How Much Money Do Employers Contribute to Employee Health Insurance?
When creating employee benefits packages, there are two main factors that decide how much an employer contributes. The first is the minimum requirement. Businesses with 50 or more full-time employees are required to provide group health insurance benefits to their employees. Covered small businesses must contribute to at least 50% of the premiums. Larger businesses tend to pay more.
The second factor is how much an employer wants to pay. In fact, a 2018 study conducted by the Kaiser Foundation found that 31% of firms that must provide health insurance paid the full cost for their employees — by choice. To add to this, 35% of covered firms paid more than the required half.
Why Offer Competitive Health Insurance Benefits
This leaves the field wide open when it comes to choosing how much you want to contribute to health benefits at your business. Employers that are not covered may decide to skip health insurance benefits altogether to save money. Those who are covered may pay just the bare minimum. This has significant drawbacks:
Employees may choose not to get health insurance at all, which could cause their health to decline.When your employees are not healthy, that translates into more callouts from work.Employees with families may jump ship at the first opportunity as children especially tend to need good insurance.Top talent will go to competitors who offer better health insurance and other benefits.
How To Decide How Much To Pay
According to Turbo Tax, the money you pay toward employee insurance premiums is deductible as an employee benefit program expense. So, if you’re looking for ways to reduce your tax liability, this is a great starting point. Incorporating this into your tax planning initiatives at the start of every year can help you decide how much to pay in premiums.
Another important consideration is how much top talent means to you. Even if you don’t look for top talent to fill every role, consider offering the best compensation package you can for key roles. These workers are not short of offers. High achievers are also usually quite ambitious and may move on to the best offer if it’s not coming from you.
What Employer Contribution Trends Look Like
At the end of the day, competitive is relative. What are other companies paying? Don’t just look at your direct competitors, but the companies that compete for the employee. For instance, a company that manufactures cars needs an accountant just as badly as one that sells groceries. In most instances, you can find their pay and benefits information via job ads published online and in newspapers. Indeed, Payscale and Glassdoor may also help you find the information you need.
Also, note the following. The aforementioned 2018 study found that 28% of small firms paid more than 50% of employee premiums. Ironically, only 22% of large firms paid more than 50%. They were, however, more like to offer insurance than smaller firms. Only 6% of larger firms did not offer health insurance compared to 27% of smaller firms.
Your 2020 Health Insurance Benefits
Are you considering group health insurance to boost your employee benefits offerings in 2020? Contact Sackett & Associates Insurance Services for more information on how to take the next step. Give us a call at (707) 823-3689.
