How much does it cost for group health?
While it may seem like a simple question, there are many factors involved which can alter the price dramatically when you are shopping for group health insurance. Here are some factors that influence the cost for groups with less than 50 full-time employees.
Rates Based On:
Location of Headquarters
Group health insurance rates differ from region to region. In Minnesota, for example, there are nine different rating areas that the state uses to determine risk factors that affect rates. The health insurance companies file different rates for each rating area.
Employee Age
Fully-insured health insurance rates are structured so that older members on the plan are charged more than younger members. This is entirely because older members generally use health care services at a higher rate than younger members. So if your business has older employees and dependents on the plan, your cost can be significantly higher than another company’s plan that employs younger employees.
Plan Type & Network
Plans with lower deductibles, lower out-of-pocket maximums, and better co-pays will be more expensive than plans with higher deductibles, out-of-pocket maximums, and no co-pays. Additionally, most health insurance companies offer plans with different networks. The better the network, the higher the cost. Some networks can be up to a 15% savings when compared to a carrier’s largest network.
I’m sure you’re thinking that is all helpful, but what are the actual rates?
They vary quite a bit, but let’s use an example of two different employees: One is 25 years old, and the other is 63. They both have the option of enrolling in a $500 deductible plan and a $6000 deductible plan with the same broad network. The estimate below is based on 2022 rates for Twin Cities area business. The employer is required by law to contribute 50% toward the employee only premium, but they may contribute more and may also contribute to the dependent’s premium as well.
25 yr old
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$6,000 deductible
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$125 cost to employer
25 year old
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$500 deductible
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$172.50 cost to employer
63 years
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$6,000 deductible
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$420 cost to employer
63 yr old
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$500 deductible
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$575 cost to employer
How can businesses offset the cost?
Tax deductions go a long way to help businesses offset costs. Not only does the employer contribution not count toward an employee’s taxable income or payroll tax, that contribution would not be subject to the 7.65% payroll tax the employer normally pays. And if you have a Section 125 Premium Only Plan set up for employees which allows them to pay their portion of the premium with tax deductible money, then the employer will not pay the 7.65% payroll tax on any of the employee’s premium. Additionally, all health insurance costs incurred by the employer are tax deductible as well.
Still have questions or wondering what the costs are for your company? Reach out to our team for a quick consultation and rates estimates from multiple carriers. We do not charge for our services.