Choice Stories

October 21, 2022

How Much Should You Spend on Group Health Insurance?

4 Tips to Planning Your Employee Benefits Budget

According to the Kaiser Family Foundation (KFF), the average annual premium for single health coverage in 2021 was $7,739. It was $22,221 for family coverage. These were the average amounts for all plan types. That includes HMO, PPO, High-Definition Health Plans (HDHPs), and Point-of-Service (POS) plans. Both figures were up 4% over 2020.

Historically, the average family premium has increased 47% in a decade and 22% in the five-year period 2016-2021.

Group Health Insurance Cost Sharing

Most employees share the cost of their coverage premium with their employer. On average, covered workers contribute 17% of the premium for single coverage and 28% of the premium for family coverage. Workers at smaller firms on average contribute a higher percentage for family coverage: 24% as compared to 37% for those at larger firms.

Twenty-nine percent of covered employees at smaller firms are in a plan where the employer pays the entire premium. That contrasts with nearly one-third (31%) of small firm workers who contribute more than half of the premium for family coverage. At larger firms, just five percent of covered workers make similar contributions to their family coverage premium.

Covered workers in 2021 contributed on average $1,299 toward single coverage and $5,969 toward family coverage. Both amounts are similar to contributions made by workers in 2020. KFF will release its 2022 employer health benefits survey results in November.

Planning Employees' Health Insurance 

As you think about your employees’ future health insurance coverage, what should you consider?

1: Use available benchmarks: KFF numbers are a good gauge of what others are paying for employees’ health coverage. Recognize that these figures are across the range of available plans. On average, HDHPs offer the most-affordable premium, followed by POS, HMO, and PPO plans.

A Willis Towers Watson survey found employers are anticipating a six percent increase in costs next year. That follows a five percent increase in 2022. Seven in 10 employers are expecting moderate to significant health care costs increases during the next three years.

2: Budget forecasting: The U.S. Bureau of Labor Statistics (Sept. 2022) shows benefits comprise about 29.5% of total compensation for private industry workers. For businesses with 1-49 workers, the percentage was 24.8%. For establishments with 500 or more workers, the stat was nearly six percent more – at 35%.

Zippia offers another look at costs in its analysis from August 2022. Investopedia published guidance on the topic in March 2022.

3: Review all coverage options: Shopping the full marketplace will help you find the best possible deal. That will allow you to provide more choices to employees, while still controlling your costs.

CaliforniaChoice offers you and your employees access to eight health plans and dozens of coverage options. CaliforniaChoice also gives you more control over your costs thanks to Defined Contribution. You choose what amount you want to contribute to employees’ health care costs. You can contribute a fixed percentage (50% to 100%) of a specific plan and/or benefit OR a fixed dollar amount for each employee. Your employees then apply your generous contribution to whichever health plan and benefits they prefer. Best of all, once you set your budget, you know what your costs per employee will be for the year.

You can offer employees health plans in one, two, three, or all four of the Affordable Care Act (ACA) metal tiers. By selecting “Total Choice,” you can significantly increase the number of plans, doctors, and specialists available to you and your employees. And your costs remain the same.

4: Don’t overlook value-adds available: It’s also smart to consider any value-added benefits that might be available from plans you’re considering. For example, with CaliforniaChoice, you get the no-added-cost benefits of the Business Solutions Suite. They include online HR support; Flexible Spending Accounts (FSAs) for employees; COBRA or Cal-COBRA billing; and initial set-up of Premium Only Plans.

The Member Value Suite offers outstanding savings on Dental, Vision, and Hearing services; fitness and wellness (including low-cost gym memberships); prescription drug savings; discounted movie, theme park, and water park tickets; travel; and much more.

Talk With a Broker to Learn More

An insurance broker can help you compare benefit options for your employees. The good news is using a broker won’t cost you more. In fact, it could save you money because a broker will have insights into the provider networks and benefits of the plans available in your area.

If you are not already working with an employee benefits broker, you can search for one online.

Your Beginner's Guide to Choosing a Small Business Employee Benefits Program

Do you need help choosing the right health benefits for your employees?
This guide can help!