Understanding Group Health Insurance Costs in California

Premiums Are Only Part Of The Story

To truly understand group health insurance costs in California, you must also consider the costs of not offering your employees health coverage. While the dollars your company spends on premiums and administrative expenses may be significant, failing to provide coverage for employees and dependents means losing the competitive edge in attracting, motivating and retaining top talent. Your business will be less competitive and a less desirable place to work, and the employees you do have are more susceptible to absenteeism, presenteeism, and lower productivity.

All of this can have a much more significant long-term impact on your bottom line than the group health insurance costs you’ll pay for your employees’ coverage.

What your company will actually pay for group health insurance depends on many factors. The number of employees and dependents who enroll in your plan, their overall health and healthcare needs, the type of benefits your plan provides, and how much you expect your employees to contribute towards premiums will all play a role in determining your group health insurance costs.

How Do California Businesses Pay Group Health Insurance Costs?

The vehicle by which California employers offer health coverage to employees is usually a group health insurance plan from a private insurance company. Some of the biggest companies offering group coverage in California include:

  • Aetna
  • Anthem Blue Cross of California
  • Blue Shield of California
  • Cigna+Oscar
  • HealthNet of California
  • Kaiser Permanente
  • United Healthcare

Several other insurers offer group plans specifically designed for small businesses’ needs and budgets.

Here’s how purchasing employee group health insurance works. A company selects a plan from one of the carriers and purchases insurance for their “group” of employees and their dependents. Businesses can offer coverage to full-time employees only, or they can extend coverage to part-time employees as well.

Related: Advantages of High-Deductible Group Health Insurance Plans for Employers

Employee Contributions to Group Health Insurance Costs

California companies that enroll in group health insurance plans will usually pay the total coverage costs to the health insurance company. However, most businesses ask their employees to contribute to coverage costs and deduct premium contributions from the paychecks of all employees who enroll in the group plan. How much the employees contribute toward the cost of premiums will impact the employer’s final out-of-pocket costs for the group health insurance plan.

According to the Kaiser Family Foundation’s (KFF) Advantages of High-Deductible Group Health Insurance Plans for Employers:

  • Covered workers contribute an average of 17% towards the premium for single coverage. For family coverage, workers pay an average of 28% of the premium.
  • In 2022, the average annual amount contributed by subscribers to group plans was $1,327 for single coverage. The cost for family coverage was on average $6,106.
  • Not surprisingly, employees of small businesses often contribute a higher percentage toward their premium for family coverage than those at large companies (36% vs. 26%).
  • Likewise, at $7,556, the average contribution amount for employees at small companies was higher than employees of larger companies, at $5,880.
  • 31% of covered workers at small companies enroll in a plan where more than 50% of the premium for family health insurance coverage is paid through payroll deductions, compared to 7% of covered workers at large companies.

Average Group Health Insurance Costs For Employers

Yes, your company’s costs will vary depending on the factors mentioned above. However, you can get a general idea of what your costs will be by looking at the average amounts that employers spend on employee health insurance.

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According to the KFF survey, in 2022:

  • Average annual premium businesses faced for employer-sponsored health insurance was $7,911 for an employee electing single coverage and $22,463 choosing family coverage.
  • The average premiums for single coverage at smaller companies was $8,012 for single coverage and $22,186 for family coverage.
  • Large companies were only slightly lower with average premiums at $7,873 for single coverage and $22,564 for family coverage.

Tax Deductions and Credits Can Reduce Group Health Insurance Costs

Businesses with less than 50 full-time employees have no obligation to offer employer-paid health insurance to their employees. But for companies that offer coverage, whether or not the law requires them to do so, all health insurance-related expenses they pay are 100 percent tax-deductible. Under federal and California law, tax authorities treat such costs as ordinary business expenses.

Additionally, California small businesses may qualify for tax credits (up to half of their premium expenses during any two-year period they offer employer-paid group health insurance). Under IRS rules, California companies can qualify for the small business health care tax credit if they:

  • Employ fewer than 25 full-time equivalent (FTE) workers;
  • The average wages for full-time equivalent employees is less than $50,000 per worker, (indexed for inflation);
  • Offers a qualified group health insurance plan to their employees through the Small Business Health Options Program Marketplace (SHOP) or by qualifying for a limited exception to this requirement);
  • Pays for a minimum of 50% of the premiums for employee-only health care coverage for each employee.

Preferred Insurance: A Valuable Resource for California Small Business

Of course, one of the best ways to keep your group health insurance costs down while providing excellent employee benefits is to work with an experienced small business group insurance broker. The independent brokers at Preferred Insurance are not tied to any one insurance carrier, so they are better equipped to provide you with plenty of coverage options with a wide variety of features – at prices likely to fit any budget.

Are you ready to see how our experienced brokers can help your California business attract and retain top talent? Start by contacting Preferred Insurance today to schedule your free consultation.