Employer contribution to healthcare

By: Christina Merhar (Zane Benefits) February 2016

When evaluating a new or existing health insurance program, your company’s contribution strategy is an important consideration. In simple terms, how much will individual employees pitch in for coverage, and what percent of health insurance is paid by employers?

With company-provided health insurance, the employer must contribute a minimum percentage and employees pay the remaining amount, usually through a payroll deduction. So, just what percent do employers pay?

Across the country, Kaiser Family Foundation found the average percent of health insurance paid by employers is 83 percent for single coverage and 72 percent for family coverage. Let’s dive into these stats a little deeper.

Note – This blog post is based off our new infographic, 7 Truths About The Cost of Health Insurance In America. Check out the full infographic here.

Employers Pay 83 Percent of Health Insurance for Single Coverage

In 2015, the average company-provided health insurance policy totaled $6,251 a year for single coverage. On average, employers paid 83 percent of the premium, or $5,179 a year. Employees paid the remaining 17 percent, or $1,071 a year.

For family coverage, the average policy totaled $17,545 a year with employers contributing, on average, 72 percent or $12,591. Employees paid the remaining 28 percent or $4,955 a year.

Small Employers Contribute Significantly Less to Family Coverage

For small employers, however, the data tells a different story. According to the 2015 KFF/HRET survey, small employers (defined as employers with 3-199 employees) tend to contribute significantly less for family coverage.

For smaller employers:

– The average policy for single coverage totaled $6,163 a year.
– The average percent paid by employers for single coverage was 85 percent, or $5,264 a year.
– The average policy for family coverage totaled $16,625 a year.
– The average percent paid by employers for family coverage was 65 percent, or $10,720 a year.

Average Health Insurance Contribution Paid By Employers, By Employer Size

What Percent of Health Insurance is Paid by Employers_

Source – KFF/HRET

Why are small employers contributing less to family coverage? One speculation is cost.

Health insurance is expensive with costs increasing annually for 90 percent of companies. In an effort to sustain coverage and manage costs, increasing employee cost-sharing for family coverage is a common approach.

Alternative Contribution Strategies

As small employers grapple with health insurance contribution strategies and tight budgets, they often turn to alternative contribution strategies.

For example, instead of purchasing and paying for a company-provided health insurance policy, small employers are providing an employer-funded defined contribution – an allowance toward employees’ individually-purchased health insurance premiums. As we wrote about earlier this week, individual health insurance costs on average 40 percent less than comparable employer coverage.

Using a compliant healthcare reimbursement program, smaller employers can define any monthly contribution for employees to use on individual health insurance premiums. By switching to this type of defined contribution strategy, smaller employers offer tax-free health benefits without having to deal with costs, participation requirements, or minimum contribution percentages associated with company-provided insurance.


When looking at what percent of health insurance is paid by employers, we see that there are differences between small and large employers. Across the nation, employers are contributing, on average, 83 percent for single coverage and 72 percent for family coverage. Small employers tend to pay slightly more (85 percent) of single coverage and significantly less (65 percent) of family coverage. Because of the high costs and contribution requirements of traditional company-provided health insurance policies, many small employers are taking a second look at individual health insurance and a defined contribution (reimbursement) strategy.

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