What is the Average Company Contribution to Employee Health Insurance?

For many Californians considering a new job offer, the percentage of company contribution to employee health insurance is extremely important. Job seekers weigh it along with other benefits such as starting wage and paid time off when deciding whether to accept the job. With family health insurance potentially running a few thousand dollars per month, this careful consideration is easy to understand.

Naturally, California employees want the percentage of company contribution to employee health insurance to reach as high as possible while employers want to reduce expenditures and still attract quality talent at the same time.

Average Company Contribution to Employee Health Insurance in 2018

In 2018, the Kaiser Permanente Family Foundation surveyed to learn more about the real cost of employee health insurance. While businesses must commit a minimum percentage towards company contribution to employee health insurance costs, most opt to go far above that requirement. 

Companies that participated in the survey paid an average of 82 percent of the price toward the full premium for a single employee with no dependents and 71 percent of the premium for family coverage in 2018.

Total Annual Cost of Employee Health Insurance

The average annual health insurance premium for one employee with no dependents was $6,896 per year in 2018. Of this amount, employers paid an average of $5,655 for one year of coverage while employees paid $1,241 or 18 percent.

As expected, the cost to provide health insurance coverage for an entire family is significantly more. It was more than three times higher last year at $19,616 annually. Employers contributed an average of $13,927 towards this annual coverage while the amount paid by employees averaged $5,689 per year or 29 percent.

Small Employers Contribute Less to Employee Health Insurance Costs on Average

According to the 2018 Kaiser Permanente Family Foundation survey, businesses that employ between three and 199 employees typically contribute less to family coverage health insurance while the numbers for single coverage remain about the same regardless of employer size.

While the total cost of family health coverage was less at an average of $18,739 per year for small businesses, these companies pay just 62 percent compared to the 71 percent of larger employers. That averages out to $11,618 per year when it comes to company contribution to employee health insurance.

Cost the Main Driver of Company Contribution to Employee Health Insurance

The cost of providing health insurance benefits for regular employees increases each year for approximately 90 percent of American employers. The rising cost is the leading reason why small California businesses cannot afford to contribute as much towards employee health insurance premiums as larger ones.

A common way for employers to manage these rising costs is to increase the percentage that employees must pay towards their health insurance premiums. At the same time, California employers understand that spending as much as possible towards this benefit is a crucial bargaining chip with high-level employees.

Other Ways Employers Are Responding to the High Cost of Health Insurance

In a joint effort to reduce costs and provide employees with more health insurance options, some California employers are beginning to offer an option called a health reimbursement arrangement (HRA). With this plan, employers contribute a set amount towards health insurance that employees purchase on their own through their state marketplace or individual health insurers.

Offering San Diego County employees an HRA can be a more affordable option for small businesses since they can create their own contribution limits as long as the amounts fall within federal guidelines.

Some other benefits include:

  • Employees can purchase their health insurance policy without paying tax on the income spent to obtain it.
  • No participation costs or minimum payment thresholds for employers.
  • Participation and eligibility requirements are typically looser than employer-sponsored health insurance plans.

Health Savings Accounts (HSA) have existed since December 2003, according to the National Conference of State Legislatures. An HSA allows participants to pay for out-of-pocket health care expenses such as co-pays, deductibles, and prescription medication costs with tax-free dollars.

An employee can opt to fund the HSA account through their employer if the company offers such a plan or makes direct contributions to the handler of the account. The first HSA accounts came about due to concerns from both employers and employees about the high cost of health insurance. 

Some California employer health plans offer employees incentives to make healthy choices that can help to keep health insurance costs as low as possible. For example, a plan participant with pre-diabetes may receive a monetary award or gift card for taking steps to prevent the disease from progressing to diabetes.

Related:  Five Tips for Small California Employee Wellness Programs

Employees need health insurance, and businesses need to make a profit. Working together to propose creative solutions towards company contribution to employee health insurance and cost containment will continue to benefit both.

Free Consultation with a Small Business Health Insurance Broker

Do you have questions about company contributions to employee health insurance for your California business?  Contact us to speak with a local small business health insurance broker.  We offer free consultations and free quotes for employee health insurance for your small business. 

Call (760) 385-8239 to schedule a free conversation

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