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Small Business Employee Benefits and HR Blog

Employers' Prohibitive Group Health Insurance Costs

Employers are likely cognizant of the contributions they make to their employees’ benefits plan, but are they fully aware of the magnitude of the costs of group health insurance?Employers' Prohibitive Group Health Insurance Costs

Current Group Health Coverage Costs

When employers purchase a health coverage plan to cover their workers and dependents, this coverage is referred to as “employer-sponsored health insurance” or “group health insurance.” While costs for each employer differ—based upon carrier, provider network, location, plan coverage and structure, and the number and demographics of covered employees—trends and averages can help shed light on the true costs to employers.

The Kaiser Family Foundation’s2015 Employer Health Benefits Survey found a 4 percent increase over 2014 rates in the average premiums for single and family coverage. The average single coverage premium in 2015 was $6,251 annually ($521 per month), and the average family coverage premium was $17,545 annually ($1,462 per month).

Of the 57 percent of employers who offered health benefits to some or all of their employees in 2015, they paid, on average, 83 percent of the premium for single coverage ($5,179 per year) and 72 percent of the premium for family coverage ($12,591 per year). Considering it in hourly wage terms, a March 2016 U.S. Bureau of Labor Statistics report found that in private industry, the average cost for health insurance benefits paid by employers to each employee equaled $2.44 per hour worked.

Future Coverage Rates Expected to Rise

Premiums continue to rise steadily each year—at a faster rate than workers’ wages. From 2005 to 2015, the average annual family premium increased 61 percent. The so-called Cadillac tax—an Affordable Care Act (ACA)-created tax on high-cost health coverage plans that will become effective in 2018—will levy 40 percent on individual plans with premiums higher than $10,200 or family plans with premiums higher than $27,500. According to the 2015 Wells Fargo Employee Benefits Trend Survey, 52 percent of all employers are concerned about being exposed to this tax given the current structure of their plan.

Conclusion

To mitigate rising health insurance costs, employers have adopted several practices, including buying health plans with high deductibles and adding wellness programs to help employees maintain or improve their health. Another option for employers to consider is contributing a set amount to their employees to allow them to buy individual health insurance on the market. Often, this can be a win-win outcome for both employers and employees. This allows employees to choose the plan and premium that best fits their situation—healthwise and financially. It also gives employers the ability to pay what they can afford, instead of paying premiums that are determined by the health insurance company.

What questions do you have about how much employers pay for group health insurance? Let us know in the comments section below!

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