As a small business owner, offering health insurance to your employees can be a game-changer for attracting and retaining top talent. However, one of the biggest concerns when considering coverage is the cost.
So, how much does small business health insurance cost?
The answer depends on several factors, including the type of plan you choose, the number of employees you have, and where your business is located. Let’s break it down.
Average Cost of Small Business Health Insurance
Again, there are many factors that feed into and can change how much a small business pays for health insurance, so what one business pays may be completely different from another. However, according to the Kaiser Family Foundation’s 2024 Employer Health Benefits Survey, the average cost of employer-sponsored health insurance for small businesses was:
- $8,951 per year ($746 per month) for single coverage
- $25,572 per year ($2,131 per month) for family coverage
Typically, small business owners share the cost of premiums with employees. On average, according to the 2023 survey, employers cover about 83% of the premium for single coverage and 63% for family coverage. This means employees pay roughly $127 per month for single coverage and $789 per month for family coverage on average. Over the last year, the average single premium increased by 6%, while the average family premium increased by 7%.
Factors That Affect the Cost of Small Business Health Insurance
Several factors can influence the cost of health insurance for your small business.
Employee Ages & Habits
Insurance providers consider the ages of your workforce when determining premiums. Older employees generally have higher healthcare costs, which can raise premiums.
While small business insurance premiums can’t take medical history and pre-existing conditions into consideration thanks to the Affordable Care Act, they can utilize factors such as your employees’ smoking habits and ages.
If a majority of your employees are more than 60 years old, for example, you will have a higher premium than if your employees are in younger demographics. Usually, the cheapest premiums are for employees around the age of 21.
Number of Employees
The number of employees you have can influence both the cost of health insurance and whether you even need to provide it. Small businesses with 50 or more full-time employees are required to provide health insurance options by law. However, if you have fewer than 50 full-time employees, you don’t necessarily need to provide this benefit.
If you do choose to provide health insurance, the number of employees may also impact how much you pay. If your business has a larger number of employees, you’ll have a smaller cost per employee for health insurance than you would with a smaller workforce.
Location
Health insurance costs vary by state due to differences in healthcare regulations, provider networks, and overall medical costs in the region. For example, New England and the Midwest regions are known to have higher premiums than other parts of America. This does tend to fluctuate from year to year, so this may not always be consistent. Likewise, different industries can have higher or lower rates.
Type of Plan & Coverage Level
There are different types of health insurance plans, including PPOs, ICHRAs, and HDHPs (High Deductible Health Plans) that offer various levels of coverage. Choosing a plan with lower deductibles and copays increases premiums, while higher-deductible plans reduce upfront costs but require employees to pay more out-of-pocket for care.
Insurance Carrier & Network
Different insurance carriers offer different rates and coverage options. Some insurers have larger provider networks, which may cost more but provide greater flexibility. Others have limited networks, which can lower premiums but may restrict employee choices. Employers should compare plans from multiple insurers to find the best combination of affordability and coverage.
Employee Health & Wellness Programs
Some insurers offer lower premiums to companies that implement employee wellness programs. Encouraging employees to participate in these programs such as preventive care, fitness programs, and health screenings can lead to lower healthcare costs over time and may result in discounted premiums from certain providers.
Government Programs
There are several government programs designed to help small businesses afford health insurance. For example, SHOP is a federal program that allows small businesses with fewer than 50 full-time employees to compare and purchase health insurance plans. Businesses that use SHOP may qualify for the Small Business Health Care Tax Credit, which can cover up to 50% of premium costs for eligible employers.
Some states like Indiana also offer expanded Medicaid programs that help cover lower-income employees. Additionally, some state-based programs provide subsidies or tax incentives to small businesses that offer health coverage.
The cost of small business health insurance varies, but with careful planning, you can find an affordable solution that benefits both your business and your employees. If you’re struggling to navigate the world of small business health insurance, a benefits consultant can help you find the health plan that fits your business’s budget and appeals to your employees.
Please let us know if you have any questions. We understand that local companies have unique needs that most national firms don’t consider or struggle to identify. This leaves your people with a less effective, one-size-fits-all benefits plan. However, our ability to cater to the needs of our clients comes from decades of client partnerships. This perspective allows us to fully address unique needs and generate creative benefits plans.
You shouldn’t have to worry about just being a number, offering a generic plan, or getting the unique support you need. Call us today.
This Benefits Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.