Health Insurance Premiums as a Cost of Employing Workers

Companies incur plenty of costs to run their businesses. Labor has consistently been the costliest item on the list for as long as most of us can remember. Why? Because employers are not just paying salaries and their portion of FICA taxes. They are also paying for benefits.

A recent CBS News post cites Bureau of Labor and Statistics (BLS) data indicating that more than 30% of the average employee’s annual compensation is tied up in benefits. The lion’s share of that money goes toward health insurance premiums.

What does this tell us? It tells us that health insurance premiums are a big part of the cost of employing people. Unfortunately, health insurance and other benefits do not directly generate revenue. So employers need to figure out some other way to value their benefits programs in order to determine if they are getting a good return.

Premiums Are Not Cheap

Whether employees know it or not, the employer portion of a typical health insurance premium can be substantial. Premiums are not cheap by any means. According to CBS News, U.S. employers pay, on average:

83% of the total premiums for individual plans

73% of the total premiums for family plans.

The average cost of an individual plan in 2021 was $7,739. For a family plan, the number was in excess of $22,200. Those numbers are staggering to anyone who doesn’t own business. It is a safe bet that a typical corporate employee has no idea that their family plan is costing their employer tens of thousands of dollars.

Is it any wonder so many employers were concerned back when Congress was discussing the Affordable Care Act in 2009 and 2010? Is it any wonder some of them decided to drop their health insurance plans and pay the penalty instead – because the penalty was less costly?

Companies Try to Keep Things Affordable

Another thing many people do not understand is just how hard companies work to keep things affordable. As healthcare prices continue to rise, so do insurance premiums. Every time a company is hit with a double-digit premium increase, it needs to be accounted for in some other way. Either expenses need to be cut, prices need to go up, or both.

The one thing employers have going for them are savvy insurance brokers whose job is to find the most affordable and attractive benefits out there. Thousands of those brokers work with BenefitMall, a Dallas general agency that connects brokers to carriers, as a broker’s broker of sorts.

BenefitMall says that carriers try to be as creative as they can to craft products employers can afford. They are limited to some degree by federal and state laws dictating what health insurance plans must cover. Still, insurance carriers are not hurting for profits.

Employers Do the Best They Can

So, where does all this leave employers? It leaves them to do the best they can with the resources they have. It leaves them dealing with health insurance premiums as the single largest non-salary item in an employee’s total compensation package.

Today’s employers need to find creative ways to supplement their benefits packages at a time when the labor market remains tight. Competition for the best talent in any given industry is fierce. At the same time, employers cannot keep paying higher health insurance premiums without having to cut somewhere else.

Health insurance premiums are part of the cost of hiring and retaining workers. There is no way around it. Employers face a tough balancing act trying to keep employees happy and benefit costs in check.