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How much do employers pay for health insurance?

Health insurance is important. We all know that. It’s something we’re trained to think about from the start of our careers. “Make sure to ask about pay and benefits,” everyone tells you as you head into the interview.  

We can even flip the script. 

As a manager, when going into hiring, you never just look at the wages. You have to consider all of the important factors that go into the cost of a new employee together. The second most expensive thing after wages? Health benefits. 

How much do employers pay for health insurance? This isn’t a simple question to answer. Thinking of the costs of employer health insurance in terms of total dollars is not easy. This is why this question is by far one of the most asked by the people I get to help. It’s worth a blog and a video!

Always remember—it’s not just employers who are paying!

Before we start talking about how much employers pay for health insurance, it’s important to mention that they are not the only ones that are having to cover the expense. Almost always, employees are covering at least some portion of their plan cost.

The baseline for contribution from the employer is 50% of the employee-only costs. Now, there are a lot of details behind this, and even some ACA laws that guide this particular amount for large employers specifically. However,  it’s important to know that employees are starting to have to cover more and more. This is hugely problematic because not only are they having to pay for more of the expense for the initial plan, but they also have to pay for the out-of-pocket costs for medical bills, too.  

When we know that 67% of personal bankruptcies are still being caused by healthcare costs, helping employees is more crucial now than ever. This is also why 6 out of 10 employees have said the most important decision-making factor about whether they keep their current job or go and find a new one is what their company is offering for health benefits. Do you see why this info is crucial?

Now that we have the groundwork laid out for the topic at hand, let’s look at three different answers to the question, how much do employers pay for health insurance? 

1. Employers are paying too much for health insurance.

My first answer is employers pay too much! Sure, this might seem like a cheap answer. It doesn’t make it not true!  Especially when you look at the actual data.  

Employer health insurance costs have gone through the roof over the past two decades. Specifically, it has increased by 368%+ since 1999. While many people blame the Affordable Care Act (ACA) for making costs go up more, if you actually follow the trend line upward, we are right where we should have expected to be all those years back prior to the ACA’s establishment.

The latest data from the Bureau of Labor Statistics indicates that 29.6% of total compensation is spent on employee benefits. By the end of this year, the expected costs per employee + employer will be $15,500 annually to provide some sort of healthcare coverage.

Just think about this for a second. This is the national average! That means some cost even more than that. This cost has gotten so heavy to the point that employers are having to make strategic decisions based on what their renewals may or may not be every single fall.

This is not sustainable anymore.

Which is why it’s changing. The same way 401(k)s came on the scene in the 1980s.

That’s right. Health benefits are undergoing the same change that retirement benefits went through almost 50 years ago. Remember pension plans? Well, you probably never had one, but you’ve probably heard of them. What you probably heard was how expensive they were—and eventually how they all just imploded.

Sounds a little like deja vu, don’t you think? That should excite you! Why?

Because the 401(k) of health benefits already exists. It’s called “managed individual” and it’s the same concept as 401(k) strategies. The employer gives money to the employees, and the employees decide how to spend the money. Simple as that! There are some incredible benefits to this model as well, especially when you’re talking about options and discounts on health plans for individuals. It’s amazing!

If you are stuck in those old group plans where one-third of your total spend on an employee is going to benefits and it keeps going up every year, you are spending too much. There is a better way, and that way is “managed individual” health benefits for your employees.

2. Employers are paying too little for health insurance.

My second answer for how much do employers pay for health insurance is… too little! That’s right! You might be thinking I am talking out of both sides of my mouth right now, but so are small businesses!  

You see, out of all the complaining that is out there about health insurance, did you know that only 31% of companies that have less than 50 employees even offer any sort of health benefit to their teams? That means that 7 out of 10 small businesses are not doing anything to help their employees with healthcare. I don’t blame them. I mean, when you look at the data above, it can feel like an insurmountable task to provide anything substantial, right?  

It depends on your budget. Most organizations have something they can give. It’s just that they don’t realize there is a “stair-step approach” they can take to finally get into benefits — maybe again, or maybe even for the first time. You can easily throttle in a brand new benefit to the team in a more flexible and accessible way than has ever been possible before.  

Yes, it’s that same managed individual model that I mentioned earlier.

When you consider in this hiring climate that the most competitive feature you can offer your team is health benefits, it should indicate how you budget your dollars. Even more importantly, maybe it’s already in your budget, but you can just reallocate and spend those dollars smarter? Based on the numbers, and based on what is being seen in the industry trends, if you don’t decide to improve your efforts on retaining and recruiting top talent, then it will likely be made for you.

What if it is more accessible than ever before? What if I told you that in the past 3 years, Remodel Health has been able to see employers put $65 Million back into their organizational budgets while improving their team’s coverages. We’re talking about real money, and real budgets, for real people and real companies that got smarter and more competitive with their employer health insurance costs.

3. Employers are paying just the right amount for health insurance.

My third answer for how much do employers pay for health insurance is… (and you’ve probably guessed it by now) …just right! It’s going to come as no surprise to you that these are those employers who have ditched those old, overpriced, outdated traditional group health plans for the newer, better, cheaper method of health benefits called “managed individual”.

More people than ever are using individual plans instead of group plans. The American consumers are making their voices heard. More carriers than ever with more plans than ever with costs being stable and even in the past 3 years going down. This is the difference-maker that the industry has been waiting for over the past 20 years, and the proof of seeing individual plans succeed over the past 7 years is very exciting!

You can see in the graphs above that not only are individual plans cheaper than group plans but that on average, employers who make this change for their team end up putting more money back into the pockets of their employees. I’d say that is a competitive advantage, for sure!

So maybe you need to stop asking how much do employers pay for health insurance, and instead start asking how you can step into the future of health benefits and not get left behind in that old pension-plan-style of group health benefits. Maybe it’s time to give your team the 401(k) of health benefits that they deserve?

Blind decisions are bad decisions.

This is why Remodel Health has developed our proprietary Health Benefits Analysis for your team. This secure and compliant evaluation of your organization will provide you with the exact outlook for what getting started with managed individual health benefits can look like. Before you don’t click on the link, don’t worry—it’s only $35 per employee. Yeah, that’s it! While it would normally cost about $9,500 to accomplish this, you can get it done cheaper and more easily than ever.

Head on over to remodelhealth.com/analysis to get started today in the future of health benefits! 

Important Notice:  Remodel Health does not intend to provide specific insurance, legal, or tax advice. Remodel Health always recommends consulting with your own professional representation to properly evaluate the information presented and its appropriate application to your particular situation.