How Much Does Small Business Health Insurance Cost Per Employee?
The answer depends on your team, your plan, and who pays what. Here is what shapes the number, and where to find current averages from trusted sources.
The Short Version
When you start budgeting for health insurance, the first question is usually what it costs for each employee. The honest answer is that it depends. The plan you choose, who is covered, where your employees live, and how much of the premium you pay all change the number.
Averages for small employers shift every year, so instead of quoting figures that will be out of date by next season, this guide walks through what shapes the cost and who pays what. If you want today's national and state averages, you will find links to trusted sources at the bottom of the page. And if you are wondering how an advisor fits into the picture, our guide on whether it is cheaper to use a benefits broker answers that.
In one sentence
What you pay per employee comes down to the plan, the people on it, and how you split the premium, so your own numbers matter more than any average.
What Drives the Cost
Four things do most of the work in setting your cost per employee. Knowing them lets you see where you have room to adjust.
Who is on the plan
Coverage for one person costs far less than coverage for a family, so the mix of single and family enrollment on your team matters a lot. The age and pay of your workforce can also move the number, since plans with an older group of covered employees tend to cost more.
The kind of plan you pick
A plan with a high deductible usually has a lower premium than one with a broad network and low out-of-pocket costs. The trade-off is that your employees pay more when they use their coverage, so a lower premium is only a savings if your team can live with the deductible.
Where your employees live
Health insurance costs differ from state to state, and sometimes from one area to the next inside a state. If your team lives in Pennsylvania, New Jersey, and Delaware, expect your options and prices to vary with each employee's location.
How you split the premium
You decide how much of the premium the business pays and how much comes out of each paycheck. That choice changes what your budget looks like and what your employees actually take home, so it is worth deciding on purpose and not by default.
Next, we look at who pays what, and what the usual split looks like for small employers.
Who Pays What
Health insurance is a shared cost. Here is how it usually divides between your business and your employees, and where you get to decide.
| Your business | Your employee | |
|---|---|---|
| The monthly premium | You pay the share you choose to cover, and that choice is yours to make. | Your employee pays the rest, usually through a deduction from each paycheck. |
| Using the plan | You do not pay for each doctor visit or prescription. | Your employee pays the deductible, copays, and coinsurance when they use care, unless you add a benefit that helps with those costs. |
| Family coverage | You can set one share for employee-only coverage and a different share for family coverage. | Family coverage costs more in total, so your employee's share is usually higher when they add dependents. |
| Tax credit | Some small employers that offer coverage through SHOP and pay at least half the cost of employee-only coverage may qualify for a federal tax credit. Other conditions apply. | The credit is claimed by the business, not the employee. |
Some employers add a benefit that helps employees with deductibles and copays. Our guide to what a MERP is explains how that works. To check whether your business may qualify for the tax credit, see the IRS guidance linked at the bottom of this page.
Ways to Manage the Cost
You cannot control what insurance companies charge, but you do have choices that shape what your business spends. These are the ones owners use most.
Every year
Look at your plan at renewal
Renewal is your best chance to ask whether the plan still fits your team. Compare the new rates and terms with what else is available before you accept them, since a plan that worked last year may not be the best fit now.
Plan style
Compare the ways to offer coverage
A group plan, a plan with a higher deductible, and an ICHRA all handle cost differently. With an ICHRA, you set the amount you offer and your employees choose their own plan. Our guide to ICHRA pros and cons helps you weigh it.
Out-of-pocket costs
Help with deductibles
If a higher deductible keeps the premium within reach, you can add a benefit that reimburses part of what employees pay when they use care. Our guide to what a MERP is explains how that works alongside a group plan.
Tax savings
Check the small business tax credit
Some small employers that offer coverage through SHOP and pay at least half the cost of employee-only coverage may qualify for a federal tax credit, with other conditions on size and average pay. The IRS page on the credit lays out the current rules.
For more ways to shape your plan and keep costs steady, read our guide to managing and reducing employee benefits costs.
Common Questions About Health Insurance Cost Per Employee
What is the average cost of health insurance per employee for a small business?
There is no single number, because the cost changes with the plan, who is covered, where your employees live, and how you split the premium. Averages are published every year and they move, so the best way to get a current figure is to look at the sources listed at the bottom of this page, then compare it with quotes for your own team.
Who pays for health insurance, the employer or the employee?
Both. The business pays the share it chooses to cover, and the employee pays the rest, usually through a deduction from each paycheck. Employees also pay deductibles, copays, and coinsurance when they use their coverage.
How much of the premium does an employer have to pay?
Federal law does not set a percentage for small employers. Employers with fewer than 50 full-time employees, including full-time equivalents, are generally not subject to the ACA's employer coverage requirements, while larger employers face additional rules. Some things can set a floor, such as the small business tax credit, which requires paying at least half the cost of employee-only coverage. Ask about any other contribution rules on the plans you are considering.
Why do health insurance costs vary from one business to another?
Four things do most of the work: who is on the plan, the kind of plan you choose, where your employees live, and how you split the premium. A team with more families, an older group of covered employees, or a plan with a low deductible will usually cost more than a younger team on a plan with a higher deductible.
Is family coverage much more expensive than single coverage?
Yes. Family coverage costs considerably more in total than coverage for one person, and the employee's share is usually larger as well. It helps to look at both numbers when you set how much the business will contribute for each type of coverage.
Can a small business get a tax credit for offering health insurance?
Some can. The federal Small Business Health Care Tax Credit generally requires fewer than 25 full-time equivalent employees, average wages below an amount the IRS adjusts for inflation, coverage offered through SHOP, and an employer share of at least half the cost of employee-only coverage. The IRS page on the credit lists the current rules.
Where can I find current averages?
KFF publishes an annual Employer Health Benefits Survey with national averages for premiums and for what employers and workers each pay. KFF also posts state-level figures, built from the federal government's employer survey, for single coverage and family coverage. Treat any average as a starting point, since your own team and plan will decide your actual cost.
This FAQ is general information, not legal, tax, or insurance advice. Costs and rules change and every situation is different, so talk with a licensed advisor about yours.
Want Help Running Your Own Numbers?
Averages only go so far. Tell us about your team and the coverage you have in mind, and we will show you what your options could look like for your business.
Compliance & References
Where to Find Current Averages
Cost averages change every year. These trusted sources publish the latest figures:
KFF's state figures are built from the federal Agency for Healthcare Research and Quality's survey of employers.
Federal Guidance
The rules mentioned in this guide come from these federal sources:
Key Points at a Glance
This content is provided for informational purposes only and does not constitute legal or tax advice. Please consult your legal or tax advisor about your specific situation.
Disclosures
We are compensated by the insurance carriers for policies you choose through us. There is no direct cost to you. Compensation may vary by carrier and product. Information on this page is for educational purposes and does not constitute legal, tax, or accounting advice. Please consult your professional advisors about your specific situation. We are licensed to advise clients in Pennsylvania, New Jersey, and Delaware. Contact us to confirm availability in other states.
