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

The health insurance industry is undergoing rapid and fundamental changes. These upheavals have come on several different fronts and threaten to reorder the way in which Americans utilize health insurance and healthcare services. Anyone who works for a company that provides employee health benefits or owns a business that does the same should be aware of the implications of these changes. Those who fail to adapt may be find themselves unprepared to face a radically-changed healthcare landscape.

If you receive health benefits through your employer, you may be concerned about the effects of rising health insurance costs. This ongoing trend threatens to make the continued provision of such benefits unsustainable for low-margin businesses. Some companies are already reducing the scope of their employees' health insurance coverage or demanding higher monthly "contributions" from their workers. Companies that struggle with high levels of debt or limited supplies of cash may be forced to ax these benefits altogether. Although the Affordable Care Act requires employers with more than 50 full-time employees to provide health insurance benefits, it doesn't compel smaller businesses to do so.

In this rapidly-changing environment, there's no "benchmark" amount that employers should pay towards their employees' health insurance policies. Since most group health coverage plans enjoy cost-lowering synergies that tend to reduce per-person costs, well-capitalized employers may be able to cover the bulk of their employees' health insurance costs. Typically, larger businesses pay for at least 50 percent of their employees' total health insurance premiums. However, you shouldn't be surprised by your employer's refusal to exhibit such generosity.

If you own a small business, your health insurance calculus could be very different. It's important to remember that you're under no obligation to provide health insurance for a workforce of fewer than 50 full-time employees. At the same time, you may be able to attract more talented and ambitious workers by offering such a benefit. In the end, your decision to offer health insurance will reflect your personal generosity and your business's cash flow.

If you choose to offer coverage, you should determine the value of the cost savings that you'll enjoy by obtaining a group health insurance plan. In other words, you should figure out the exact amount that your employees will save by signing up for your plan. If this turns out to be a significant amount, you may wish to ask your employees to contribute a larger share of their premiums. On the other hand, you may wish to pick up a greater share of the cost of a non-discounted policy.

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