How much do employers pay for health insurance? 2025 Guide

Employers pay an average of $7,034 for health insurance for individual workers. Private industry employers typically cover 59% to 80% of healthcare premiums. 

How much do employers pay for health insurance? According to the Kaiser Family Foundation (KFF), businesses pay an average of $7,034 to cover individual workers on their team. For family coverage, employers pay an average of $17,393. 

Employer-sponsored health insurance isn’t cheap, and businesses looking to offer these benefits need to be aware of the costs of offering health plans and how they change year over year. The same KFF report shows that costs for employer contributions increased 24% in 2023 compared to 2022. Even more, costs are expected to increase 5.8% more in 2025.

Fortunately, businesses have several options to choose from, ensuring there’s a benefits plan that fits the company budget. In this post, we’ll dive deeper into the costs of employer-sponsored health insurance, factors that affect pricing, and the benefits of offering these perks. Plus, we’ll suggest ways to control your costs and tips for finding budget-friendly health insurance plans for your employees.

How much does group health insurance cost?

Many businesses choose to use a commercial insurer for benefits administration. These insurers provide a specific plan or several plan options, known as group insurance, for the company to offer to employees. The difference between group vs. individual insurance is that group plans are preselected and offered to employees, while individual plans are chosen and paid for by a single person.

The KFF report lists the average cost of group health insurance plans as $7,034 per individual or $17,393 for families. The actual cost will vary depending on the plan type — HMOS are generally cheaper than PPOS — and other factors like the provider network and contribution amount. 

According to the KFF study, companies pay an average of 83% of employee premiums. These numbers can vary dramatically from one business to another and often depend on the business size. Some small firms with only a handful of employees opt to cover 100% of premiums. On the other hand, some large employers with dozens of employees may choose to contribute less to control costs .

Do employers have to pay for employee health insurance?

Small employers aren’t required to offer insurance, but the ACA requires companies with 50 or more employees in the prior calendar year to offer affordable coverage. Some states have their own regulations, meaning it’s important to check regulations when deciding whether or not to offer health insurance plans.

A Census Bureau study, with data based on a three-year average from 2020-2022, found that: 

• 86% of private-sector employers offered health insurance, but these numbers change based on the company’s size.

• Just over 50% of small private-sector employers with 50 employees or fewer offered health insurance. Small business health insurance is less common since it can significantly increase costs for companies with already tight budgets.

• Among medium-sized firms with 50 to 90 employees, that number goes up to around 90%. 

Considerations and benefits of providing health insurance for employees

Health insurance costs can affect large and small businesses alike. According to the KFF report, only a third of small businesses (with three to nine employees) offer health insurance.

Companies considering investing in health insurance should examine their budgets and determine how much they can contribute. Businesses should reevaluate these decisions every year or every few years as the company grows.

While these benefits can be costly, they also provide a significant return on investment. 

Some benefits of providing health insurance:

• Employee retention: Employees are more likely to stay at a company when they feel taken care of, and health plans are one way to incentivize these workers

• Better talent acquisition: Offering competitive benefits packages with healthy insurance can attract talent, especially if your competitors don’t offer these perks

• Tax advantages: All businesses can deduct 100% of premiums for employee health insurance, while small businesses (25 employees or less) may qualify for a tax credit

• Increased happiness: Employees with health insurance plans tend to be less stressed and more focused since they aren’t worried about issues like paying for illnesses

• Diversity support: Offering health insurance plans levels the playing field, allowing employees from all backgrounds to gain equal access to adequate healthcare

Factors that can affect the cost of health insurance

Health insurance costs vary from company to company. While the average costs above can give you an idea of how much you’ll pay, several factors affect the costs for employers who are considering offering health insurance.

Factors that impact employer health insurance costs include:

• Plan type: Different plan types, including PPO, HMO, EPO, and HDHP, impact costs since they offer varying levels of coverage and out-of-pocket costs.

• Provider networks: Insurers in different networks price coverage differently, impacting the price of your plans.

• Company and employee location: Some networks provide limited coverage in areas, meaning you may have more or fewer options depending on where your company and employees are located. 

• Contribution amount: One of the biggest factors in your health insurance pricing is how much you want to contribute — 10%, 50%, or 100% of premiums If you offer an alternative like Individual Coverage Health Reimbursement Arrangements (ICHRAs), you can set allowances in absolute months rather than percentages to control contributions costs.

• Risk pool: Your employees’ risk level factors into insurer pricing. This includes how old employees are as well as demographics.

• Percentage of full-time vs. part-time employees: In general, companies provide insurance only to full-time employees. If you have a lot of part-time employees, your costs may be more affordable since you won’t need to offer coverage for everyone on the team. Alternatively, you can use an alternative like ICHRAs that allow you to offer a different allowance to part-time employees without increasing company costs significantly.

Coverage level: Offering coverage for employees only can reduce your costs, while covering families in addition to individual employees can increase costs.

How to control health insurance costs for employees

While health insurance pricing can be daunting, employers have options to control the cost of health insurance for their employees. One way to offer affordable employer health insurance is to offer a High Deductible Health Plan (HDHP), which has lower premiums since covered individuals pay more when they use the policy. 

You can also adjust contribution amounts. If you can’t afford to fully cover your employees, offer to cover 25% or 50% of their premiums. This can go a long way in building team morale while meeting your budgetary needs.  In addition, you can ask a broker to negotiate plans for you, ensuring you get the best possible pricing.

You may also consider alternative health insurance options like Health Reimbursement Arrangements (HRAs). Read on to find out more about those types of health insurance offerings.

Individual coverage health reimbursement arrangements (ICHRA)

An ICHRA is a type of health insurance plan where you offer a reimbursement instead of covering premiums as part of a group plan. The difference between ICHRA health insurance vs. traditional plans is that with ICHRAs, you provide allowances so employees can enroll in individual health plans. 

The benefits of this arrangement are that you can decide exactly how much to spend on your health insurance benefits, and employees can pick plans tailored to their needs. These allowances are tax-free, so you’ll want to familiarize yourself with ICHRA reporting guidelines to ensure compliance. An ICHRA can be paired alongside a normal group plan, and you can customize the benefits to different groups of employees.

Qualified small employer health reimbursement arrangements (QSEHRA)

A QSEHRA is a similar reimbursement plan, but it’s not suitable for all businesses. QSEHRAs are designed for small businesses with fewer than 50 employees, while ICHRAs are for all businesses. 

The differences between a QSEHRA vs. an ICHRA don’t end there. With QSEHRAs, the IRS sets contribution limits of $5,850 for individuals and $11,800 for families, while ICHRAs don’t have any contribution limits. These plans also can’t be combined with group plans, and you have to offer the same benefits to all employees.

The benefits of this arrangement are similar to those of ICHRAs in that reimbursements are tax-free, and you can control exactly how much you contribute on each employee’s behalf.

Health insurance stipends

Another option is to give your employees a health insurance stipend. With this option, you give your employees a set amount of money toward healthcare expenditures like paying for an individual plan. These stipends are not tax deductible, making them less appealing than ICHRAs for some businesses. 

However, the simple and cost-effective framework makes it an attractive choice for others who want simple budgeting and don’t have a lot of employees.

Use Thatch to find health insurance plans

The costs of health insurance for employers can vary dramatically depending on the size of your business, your location, and the types of benefits you choose to offer. Each business has the power to control costs to fit their budget. 

Use Thatch to pick health insurance plans and offer coverage that makes sense for your employees and your budget.