Group Health Insurance Cost: What a Small Business Really Pays
Group health insurance cost is the first thing every business owner asks about, and the number they usually find is enough to end the conversation. The average employer plan now costs $26,993 a year for family coverage, according to KFF’s 2025 Employer Health Benefits Survey.
That figure is real, but it is not what your business pays. It is the total premium before the cost is split with employees, before the tax deduction, and before the decisions that let you set your own budget. Once you see how group health insurance cost actually works, the picture changes.
Below we walk through the averages, a complete example for a 10 employee business, what drives your price, how renewals change it, and the proven ways to bring it down.
The premium on the quote is only the starting point. What your business actually pays depends on the decisions you make.
Group Health Insurance Cost on Average
KFF found average annual premiums of $9,325 for single coverage and $26,993 for family coverage in 2025. Both rose 5 to 6 percent over the prior year, faster than inflation.
Employees paid part of that. On average, workers covered 16 percent of the single premium and 26 percent of the family premium. At firms with 10 to 199 workers, employees paid 36 percent of the family premium, which shows that smaller businesses often lean on employees more for dependent coverage.
| 2025 Average | Single Coverage | Family Coverage |
|---|---|---|
| Total annual premium | $9,325 | $26,993 |
| Average worker share | 16 percent | 26 percent |
| HSA qualified plan premium | $8,620 | $25,379 |
These are national averages across every plan design, region, and contribution level. They are useful for context and nearly useless for budgeting. Your group health insurance cost comes down to your team, your location, and your decisions.
Group Health Insurance Cost for a 10 Employee Business
Here is a hypothetical small business with 10 employees on a plan that costs $700 a month for employee only coverage. Six employees cover just themselves, two add a spouse, and two cover their whole family. These figures are for illustration only.
| Coverage Tier | Employees | Monthly Premium Each | Monthly Total |
|---|---|---|---|
| Employee only | 6 | $700 | $4,200 |
| Employee and spouse | 2 | $1,470 | $2,940 |
| Family | 2 | $2,100 | $4,200 |
| Total | 10 | $11,340 a month, or $136,080 a year |
That $136,080 is the number that scares people. The business does not pay all of it. Here is what happens under three common contribution strategies.
| Strategy | Business Pays per Year | Family Tier Employee Pays per Month |
|---|---|---|
| 50 percent of employee only premium | $42,000 | $1,750 |
| 75 percent of employee only premium | $63,000 | $1,575 |
| 75 percent of employee only plus 50 percent of dependent cost | $89,040 | $875 |
Look at the last column. Under the first two strategies, an employee covering a family still pays well over $1,500 a month, and many will decline coverage because of it. The third strategy costs the business more, but it is the difference between a benefit employees can actually use and one that only looks good on paper.
Key point: Carriers commonly require the business to pay at least 50 percent of the employee only premium. Contributing toward spouses and children is usually optional. That single decision swings your group health insurance cost more than almost anything else.
Then the tax deduction
Employer contributions are generally deductible as a business expense. For a business taxed at a 21 percent rate, the $42,000 in the first strategy would reduce taxes by about $8,820, bringing the real cost closer to $33,180.
Employees who pay their share through a Section 125 premium only plan use pretax dollars, which lowers payroll taxes on both sides. Your actual savings depend on how your business is structured, so confirm the numbers with your CPA. We are health insurance brokers, not tax advisors.
The premium is what the plan costs. Your contribution strategy decides what the business pays. The tax deduction decides what it really costs you.
Group Health Insurance Cost per Employee
Owners often want a single per employee number for budgeting. In the example above, the business spends $350 to $742 per employee per month depending on the strategy, or $4,200 to $8,904 per employee per year.
The more useful number is what each employee pays, because that decides who enrolls. If employee costs are too high, people waive coverage, and carriers commonly require a minimum share of eligible employees to enroll, often around 70 percent after excluding those with other coverage. A plan your team cannot afford can put your whole group at risk of not qualifying.
That is why we look at group health insurance cost from both sides: what the business pays and what the employee sees on each paycheck.
What Drives Group Health Insurance Cost
On fully insured small group plans, carriers cannot price your group based on anyone’s health. Premiums come from a short list of factors.
| Factor | What It Means | Can You Change It? |
|---|---|---|
| Employee ages | Each person is rated by age, and older employees cost more | No |
| Location | Premiums vary by rating area based on local costs and carrier competition | No |
| Tobacco use | Many states allow a tobacco surcharge within federal limits | Rarely |
| Plan design | Deductibles, copays, coinsurance, and out of pocket maximums | Yes |
| Network | Broad national networks usually cost more than focused regional ones | Yes |
| Coverage tiers | How many employees add spouses and children | Indirectly, through your contribution strategy |
You cannot change your team’s ages or your zip code. Everything you can control sits in plan design, network, and how you structure contributions.
How Group Health Insurance Cost Changes at Renewal
Your group health insurance cost is not set once. Carriers reprice every year, and KFF found average premiums rose 5 to 6 percent in 2025 alone.
