Average Employer Contribution to Health Insurance Premiums

One of the most common questions we receive as an employee benefits broker is how much the average employer contributes to their employees’ health insurance premiums. It’s a tough question because there are a lot of different factors involved, but luckily, there are some excellent resources available to help us source reliable answers.

In addition to our own proprietary client roster, one of our favorite resources is the annual Kaiser Family Foundation (KFF) Health Benefits Survey because it succinctly summarizes data from an accurate (and broad) representation of employers across the country and provides charts and graphs to make the information more easily digestible. This allows us to show our clients trends over long periods of time and perhaps help predict what they can expect for the upcoming year.

Here’s what the 2017 KFF Health Benefits Survey reported for employer contributions to health insurance and how the data compares to the previous benefits year.

Employer vs. Employee Contributions to Health Insurance

The following averages vary based upon a number of factors including, but not limited to, the size of the firm, revenue, and overall cost of premiums. Your employee benefits broker can help you obtain more in-depth, geographically-relevant benchmarking data, but, looking at this data can give employers a good idea of what their competitors may be offering.

In 2016, employers contributed to health insurance in average of:

• $5,306 (82 percent) for single coverage (with employees contributing $1,129)
• $12,865 (71 percent) for family coverage (with employees contributing $5,277)
  
  

In 2017, employers contributed to health insurance premiums in average of:

• $5,477 (82 percent) for single coverage (with employees contributing $1,213)
• $13,049 (70 percent) for family coverage (with employees contributing $5,714)

The numbers above reflect all plan types, but there’s a fair amount of variety between each plan type. Here is an overview of employer versus employee contributions to health insurance by plan:

• For Health Maintenance Organization (HMOs), the average employer contributed $5,520 for single coverage (78 percent), while employees contributed $1,532. For family coverage, the split was $12,221 (64 percent) and $6,850, respectively.
  
  
• For Preferred Provider Organization (PPOs), the average employer contributed $5,653 for single coverage (81 percent), while employees contributed $1,312. For family coverage, the split was $13,430 (69 percent) and $6,050, respectively.
  
  
• For Point of Service (POSs), the average employer contribution was $5,912 for single coverage (88 percent), while the employee contribution was $804. For family coverage, the split was $12,530 (69 percent) and $5,616, respectively.
  
  
• For a High Deductible Health Plan (HDHP) with a savings option, the average employer contribution was $5,004 for single coverage (82 percent), while the employee contribution was $1,020. For family coverage, the split was $12,982 (74 percent) and $4,599, respectively.
  
  

Average Percentage of Employer Contribution to Health Insurance

The numbers in the previous section give an overview of what the average employer contributes to health insurance premiums.

You’ll notice that the average employer contribution for all plans held steady in terms of percentage from 2016 to 2017, so while insurance premiums are increasing everywhere for everyone, employers are still paying around the same share: 82 percent for individuals and 70 percent for family coverage.

If you’re looking for a general place of comparison, these shares are a fairly good marker. Because actual premium price can vary so greatly across companies, percentage of premium is one of the best measuring tools. If your company is paying less as a percent of individual and family premiums, this could negatively affect your employee recruitment and retention efforts.

Affordability Standards with the Affordable Care Act (ACA)

When determining how much you’ll contribute to your employees’ health insurance premiums, remember that the Affordable Care Act (ACA) sets specific affordability standards.

The law says that, in order for health coverage to be deemed “affordable,” the lowest-priced individual plan offered by the employer must cost “9.56 [percent] or less of the employee’s household income.” Note that this figure not only include the employee’s income, but also the total income for those contributing to the household. (This percentage is adjusted annually for inflation.)

This standard does not include employee plus spouse, employee plus children, or family coverage, nor any other out-of-pocket expenses, like deductibles, coinsurance, or copays. Of course, this is referring to the employee-paid portion of the premium — not the entire premium.

For example, if an employee’s monthly household income is $4,083 ($49,000 annually), 9.56 percent of their income is $390 per month. If the employee’s portion of the lowest-priced health insurance plan is $390 per month or less, the plan is deemed affordable.

If your health coverage is deemed “affordable” and also meets the minimum value standard, employees who choose to purchase a plan on the ACA marketplace instead of enrolling in your employer-sponsored plan, would not qualify for any tax subsidies.

Your employer-sponsored plan meets the minimum value standard if both of the following requirements are met:

• The plan covers at least 60 percent of the total cost of healthcare services
• The plan includes “substantial coverage of physician and inpatient hospital services”
  
  

What Can Your Company Contribute to Health Insurance Premiums?

Obviously, these numbers are averages — there will be many employers who pay less than this, but plenty who pay more. In the end, you’re the only one who can determine which percentage is right for your company.

Because you’ll be competing for the same talent pool, you’ll want to be sure your benefits are on par with other companies in you geographic area. When making these decisions, be sure to check the average contribution your local peers are making to their employees’ health insurance premiums. If you’re not sure how to obtain such information, your employee benefits broker should be able to help.

How much do you contribute to your employees’ health insurance premiums? To determine competitive contributions and strategic employee benefits solutions, schedule a complimentary benefits review for your firm.

*Blog post originally published on July 10, 2018.