Those are national averages, though. What you actually pay depends on your business size, where you're located, the plan type you choose, and who's on your payroll.
This article breaks down what employers typically spend, what pushes those numbers up or down, the full cost picture beyond the premium itself, and practical ways to budget and control spending.
Key Takeaways
- Employers pay about $7,885 (84%) for single coverage and $20,143 (74%) for family coverage
- Groups under 50 FTEs aren't required to offer coverage, but often pay more per employee than larger groups
- Age, group size, location, plan design, and claims history are the biggest cost drivers
- Fully-insured, self-funded, and level-funded plans each carry a different cost and risk profile
- Plan design, wellness incentives, and broker negotiation can cut total employer spend
How Much Does Health Insurance Cost for Employers?
There's no single "average" price tag for employer health insurance. Costs shift depending on your funding model, group size, and which coverage tier employees select.
A common budgeting mistake: assuming a flat per-employee cost. Family coverage runs nearly triple the cost of single coverage, and premiums climb at renewal almost every year. If your budget doesn't account for tier mix and annual trend, you'll come up short.
Average Cost by Coverage Tier
Here's what the national averages looked like in 2025:
| Coverage Tier | Total Annual Premium | Employer-Paid Share | Employee-Paid Share |
|---|---|---|---|
| Single | $9,325 | $7,885 (84%) | $1,440 (16%) |
| Family | $26,993 | $20,143 (74%) | $6,850 (26%) |
Notice the shift in cost-sharing. Employers absorb a larger percentage of single coverage than family coverage, which is part of why dependent enrollment decisions matter so much for your total spend.
Average Cost by Business Size
Smaller employers generally pay more per employee than larger ones. KFF's 2025 data shows smaller firms pay more per employee and shift more family cost to workers:
| Firm Size | Single Premium | Family Premium | Worker Share of Family |
|---|---|---|---|
| 10–199 workers | $9,211 | $26,054 | 36% ($8,889 avg) |
| 200+ workers | $9,361 | $27,280 | 23% ($6,227 avg) |
The JPMorgan Chase Institute found that firms with fewer than 10 employees paid the highest premiums of all, largely because they lack the negotiating leverage bigger groups have.
Larger employers benefit from risk pooling. Spreading claims risk across a bigger group softens any single high-cost claim and adds leverage at the carrier negotiating table.
Fully-Insured vs. Self-Funded/Level-Funded Costs
Your funding model changes your cost structure and your risk exposure.
Fully-insured plans: You pay a fixed premium to a carrier that assumes the claims risk. Costs stay predictable, but you have less control over your own trends because premiums reflect the carrier's broader pool rather than your group alone.
Self-funded and level-funded plans flip that arrangement:
- Employer assumes claims risk, usually with stop-loss insurance to cap catastrophic exposure
- Level-funded plans set a fixed monthly cost for the year, smoothing out cash flow
- Healthy groups can save by eliminating a roughly 2% carrier risk charge and cutting 2–3% in state premium taxes
A benefits advisor like Franklin Benefits Group can help you assess which funding model fits your risk tolerance and cash flow, rather than guessing from premium alone.
Key Factors That Affect the Cost of Employer Health Insurance
Premium pricing isn't arbitrary. It's built from a combination of workforce demographics, geography, plan structure, and claims experience.
Employee Age & Family Size
Older employees and larger covered families push average costs up. Insurers can vary rates by age, but federal rules cap adult age-based variation at a 3:1 ratio. Your oldest covered adult can't be charged more than three times what your youngest adult pays for the same plan.
Group Size & Participation
A bigger group spreads risk more evenly, which tends to lower per-employee rates. Most states also require 70% of eligible employees to accept SHOP coverage (or already have qualifying coverage elsewhere) for a group to remain eligible for standard small-group pricing. That minimum participation requirement gets waived each year during the November 15–December 15 open enrollment window.
Location & State Mandates
Where your business operates matters. KFF data consistently shows higher average premiums in the Northeast and lower averages in the South.
State-mandated benefits raise cost as well. Each mandate can add roughly 1–2% to premium, and states stack those requirements differently. Franklin Benefits Group works with employers across Pennsylvania, New Jersey, Delaware, and multi-state workforces, where those mandate gaps often show up in renewal pricing.
Plan Type & Design
Plan structure trades premium cost against out-of-pocket exposure:
| Plan Type | Avg. Single Premium | Avg. Family Premium | Avg. Single Deductible |
|---|---|---|---|
| PPO | $9,818 | $28,272 | $1,337 |
| HDHP/SO | $8,620 | $25,379 | $2,609 |
| HMO | — | — | $1,649 |
HDHPs cost less upfront but shift more risk to employees through higher deductibles. PPOs cost more but offer lower deductibles and broader network access.
Industry & Claims History
Insurers can't legally use your group's specific health status or past claims as a small-group rating factor. Your industry's overall risk profile and renewal-year loss ratio can still influence pricing indirectly. Rate filings for 2026 showed a median proposed increase of 11% across 318 small-group insurers reviewed by KFF—year-over-year movement at that level is common in this market.
