbursement plans covered a larger portion of employee health expenses.

Conclusion

So what’s the key takeaway? Health insurance reimbursement provides more value for less money than traditional group health insurance, costing small businesses less while covering a greater percentage of their employees’ premiums.

For more details, check out the "Health reimbursement vs. group health insurance" section of our 2017 Annual Report.

Annual Report 2017: Small Business Health Insurance Reimbursement

Has a reimbursement plan lowered your company’s health insurance cost? Let us know in the comments below.