What Percent of Health Insurance is Paid by Employers?
The most common type of insurance in the United States is employer-sponsored insurance, but how much does this insurance actually cover? With employer insurance covering over 56% of people in the United States, there needs to be more transparency about how this coverage works in order to decide if it’s the best option.
How much does the average employer contribute to their employees’ health insurance premiums? What factors are involved with this process? Additionally, what’s covered under employer health insurance? In this guide, we’ll tackle these questions and more.
What Factors Affect Employer Contributions?
First, let’s look at the different factors that might affect how much an employer is willing and able to contribute towards employee health insurance. The most common factors are those below:
- Employer size
- Income/revenue
- Cost of premiums
- Insurance availability
- Plan type (HMO, PPO, etc.)
The employer size is usually the biggest indicator of how much they can pay. Because larger employers have greater purchasing power when it comes to group health insurance, they’re usually able to negotiate better rates. However, this is changing thanks to small business insurance alliances which allow small businesses to join together to secure lower rates as one group.
How Much Do Employers Contribute?
Now that you understand the factors behind employer insurance contributions, it’s time to talk numbers. In general, this number depends on whether we’re talking about single or family coverage. Single coverage is the cost for a single employee with no dependents. Employers usually cover around 82% of the cost for single coverage. On the other hand, for families with dependents, employers will cover around 70%.
While these is no blanket option for every employer, most cover between 70-80% of health insurance premiums. This makes coverage more affordable for employees, and it’s better for both businesses and employees. Employers that cover a lower percentage of employee’s health insurance premiums might have a hard time recruiting and keeping top talent.
What Is Included in Health Insurance Coverage?
Finally, let’s discuss what’s actually included in employer-sponsored health insurance coverage. While much of coverage is based on the employee’s specific plan, traditional health insurance has to cover a number of different services including annual exams, routine testing, medically-necessary care, and mental health resources.
However, it’s important to note that this doesn’t include “extras” like vision and dental. There also might be out-of-pocket costs associated with additional or regular treatments. Finally, don’t worry about enrollment periods since these only apply to individual health insurance plans and Medicare. However, for employees opting for individual alternatives, learn when is open enrollment for 2019.
Alternative Contribution Strategies for Employers
Some employers opt out of traditional health insurance in favor of an alternative method of contributing to employees’ healthcare. This is an especially popular option for employers that are smaller and have fewer employees. Many offer options like an HRA or health reimbursement arrangement or they choose to be self-insured.
Both of these are valid options, though they come with their own challenges. As we said before, there are no one-size-fits-all when it comes to insurance. Small businesses are usually able to contribute less to employees’ healthcare costs, and this is presenting new challenges.
Understanding Health Insurance
The better you understand how employer health insurance functions, the better equipped you’ll be to make a smart decision about your own insurance. Employers of all shapes and sizes are coming up with innovative ways to meet their employees’ needs. In the future, hopefully we’ll all have a better understanding of what it means to have the right healthcare coverage.
Whether you’re an employee or a business owner, you have to take health insurance seriously. Your health is the most important thing you have, so it’s best to protect it while you can.
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