What's the Cost of Small Business Health Insurance?
What's the Cost of Small Business Health Insurance?
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Employers paid an average of $6,584 in annual health insurance costs for a single worker and $16,357 for a family policy in 2022.
As a small business owner, you are not required by law to offer health insurance. However, doing so can help you attract and keep employees.
What's the average cost of small business insurance?
The average small business owner pays $6,584 a year to cover a single worker's health insurance. For family coverage, that jumps to $16,357.
Most employer health plans split the cost of insurance between the company and the worker. Although most small business insurance plans require employers to pay at least half of the total cost of health insurance premiums, the average small business owner pays significantly more.
Annual cost breakdown
Dollar cost
Percentage covered
Worker pays | Employer pays | |
|---|---|---|
Individual | $1,327 | $6,584 |
Family | $6,106 | $16,357 |
Dollar cost
Worker pays | Employer pays | |
|---|---|---|
Individual | $1,327 | $6,584 |
Family | $6,106 | $16,357 |
Percentage covered
Worker pays | Employer pays | |
|---|---|---|
Individual | 17% | 83% |
Family | 27% | 73% |
Factors that affect price
Age, tobacco use and health insurance plan type all have major impacts on the cost of providing health care benefits to your employees. Other factors like your physical location and the type of work you perform may influence your monthly rates.
- Health insurance plan type
- Tobacco use
- Age
- Type of work
- Location
The Affordable Care Act (also called "Obamacare") doesn't allow insurance companies to take preexisting conditions into consideration when issuing policies. That means your workers won't be denied or quoted a higher price because of an illness or injury.
However, age and tobacco use both factor into rate prices. Pricing also varies by location and industry. For example, you should expect to pay more if you live in New England or if you work in the utilities industry.
Health insurance is divided into four metal tiers: Bronze, Silver, Gold and Platinum. All four plan types provide coverage for the same types of care. In other words, a Bronze plan will cover all of the same medical procedures as a Platinum plan. However, as an employer, you will pay more for a Gold or Platinum plan and less for a Bronze or Silver plan because they offer different levels of coverage.
How does small business health insurance work?
Small business group health plans have cheaper rates than individual plans.
You aren't required to offer your employees health insurance if you have fewer than 50 full-time workers (100 in some states), but many small businesses choose to offer it. Many states require that at least 70% of your employees sign on to your health plan. If you don't hit that threshold, you might not be able to offer medical insurance.
Insurance companies typically require that employers pay at least half of their employees' health insurance premiums. In practice, many employers go above and beyond this figure.
The government offers health insurance subsidies to qualifying small businesses. These can pay for up to half of your business's annual health insurance contributions. To qualify, you must offer a plan through the Small Business Health Options Program (SHOP) to all of your full-time employees and meet the following standards.
- You must have fewer than 25 full-time workers
- Your average worker must earn less than $56,000 a year
- You must cover at least half of your worker's health insurance costs
How do you buy health insurance for a small business?
You can buy small business health insurance plans through traditional health insurance brokers, directly through an insurance company or by comparing different plans through SHOP, a government-run online health insurance marketplace.
You could also work with a professional employer organization (PEO), which can manage your human resources and administer your small business's health insurance plan for you.
Contracting with a PEO can lower your health care costs. PEOs can also save you money by providing access to lower monthly rates. You may also prefer to work with a PEO if you don't want to learn the ins and outs of health insurance rules and regulations.
If you don't have many small business health insurance plan options in your area, or if you'd like to give your workers greater flexibility in choosing their health care coverage, you can offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).
That arrangement lets you reimburse your employees for health care expenses using pretax income. The 2022 limits for a QSEHRA are up to $5,450 annually for a single person and up to $11,050 for a family. If an employee doesn't use all of their benefits, you can choose to keep the extra money or roll it over to the next year.
Frequently asked questions
What's the average cost of small business insurance?
In 2022, small businesses spent $6,584 per year for a single-worker health plan and $16,357 for family coverage, on average. Workers contributed an average of $1,327 and $6,106 per year for individual and family plans, respectively.
What is an ICHRA plan?
An Individual Coverage Health Reimbursement Arrangement (ICHRA) lets businesses set aside a certain amount of pretax money each month that can be used to reimburse employees for health care expenses. An ICHRA offers potential cost savings and greater flexibility compared to a traditional health insurance plan.
Do I need health insurance for my small business?
No, businesses with fewer than 50 employees are not required by the Affordable Care Act (ACA) to provide health insurance for their workers. However, many small businesses choose to offer health insurance to attract and retain high-quality workers.
Sources and methodology
Average health insurance cost data is from the Kaiser Family Foundation (KFF) 2022 Employer Health Benefits Survey. Government subsidies and ACA compliance information are from HealthCare.gov.
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