Turns out, this is a doozy of a question.

Put simply, there’s a big range in how much small group insurance costs for employers because there are many factors at play when offering health coverage.

In this article, we’ll explain what goes into the cost of health insurance at a small business.

How is health insurance priced?

How much you pay for health insurance typically depends on the makeup of your team and how many bells and whistles you want your plan to have.

If you haven’t dealt with health insurance since the Affordable Care Act (ACA) was passed, keep in mind a few things have changed. Namely, the ACA doesn’t allow carriers to look at a person’s gender or medical history when calculating quotes.

There are some factors where your choices can impact the cost of health insurance for your business, and then there are factors you can’t control.

Small group health insurance cost factors

What health insurance premium factors do I control?

Here are the choices you can make that impact how much you as the employer will pay for small group health insurance:

1. Which plan tier to offer employees

There are different tiers of health insurance plans available to small businesses. The Affordable Care Act (ACA) requires plans at each level to cover a certain percentage of average health care costs. Here’s how it breaks down:

Plan tier % of health care costs covered
Bronze (the lowest priced tier) 60%
Silver 70%
Gold 80%
Platinum (the highest priced tier) 90%

Platinum plans usually have the most expensive premiums, the most extensive coverage, and the lowest out-of-pocket costs. In contrast, bronze plans usually have the lowest premiums, less coverage, and the highest out-of-pocket costs.

Insurers have a lot of leeway in terms of how they design their plans, so you’ll still see plenty of variation, even for plans at the same metal level. As you can imagine, plans with better benefits generally come with higher premiums.

As an employer, you get to choose which metallic tiers to provide to your group.

2. Which carrier you select

Whether you go with Blue Cross Blue Shield, Kaiser Permanente, or another option, the insurance carrier you choose can impact the price you get. Though tier prices tend to be pretty similar, each carrier does have its own flavor of offerings and costs.

3. How much your company contributes

You can think of this as a sliding scale.

If you decide to contribute 100% of your employees’ health insurance premiums, your costs would be higher than, say, if you decide to only contribute 60% towards your team’s premiums.

Similarly, your costs will change depending on whether and how much you choose to contribute to the premiums of your employees’ dependents.

What health insurance premium factors do I not have control over?

And here are the factors that can impact small group health insurance costs no matter what plan or employer contribution choices you make:

1. Location

Where your business and employees are based plays a big role in insurance costs. Prices and plans can vary by state or region.

2. Age of enrollees

Older employees typically have greater health needs than younger employees. In most states, a health plan can cost up to three times more for people who are older.

So if your business is comprised mostly of 20-somethings, your group’s health insurance premiums may be much less expensive than a group with mainly employees in their 50s and 60s. (The exceptions are Vermont and New York, where premiums don’t vary based on age.)

If your plan is set up to use composite rating—or the average zip code, smoker status, and age (when applicable) of all the employees—premiums will be the same for all employees. With member-level rating, individual enrollees may have different premiums based on their age or smoker status.

3. Tobacco usage

Do your employees use tobacco regularly?

While many carriers do not consider tobacco usage, they are allowed to charge tobacco users as much as 50% more for their premiums. The exception is if you’re in California, Connecticut, District of Columbia, Massachusetts, New Jersey, New York, Rhode Island, or Vermont, where tobacco surcharges are not allowed.

In order to apply a tobacco surcharge, a small employer is required to offer a tobacco cessation or wellness program that will allow participating employees to avoid the tobacco surcharge.

How much is an average health insurance premium?

As mentioned above, there are many factors that affect premiums, so costs can vary greatly. But you can still get a sense of the average price employers pay.

Here are the average costs* based on the Kaiser Family Foundation’s 2019 Employer Health Benefits Survey.


Per employee
PPO $640
HMO $603
All plans $599


Per employee
PPO $7,675
HMO $7,238
All plans $7,188

*Disclaimer: The data shown here is from the Kaiser Family Foundation, and is used for illustrative purposes only. Your specific health insurance prices will vary.

How much will offering health insurance cost my business?

At first, you might think that the prices above are all on you. But you can decide how much you contribute to your employees’ premiums.

Most insurance carriers require employers to cover at least 50% of their team’s premiums. However, many employers choose to contribute a greater amount.

There’s also a special small group enrollment period from November 15 to December 15 each year. That’s when small businesses can enroll their employees in plans with no employer contribution requirements.

Want to get a quote for your small business? Talk to a health insurance broker. They’ll ask you some questions and provide an accurate estimate of what you’ll pay based on what’s right for your unique business and team.

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