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What Is the Average Cost of Small Business Health Insurance?

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Published On: September 1, 2021

Health insurance is the single most popular employee benefit, and it’s easy to understand why. Health insurance benefits mean employees don’t have to pay expensive premiums out-of-pocket to cover themselves and their families. So small business health insurance is great for employees, but what about your business? 

In fact, small business health insurance benefits can be great for your company, too. 

  • Providing health insurance benefits makes your company more attractive to employees, helping with recruitment and employee retention. 

  • There are potential tax advantages—premium costs can be deducted from federal business tax and your small business may benefit from additional tax credits.

  • Small business health insurance shows that your company cares about its employees and their quality of life. 

That’s not to say health insurance is all upside for employers. It’s expensive, and, as a small business owner or HR manager, you have to figure out which health insurance packages to offer and how much they cost. Finding answers isn’t as easy as it should be.

This article aims to answer some of the most pressing questions about small business health insurance, including the big one: How much does it cost? 

Small Business Health Insurance: What Does the Average Small Business Pay?

Small business health insurance costs depend on many factors, so it’s impossible to say exactly how much your business will pay. But we can work out a ballpark figure by averaging what companies across the U.S. pay for employee premiums. 

Here are the headline average figures:

  • Flat annual premiums for single coverage medical care cost $5,491 per year. 
  • Flat annual premiums for family medical care cost $12,453 per year. 

These are small business health insurance premiums averaged across two dozen industries. However, some industries pay more than others. For example, small business health insurance costs in the retail industry are significantly lower than in the utility industry. In retail, annual premiums are around $5,087 for single coverage and $11,371 for family coverage. In the utility industry, it’s approximately $6,981 for single coverage and $18,579 for families. 

We’ve focused on small business health insurance premiums, but there may be additional costs to consider. These include the time and resources you’ll need to manage employee insurance benefits. You can expect to spend time researching insurance plans initially and during renewal, monitoring regulatory changes and communicating with insurance brokers or providers.  

What Factors Affect Small Business Health Insurance Costs?

Small business health insurance premiums are based on risk. Because every company is unique, it has a unique risk profile that insurance providers take into account when calculating premiums. Here are some of the factors that can affect the cost of health insurance for small businesses.

  • Location. Your company’s location impacts risk, as well as the laws insurance companies have to follow and the level of competition between insurance providers. Each of these can affect your insurance premiums. 

  • Demographics. The Affordable Care Act prohibits insurance companies from taking some demographic factors into account, including race, gender and medical history. However, providers can include other factors such as age or tobacco use. 

  • The type of coverage. There are many different types of health insurance plans. They include Exclusive Provider, Health Maintenance Organization (HMO), Point of Service (POS) and Preferred Provider Organization (PPO) plans. The insurance plan you select impacts premiums, available healthcare providers and related insurance costs such as deductibles and copays.  

The health insurance market is as overwhelming as it is complex, and there are many variables to consider when choosing a health insurance plan that meets the needs of your small business. Small businesses with limited budgets must weigh the benefits to their company and its employees, as well the potential costs. Of course, a sustainable benefits package relies on finding a health insurance plan that works for everyone, too. Read more here to see if your small business needs insurance.

Luckily, a top-rated health insurance broker with small business expertise can help. A reliable insurance broker should have the dexterity to guide a small business through the health insurance market and the knowledge to educate them about the issues that impact small businesses. Once found, a qualified insurance broker will work with you to find the best small business health insurance package at the best price. To learn more about how brokers get the best rates, click here.  

To measure how your company's benefits compare across healthcare and all other major components, download your free custom benchmark report from Mployer Advisor here

Looking for more exclusive content? Check out the latest on the Mployer Advisor blog.

Small Business InsuranceBusiness Insurance

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Abbey Dean

Director of Content, Mployer Advisor

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