How Much Should an Employer Pay for Employees’ Health Insurance?

35

Health insurance is an important, and sometimes controversial, issue. Health care costs continue to increase with each passing year. In addition, American citizens are living longer. They are reaching retirement age later. They are also using more healthcare than ever before. Due to all of these factors, health insurance premiums continue to rise.

Employees may expect their employers to cover a portion, if not all, of the cost of healthcare premiums. Under the rules and guidelines of the Affordable Care Act, this is the case for companies with 50 or more employees. Large businesses must provide adequate health insurance plans. They must pay at least 60 percent of the premium. Employees must not be forced to spend more than 9.5 percent of their salary on the premium. With those rules in mind, businesses may decide to pay the 60 percent or slightly less.

These rules only apply to full-time, permanent employees. Individuals who are employed part-time may not be covered by any health insurance plan. The same is true for temporary or seasonal employees.

Another facet to how much an employer should pay for health insurance premiums concerns the need for employers to hire and retain quality employees. Companies that desire to hire the best of the best may decide to pay more of the premium and/or offer higher quality plans. Those that simply need to meet the requirement set forth by the federal government are likely to offer lower level plans with high deductibles.

Companies with under 50 employees are not required by law to provide health insurance coverage for their employees. Still, most employers know that they need to offer some type of health insurance benefit in order to attract qualified applicants to their open positions. These smaller employers have access to the Small Business Health Care Tax Credit, which covers half of the cost of the premium the employer pays. They may also have access to discounted plans through the Affordable Care Act’s SHOP program.

Those looking for hard dollars will learn that there is no set-in-stone price for healthcare coverage. The figures change depending on what percentage of the premium the employer chooses to cover as well as the type of plan. While employers are compelled to pay for 60 percent, most pay much more than that. In fact, most recent figures show that employers pay 83 percent of health insurance premiums, on average. That number drops by about 10 percent when including family plans.

Businesses deciding how much to pay for a health insurance premium should keep in mind that insurance premiums go up almost every year. On average, health insurance costs in the United States increase by about three percent each year. Employers must decide whether to cover those increases or pass them along to the employees. Because the figures changes every year, employers must constantly evaluate and re-evaluate the amount they are willing and able to spend on health insurance.