Apply a 6 percent increase to the example above. The total monthly premium rises from $11,340 to about $12,020, and the employee only premium rises from $700 to $742.
- If the business pays 50 percent of the employee only premium, its contribution rises from $350 to $371 per employee, adding about $2,520 a year.
- If the business pays a flat $400 per employee, its cost does not change at all. The increase lands on the plan, and the business decides whether to raise its contribution.
Neither approach is wrong. The point is that your contribution structure decides who absorbs every future increase, so it is worth choosing on purpose.
Five Proven Ways to Lower Group Health Insurance Cost
1. Use a flat dollar contribution
A percentage contribution grows automatically with every renewal. A flat dollar amount keeps your budget fixed and puts you in control of each increase.
2. Offer a base plan with a buy up option
Many carriers let small groups offer two or more plans. The business contributes toward a solid base plan, and employees who want richer coverage pay the difference. Everyone gets a choice, and your cost stays put.
3. Consider an HSA qualified plan
KFF found that high deductible plans paired with a savings option carried lower average premiums, at $8,620 for single coverage and $25,379 for family. Some employers put part of the savings into employee HSAs, which employees own for life.
4. Look at level funded coverage
Level funded plans charge a steady monthly amount that covers expected claims, administration, and stop loss protection. For healthier groups, they often cost less than fully insured plans, and some return part of any surplus when claims run low. They are usually underwritten, so group health does affect pricing. KFF found 37 percent of covered workers at firms with 10 to 199 workers are now in level funded plans.
5. Compare every single renewal
The plan that was the best value three years ago may be the most expensive option on the table today. Renewing without comparing is the most expensive habit in group insurance.
Where we fit in: Carriers set rates, process claims, and administer the policy. Our job is to put real quotes in front of you, model contribution strategies with your actual employee census, and guide you through every decision so you choose a plan that fits your budget and that your team will actually use.
Costs Beyond the Premium
The premium is the biggest part of group health insurance cost, but it is not the only part. Businesses should also plan for:
- Payroll setup. Employee contributions need to be deducted correctly each pay period, which your payroll provider handles once it is configured.
- Section 125 plan documents. A premium only plan requires a written plan document so employee contributions can be taken pretax.
- Your time. Adding new hires, removing employees who leave, and answering benefit questions all take attention.
Broker guidance is usually not an added cost. Broker compensation is typically paid by the carrier and built into the premium, and small group rates are generally the same whether you use a broker or go direct.
The Small Business Health Care Tax Credit
Employers with fewer than 25 full time equivalent employees and average wages under an IRS threshold may qualify for the Small Business Health Care Tax Credit. It can be worth up to 50 percent of the employer’s premium contribution for two consecutive years. It requires buying coverage through the SHOP Marketplace and paying at least 50 percent of the employee only premium. The credit works on a sliding scale, so the smallest employers with the lowest average wages receive the most.
When Group Coverage Is Not the Right Fit
Traditional group insurance is not the only option. A QSEHRA lets employers with fewer than 50 full time equivalent employees that do not offer a group plan reimburse employees tax free for individual coverage and medical expenses, up to IRS limits. An ICHRA lets employers of any size reimburse employees for individual market coverage, generally ACA compliant plans, with amounts that can vary by employee class. Each has specific rules, and the right choice depends on your team.
See Your Real Numbers
Tell us about your team and we will model your actual group health insurance cost, with contribution strategies side by side.
Find My PlanFrequently Asked Questions
What is the average group health insurance cost per employee?
KFF’s 2025 survey found an average annual premium of $9,325 for single coverage, split between employer and employee. Your actual cost depends on employee ages, location, plan design, network, and how much the business contributes.
What is the minimum an employer has to contribute?
Carriers commonly require at least 50 percent of the employee only premium. Requirements vary by carrier, which is one reason to compare more than one.
Do I have to pay for my employees’ families?
Usually not. Contributing toward spouse and dependent coverage is typically up to the employer. Without some help, family coverage can be too expensive for employees to take.
Can one employee’s health problems raise our group health insurance cost?
Not on a fully insured small group plan, where pricing is based on factors like age, location, and tobacco use. Level funded plans are different, because they are usually underwritten.
Is group health insurance tax deductible?
Employer contributions are generally deductible as a business expense. Confirm the details for your business with your CPA.
Why did my renewal go up so much?
Renewal increases usually reflect rising medical costs, changes in your employees’ ages, and carrier pricing changes. The only way to know if your renewal is fair is to compare it against the market.
Group Health Insurance Cost, Handled the White Glove Way
Our White Glove approach means we do everything we can so choosing coverage does not become one more thing on your plate. We gather the quotes, run the numbers with your actual team, explain every tradeoff in plain language, and personally guide you through each step only you can take.
You know your business and your people. We bring every option to the table and help you find the group health insurance cost that fits your budget and your team.
Sources: KFF 2025 Employer Health Benefits Survey; IRS, Small Business Health Care Tax Credit and the SHOP Marketplace.
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