Health insurance is an essential employee benefit, but it doesn’t come cheap to employers. With the steady climb of healthcare costs, companies are often caught in the crossfire. They struggle to find the balance between offering competitive coverage and maintaining their bottom line.
In this article, we’ll go over the average cost of employer-sponsored coverage and an alternative health benefit option that may better suit your budget.
In this blog post, you’ll learn:
- The different health plan types.
- Employer-sponsored health insurance costs.
- How to take advantage of individual health insurance coverage.
Find out how to offer affordable health insurance to your employees.
Types of employer-sponsored health insurance plans
Before we get to the numbers, let’s start with your coverage options. Knowing the different health plans available makes it easier to choose the one that suits your budget and needs.
Common types of health insurance plans employers offer include:
- Preferred provider organization (PPO) plans
- Health maintenance organization (HMO) plans
- Point of service (POS) plans
- Exclusive provider organization (EPO) plans
- High deductible health plans (HDHPs)
- Health savings account (HSA)-qualified plans
- Indemnity plans
- Catastrophic health plans
- Self-funded group health plans
What factors influence the cost of health insurance
What employers pay for health insurance depends on factors like company size, industry, and geographical location.
Some other major factors include:
- The health insurance carrier
- The plan type
- The network of providers in the plan
- Health plan features, such as annual deductibles, copayments, and out-of-pocket maximums
- The employer contribution amount
- The demographics of your employees
- Benefits utilization
The average cost of employer-sponsored health insurance
According to KFF1, single coverage premiums increased by 6%, while family coverage premiums climbed by 7% in 2024.
Annual premiums for employer-sponsored health insurance among large employers averaged:
- $8,884 for single coverage
- $25,719 for family coverage
Cost-sharing between employers and employees
Employers aren’t the only ones paying for health insurance. They often share the cost of premiums with their employees. Employers generally cover a larger portion, but they can shift more of the financial burden on employees.
Employees contributed an average of 16% of the premium for single coverage and 25% for family coverage, which is lower than the contribution percentages seen in 2023.
Based on data collected by KFF, the average contribution amount for covered workers at large firms was:
- $1,429 for single coverage
- $5,697 for family coverage
This means employers covered 84% of group health premiums on average. This is much higher than the traditional 50-70% range employers are expected to cover. With employers shouldering more of the cost, finding cost-controlled benefits is more important than ever.
Group vs. individual insurance coverage
Group health insurance is a popular choice for employer-sponsored coverage. However, it’s not always the most cost-effective solution.
Individual policy premiums are often cheaper than group premiums. KFF2 found that the average benchmark premium for Marketplace plans was $477 in 2024, totaling $5,724 for the year.
With cheaper individual rates in many states, employers might wonder how they can switch to these plans instead of offering group coverage.
How large employers can better manage healthcare costs
Employers can better manage their budgets by offering an individual coverage health reimbursement arrangement (ICHRA) in place of a traditional group health insurance plan. This way, they can leverage the affordability of individual plans while still meeting the Affordable Care Act’s (ACA) employer mandate for applicable large employers (ALEs).
The ICHRA is an employer-funded health benefit that’s growing in popularity. According to a new data report from the HRA Council, ICHRA adoption increased by 21% from 2024 to 2025.
With an ICHRA, employers can cover the cost of individual health insurance premiums for employees instead of buying a one-size-fits-all group plan for them.
Here’s how it works:
- Employers set a tax-free monthly allowance for their employees. There’s no annual limit on employer contributions with an ICHRA. You can offer your workers as much as you want. According to our 2024 ICHRA Report, the average monthly ICHRA contribution was $524.
- Employees purchase individual health plans. To participate in an ICHRA, eligible employees need individual coverage. Coverage through a spouse’s or parent’s group health plan won’t work. Employees can purchase individual medical plans that provide minimum essential coverage (MEC) through the Health Insurance Marketplace. They can also consult a licensed insurance agent or health insurance company for private exchange plan options. This allows employees to choose a plan that best fits their needs. They can choose a plan that aligns with their preferred providers, prescriptions, and more.
Employers have the flexibility to adjust allowance amounts according to employee classes. For example, they can offer full-time employees $400 for monthly premiums while offering part-time employees $200. They can also tailor allowances based on factors like employee age and family size.
Offering an ICHRA through Remodel Health
If you’re looking to take control of your healthcare expenses, Remodel Health is here to help. You can offer an ICHRA through Remodel Health’s ICHRA+ platform. With our team of experts and white-glove service, you can easily set up and manage your benefit.
We handle:
- Plan design
- Legal plan documents
- AutoPay for employees’ monthly premiums
- Required ICHRA plan notices
- Providing necessary data for compliance filings
Plus, your eligible workers won’t have to navigate the individual market on their own. They can shop for individual health insurance plans directly through Remodel Health.
Conclusion
Employer-sponsored insurance is the most important employee benefit you can offer in your total compensation package. It’s key to attracting and retaining top talent at your organization. However, you don’t have to break the bank by purchasing a costly group medical plan. By offering an ICHRA, you can save money by taking advantage of individual health insurance premiums, which are often cheaper than group premiums.
- https://www.kff.org/report-section/ehbs-2024-summary-of-findings/#fn1
- https://www.kff.org/affordable-care-act/state-indicator/average-marketplace-premiums-by-metal-tier/?currentTimeframe=1&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
Learn how to transition your clients from traditional group health plans to ICHRA.
