Whether you’re an Applicable Large Employer (ALE) with 50 or more full-time employees who is required to offer qualifying health insurance benefits to your employees (or pay a fine), or you’re a smaller employer not subject to the ACA’s “pay or play” provision, it’s important to consider the likely return on your investment (ROI) in employee benefits.
Look at your potential benefits budget, your employees’ needs, the coverage and features you want in the plans you’re considering, and ask yourself these five important questions:
1: What benefits do you need to offer to employees to attract and retain them?
2: How much will those benefits cost?
3: How, if at all, will you share costs with employees? Keep in mind that most health insurers require an employer to contribute at least 50% of plan premiums for employer-sponsored coverage. Many employers choose to contribute more.
According to the latest KFF Employer Health Benefits Survey, released in October 2024, across all plan types, average annual premiums for employer-sponsored health plans reached $8,951 for single coverage last year and $25,572 for family coverage. Single family premiums were up six percent from 2023, while the average family plan premium increased seven percent. For all plans, enrolled participants, on average, contributed $6,296 toward their family plan cost, while the average employer contribution topped $19,000.
The 2024 KFF survey found HMO costs were lowest: $8,745 for single coverage, with employees contributing about 14%. That compares to $25,203 for family HMO coverage, with employees contributing more than 26.6%.
PPO coverage costs more, with an average single coverage premium of $9,383, and employees paying about 16%. For PPO family coverage, employees contributed about 25% of the $26,678 premium in 2024.
High-Deductible Health Plans (HDHPs) offered the most affordable premiums in 2024. Employees paid $1,259 of the single coverage premium average of $8,275. For family coverage, employees paid 23% of the $24,196 total premium.
KFF says premiums were lower in 2024 for workers at private, for-profit firms and higher for those at private, not-for-profit employers.
4: Beyond health insurance: can you save by offering proactive/preventive health care? The ACA mandates some preventive care as part the Essential Health Benefits (EHBs) in ACA-compliant plans. Many employers offer added incentives to employees to take a more active role in their health care. Some partner with their health plan(s) to encourage participation in healthier activities – at work and/or at home. These often include events to promote mental health awareness, meditation, or quarterly fitness challenges; webinars offering tips to beat the heat or sharing information on the benefits of laughter; meetings before open enrollment with tips on making the most of your health plan; and other activities. Ask your broker about discounts, rebates, or programs that can help your employees live heathier lives.
Also don’t overlook available prescription drug discounts that can help employees reduce their out-of-pocket costs. The California Rx Card offers discounts of up to 80% on prescriptions – often reducing card holders’ costs to less than their Rx co-pay with insurance. (The free card is available to all members of the CaliforniaChoice multi-carrier, employee-choice exchange as part of the CaliforniaChoice Member Value Suite.)
5: Can you afford to offer more than health insurance? Ancillary benefits like dental, vision, life, and supplemental health coverage (such as critical illness, hospital indemnity, and disability insurance) are increasingly popular with employees – even if they have to pay for it themselves. Wellness programs can also help improve employees’ health. In recent years, interest among employees in pet insurance has increased, too. With greater than 60% of U.S. households having a pet, more pet parents are interested in pet insurance to help them cover the costs for caring for their furry, scaley, or other friends.
So, you may be wondering, “What sort of ROI can I expect on my employee benefits program?” It can vary based on your selected insurance program, your group size, your employee population, and other factors. A study by Avalere Health commissioned by the U.S. Chamber of Commerce estimated a 47% ROI for employers with 100 or more workers offering health insurance in 2022. That means that for every dollar an employer spends on employer-sponsored insurance, it receives $1.47 in financial benefits. The study projects an increase to 52% ROI by 2026. Another study found a small business client with 15 employees engaged in the professional services industry had an outstanding 109% return on its investment in employee health insurance. Talk with your broker about what’s possible for your group.
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