It can be difficult at times to determine what percentage of health insurance costs you should cover for your small business. Choosing a percentage means that the exact amount will vary from year to year. This leaves many small business owners wondering what benchmarks they should follow — and other options available to them.
My Health Insurance Cost: By Percentage
A 2015 survey by Aflac found that just over half of respondents (52 percent) felt that their companies should be covering 80 percent of their health insurance cost. Covering such high percentages is relatively easy for Fortune 500 companies, but for small businesses, 80 percent might be asking a bit much.
According to the U.S. Bureau of Labor Statistics, the average company covers about 70 percent of health insurance cost. If you are looking for a benchmark, this is a good place to start, but remember to manage employee expectations with the reality of your business. In addition, your employees will appreciate transparency, so don’t be afraid to talk to them about your contribution.
Total Health Insurance Cost: Group Health Plans
You are most likely concerned about the percentage you are paying if you offer a group health plan. Group health insurance costs are on the rise. The Kaiser Family Foundation (KFF) reports that group healthcare costs have increased more than 200 percent since 1999.
In 2015, KFF found the average premium for single coverage on a group plan was $521 per month ($6,251/year) and the average premium for family coverage was $1,462 per month ($17,545/year). Keep in mind that these numbers will vary based on many factors, such as size of the company, location, and the number of large claims the previous year.
Time and time again, studies have found that the cost individual health insurance is more affordable than group health coverage. In fact, when comparing group rates to individual policies on the Affordable Care Act (ACA) Exchanges, the individual cost is up to 60 percent lower on average.
Controlling Health Insurance Cost: Defined Contribution
Defined contribution plans can be a predictable way to manage your health insurance costs without carrying a group health plan. By setting up an health reimbursement arrangement (HRA) or healthcare reimbursement plan (HRP), you can cover a percentage of your employees’ costs, but still control your budget.
Making healthcare decisions can be exhausting, but it’s imperative to make sure you understand all your options before signing the annual contract. Do your research and crunch the numbers. Above all, be truthful with your employees so that they can see the value of the benefit you are providing. As always, we are here to help answer your questions.
What are you doing to control your health insurance costs? Let us know in the comments below!