Cost Breakdown of Employer-Sponsored Health Insurance
The premium is just one line item. The full cost of offering health insurance includes several other recurring pieces.
Premiums are the obvious cost: the recurring monthly or annual amount split between employer and employee contributions, as outlined above.
Administrative & compliance costs add up in the background:
- ACA reporting (Forms 1094-C and 1095-C for every full-time employee)
- COBRA administration for employers with 20+ employees (up to 102% of plan cost, or 150% during the 11-month disability extension)
- Broker or consulting fees, which carry federal disclosure requirements once compensation reaches $1,000
Franklin Benefits Group clients get access to the Ease platform and an HR Toolbox of compliance apps that help absorb this load. Ease alone supports enrollment and ACA documentation for more than 75,000 small businesses nationally.
Ancillary & wellness benefits often complete the package:
- Dental and vision coverage
- Employee Assistance Programs (EAP)
- Wellness incentives
These are usually optional, but they often separate a package that attracts talent from one that only meets the minimum.
How Employers Can Control Costs and Budget Effectively
There's no universal "right" budget here. The goal is balancing what your business can afford against benefits competitive enough to attract and keep good people.
Plan Design & Funding Strategies
Pairing a high-deductible health plan with an HSA or HRA can lower your premium line while still giving employees meaningful coverage. The HSA is a tax-advantaged account owned by the employee; the HRA is employer-owned and returns unused funds at year-end.
Self-funded or level-funded arrangements can also make sense, but only when your group size, claims stability, and risk appetite support it. Employers who need budget certainty above all else are usually better served staying fully insured.
Cost-Sharing & Eligibility Adjustments
Two adjustments worth exploring:
- Medicare transition support: Help Medicare-eligible employees (65+) understand their options to lower your group's average age and overall cost.
- Dependent and spousal coverage rules: A spousal surcharge (extra charge when a spouse has coverage available elsewhere) manages plan costs without cutting benefits.
In one Franklin Benefits Group client case, Medicare transition support reduced the plan's average age by 15%, kept premiums level for three straight years, and generated a $12,000 carrier refund in 2019. Employees also avoided Medicare late-enrollment penalties.
Broker Negotiation & Market Analysis
Working with an experienced local broker gives you leverage you likely don't have alone. A broker can benchmark your rates against the market, run a full analysis across multiple carriers, and negotiate on your behalf at renewal.
Franklin Benefits Group's Broker of Record process shows how this works in practice. Appointing a new broker doesn't require switching carriers or plans mid-year. A simple letter to your current carrier keeps coverage uninterrupted while the firm runs a market analysis across its carrier relationships, at no additional cost to you.
Budget for trend, too. PwC's Health Research Institute projects medical cost trend approaching 9% by 2027, driven by labor costs, inflation, utilization, and new therapies. Build that into a multi-year budget rather than reacting to it each renewal.
What Employers Often Get Wrong About Health Insurance Costs
Three habits quietly inflate what employers pay for health coverage:
- Fixating on the sticker price. Focusing only on premium totals overlooks the retention and recruitment value that solid benefits actually provide.
- Never shopping the market. Auto-renewing with the same carrier year after year, without a competing quote, almost always leaves money on the table.
- Under-budgeting for trend. Skip long-term premium growth in your forecast, and next year’s renewal shock catches you off guard.
Costs still vary widely by workforce, location, and plan design. A broker who shops multiple carriers and models contribution scenarios is how most employers land on a budget that balances cost, coverage, and employee satisfaction.
Frequently Asked Questions
What does the average American pay for health insurance?
Employees contributed an average of $1,440 annually for single coverage and $6,850 for family coverage in 2025, per KFF. Employers still pay most of the premium—often several times that employee share.
What is the 80/20 rule in health insurance?
It's the ACA's Medical Loss Ratio requirement. Insurers must spend at least 80% of premium revenue (85% for large groups) on medical care and quality improvement, or issue rebates.
Do small businesses have to offer health insurance to employees?
No. Employers with fewer than 50 full-time equivalent employees aren't required to offer coverage. Those at or above that threshold can face ACA penalties if they don't offer affordable, adequate coverage.
How much do employers typically contribute toward employee health insurance premiums?
On average, employers cover about 84% of single coverage premiums and 74% of family coverage premiums, based on 2025 KFF data. Contribution percentages vary by group size and plan type.
What's the difference between self-funded and fully-insured plans in terms of cost?
Fully-insured plans have a fixed, predictable premium since the carrier assumes claims risk. Self-funded plans shift that risk to the employer, which can lower costs for a healthy group but adds exposure to high-claim years.
How can a broker help lower my company's health insurance costs?
A broker runs a market analysis across multiple carriers, benchmarks your current rates, and negotiates renewal terms on your behalf. That process often uncovers lower rates or stronger plan options than shopping a single carrier alone.
