Small Business Health Insurance: Costs Per Employee
Published on May 07, 2019
Updated June 20, 2019
As an employer considering the cost of small business health insurance, you may have questions about the cost per employee through group plan coverage. While the cost of employees depends on what small business health insurance plan you choose, the good news is that group health insurance plans are generally cheaper than individual health plans.
The cost of small business health insurance depends on the plan you choose
As per the Affordable Care Act (ACA), if you have less than 50 full-time or full-time equivalent employees, you have the option of whether or not you decide to offer group insurance coverage. If you do choose to offer a group plan to your employees, you should know that the cost and related cost per employee partially depends on the type of group plan you choose. Different small business health insurance plan types have different metal levels, meaning that each plan has corresponding different monthly premiums and annual deductibles.
- A group plan with a low monthly premium and high annual deductible may allow you to save more up front, and could mean a lower cost per employee.
- A group plan with a high monthly premium and low annual deductible may result in a higher cost per employee, but may make sense depending on the needs of your workers.
The preferences and anticipated healthcare needs of your employees may also influence your choice of group plan and your cost of small business health insurance. Relatively healthy employees might choose plans with lower premiums, while employees who tend to visit the doctor more often for prescriptions or treatments might choose higher premium plans. Either way, your cost per employee may vary.
Group plans may be less expensive than individual plans
According to a recent eHealth report, small business health insurance plans have lower average per person costs compared to coverage in the individual market.
The report found that, in 2018, the average premium per person was 7 percent lower with a small business plan than the average premium for an individual plan, and that group plan deductibles were 31 percent lower per person than for individual coverage.
Source: eHealth 2018 Small Business Health Insurance Report
The eHealth report also found that:
- Average group insurance premiums decreased – Average per-person premiums for small business health insurance plans decreased by 2 percent between 2017 ($416) and 2018 ($409).
- Group size can affect premiums – In 2018, groups with 5 or less employees had an average monthly premium of $419 per covered person, while groups with 6 to 29 employees had an average monthly premium of $364 per covered person, or 13 percent less.
- Group plans have remained stable – While average premiums for individual coverage increased 54 percent between 2015 and 2018 (from $286 in 2015 to $440 in 2018), average per person premiums for small business coverage increased only 5 percent during the same period.
Overall, small business health insurance plans have shown substantially more premium stability than individual coverage while also maintaining lower costs per person.
Why are group plans usually less expensive than individual plans?
Generally, small business health insurance plans are cheaper than individual plans, partially because of the advantage of having a larger risk pool. This means that when a larger amount of people are enrolled in a group health plan, the risks are more evenly spread out across all members of the group. Since group plan members pay monthly premiums to maintain their coverage, there is more money available for the health insurance company to draw from when someone enrolled in the plan needs medical care. Because of these reasons, choosing small business health insurance may result in better pricing and a lower cost per employee.
Dependents and the cost of small business health insurance
Another factor that influences the cost of small business health insurance and the cost per employee is whether dependents are part of the group plan. It is important to know that most small business health insurance plans usually allow the addition of qualified dependents. However, it is your choice as an employer whether or not you decide to pay for the employee dependents’ health insurance.
Whether or not you contribute to dependents’ premiums, your employees can still add their dependents to the group plan. Providing a group health plan that includes dependents can benefit your company and employees while protecting yourself and your family.
Cost sharing can mean lower cost per employee
You should know that premiums will not represent your company’s actual cost of small business health insurance. Since group plans are employer-sponsored coverage, both the employer and employees split the cost of monthly employee premiums between them. This is called cost sharing for small business health insurance. Cost sharing lowers the price for individuals in a group health plan because both the business owner and employees contribute to the cost of small business health insurance.
Tax credits and tax deductions can also reduce the financial impact of cost sharing and premiums for your company. Overall, you can likely offer better health benefits to employees for less money through a group plan.
Finding affordable small business health insurance
For help with figuring out your cost of health insurance and cost per employee, you can quickly find competitive premium quotes through eHealth’s online quote form. You can also speak with one of eHealth’s licensed health insurance agents. Our specialists can assist you with determining your cost per employee through a group health plan, and we can help you find the right plan for your budget and preferences.
This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.