evu11

[evu11]

What Are the Average Small Business Health Insurance Costs?

Providing health insurance is one of the most important—and expensive—benefits small business owners offer to their employees. While it plays a crucial role in attracting and retaining top talent, understanding the true cost can be confusing, especially with the wide variety of plans and coverage options available. So, what are the average small business health insurance costs in the U.S., and what factors influence those costs? Let’s break it down.

Why Health Insurance Matters for Small Businesses

Offering health insurance isn't just about compliance or competition—it’s about creating a healthy, loyal, and productive workforce. According to a 2023 study by KFF (Kaiser Family Foundation):

56% of small businesses (those with fewer than 200 employees) offer health insurance to at least some employees.

88% of workers say health benefits are a major factor in choosing a job.

Providing this benefit helps reduce employee turnover, lowers absenteeism, and can even qualify your business for tax advantages.

Average Cost of Small Business Health Insurance in 2024

The cost of health insurance varies depending on company size, location, employee demographics, and the type of plan offered. However, we can look at national averages to understand what most small business owners can expect.

🔢 Key Stats from 2023 (KFF Employer Health Benefits Survey):

Average annual premium for single coverage: $8,435 per employee

Average employer contribution for single coverage: $6,485 (about 77% of the premium)

Average annual premium for family coverage: $23,968 per employee

Average employer contribution for family coverage: $17,393 (about 73% of the premium)

That means, on average, a small business will pay around:

$540/month for each employee’s individual coverage

$1,450/month for each employee’s family coverage

These are national averages, so actual costs can be higher or lower depending on your specific situation.

Factors That Affect Small Business Health Insurance Costs

1. Number of Employees

Typically, the more employees you insure, the better rates you can negotiate. Very small businesses (under 10 employees) may pay more per person than those with 25–50 employees.

2. Location

Health insurance costs can vary widely by state and even by city. For example:

In California, average premiums are higher due to cost of living and healthcare provider pricing.

In Texas or Florida, premiums may be slightly lower.

3. Type of Plan

There are several plan options to choose from:

HMO (Health Maintenance Organization): Lower premiums, but limited provider networks.

PPO (Preferred Provider Organization): Higher premiums, more flexibility.

HDHP (High-Deductible Health Plan): Lower premiums, higher out-of-pocket costs, often paired with an HSA (Health Savings Account).

4. Employee Demographics

Younger, healthier employees typically result in lower premiums. Insuring an older workforce may increase rates.

Tax Credits for Small Businesses

Small businesses with fewer than 25 full-time equivalent employees earning an average salary of less than $60,000/year may qualify for a tax credit under the Small Business Health Care Tax Credit (part of the Affordable Care Act).

The credit can cover up to 50% of your premium contributions if you buy insurance through the Small Business Health Options Program (SHOP) marketplace.

How to Reduce Health Insurance Costs

Here are a few strategies small businesses can use to manage and potentially reduce health insurance expenses:

Compare plans annually through private brokers or the SHOP marketplace.

Offer HDHPs with HSAs to lower premiums while giving employees tax-free savings options.

Encourage wellness programs to reduce long-term claims and improve employee health.

Partner with a Professional Employer Organization (PEO) to get access to large-group insurance rates.

Final Thoughts

The average cost of small business health insurance in 2024 remains a significant investment, but it’s also one of the best ways to build a strong and committed team. With single coverage averaging around $540/month and family coverage around $1,450/month, planning your budget accordingly is essential.

The good news? Tax credits, smart plan selection, and employee engagement in wellness can help reduce those costs over time. Whether you're a startup or an established small business, offering health insurance can give your company a competitive edge and support the long-term success of your workforce.