How much does group health insurance cost an employer?

Three official measures, three different questions

Most commercial lines have no government price data. Group health has three large surveys, and each answers a different question. Quote them by name, because their averages do not match.

• AHRQ MEPS-IC surveys private-sector establishments. It reports the average annual premium per enrolled employee, what employees contribute, and the share of establishments that offer coverage, by firm size and state. It is the only official source with state figures⁠¹.
• KFF’s Employer Health Benefits Survey covers non-federal public and private firms. For 2025 the sample was limited to firms with 10 or more workers, and KFF reports averages per covered worker⁠².
• BLS Employer Costs for Employee Compensation (ECEC) reports what employers spend on health insurance per hour worked, averaged over all workers in a group, whether or not they are enrolled⁠³.

The gap is a difference of scope, not a contradiction: KFF includes public employers, leaves out firms under 10 workers and averages per covered worker, while AHRQ counts only private-sector establishments of every size. For a private business, AHRQ is the closer benchmark. KFF is more useful for plan design (deductibles, plan types, funding) and for trend, because it is published every October. Its 2026 edition was not yet out on October 13, 2026.

What a premium costs at your firm size

The employer’s bill depends less on the total premium than on how it is split. AHRQ’s 2025 figures by firm size show the split moving, not the premium⁠¹:

Small-firm employees pay 32.1% of the family premium, against 27.2% at larger firms (our calculation). KFF’s 2025 data show the extremes behind that average. At firms with 10 to 199 workers, 29% of covered workers have the entire single premium paid by the employer, against 7% at larger firms. Yet 29% of covered workers at those smaller firms must pay more than half of the family premium, against 5% at larger firms, and 28% face a family contribution of $12,000 or more⁠². The average single contribution rate is the same 16% at both sizes; the gap is in family coverage⁠².

Smaller-firm plans also carry higher deductibles. In 2025, KFF found an average single deductible of $2,631 at firms with 10 to 199 workers, against $1,670 at larger firms⁠². Plan type moves the premium too: a high-deductible plan with a savings option averaged $8,620 single and $25,379 family, while a PPO averaged $9,818 and $28,272⁠².

By state

AHRQ’s state averages for 2025 range from $7,612 (Mississippi) to $10,913 (New York) for single coverage, and from $21,932 (Mississippi) to $30,132 (Alaska) for family coverage⁠¹. The share of small-firm establishments offering coverage varies even more: 16.5% in Alaska, 67.6% in Hawaii. The full 51-row table, with small-firm columns, is on the health insurance premiums by state page, and each state hub repeats its own row.

The cost per hour worked

ECEC turns health spending into a payroll-style rate. In June 2026, private employers spent an average of $3.48 per hour worked on health insurance⁠³. That is eight times the $0.43 they spent on workers’ compensation. Across industries the figure runs from $0.84 in leisure and hospitality to $7.37 in information, and it is $8.20 for union workers against $3.07 for nonunion workers⁠³.

Average employer cost per employee hour worked for workers' compensation and for health insurance, averaged across all workers in the group, plus workers' compensation as a percent of total compensation. Group averages mix high- and low-risk jobs, so they are not a premium rate for any single business. U.S. Bureau of Labor Statistics (BLS), National Compensation Survey, June 2026 (2026 Q2), private industry workers, released 9 Sep 2026.

Because ECEC divides spending by all hours worked, including those of employees who are not enrolled or not eligible, the per-hour figure reflects take-up as much as price. At $3.48 an hour, a worker on a 2,080-hour year represents about $7,238 of employer health spending (our calculation). That is close to AHRQ’s $7,208 employer share for single coverage, but it averages enrolled single, enrolled family and unenrolled workers together. Take-up is the hidden variable. KFF found that at firms offering coverage in 2025, 80% of workers were eligible and 76% of those took it, so 61% were enrolled⁠².

How group health is priced

Fully insured small group plans

Under the ACA, an insurer’s small-group premium may vary only by four factors⁠¹³:

1. Individual or family coverage

   Each tier has its own rate.

2. Rating area

   For a small group, the area is generally set by the employer’s principal business address, not where employees live.

3. Age

   Rates may vary no more than 3:1 between adults 21 and over, following a uniform age curve.

4. Tobacco use

   Up to 1.5:1.

Claims history, industry and employees’ health status are not among the factors. A small group’s premium is the sum of each enrolled employee’s age-rated price in the plan you choose, so hiring an older staff member raises the bill and a claim-heavy year does not, by itself.

Where state law allows, insurers may still set minimum employer contribution and participation rules. They must sell group coverage at any point in the year, but a small group that does not meet those rules can be limited to an annual enrollment window from November 15 to December 15⁠¹⁴.

Self-funded and level-funded plans

Larger employers usually self-fund. They pay claims from their own money and buy stop-loss insurance against large ones. In 2025, 67% of covered workers were in self-funded plans: 80% at firms with 200 or more workers and 27% at firms with 10 to 199⁠². Among smaller firms, 37% of covered workers were in level-funded plans, which combine a small self-funded layer with stop-loss coverage. KFF notes that these plans use health status in rating and underwriting, and are not required to cover all the essential health benefits mandatory for insured plans⁠². Because they rate on health status, a level-funded price can follow your own group’s claims; an ACA small-group price cannot⁠²⁠¹³.

Worked example: a 12-person business

This is our illustration, using AHRQ’s 2025 national averages for firms under 50 employees⁠¹. Your own quote will differ by plan, area and the ages of your staff.

1. Enrollment

   Seven employees take single coverage, three take family coverage, two decline.

2. Premiums

   7 × $9,034 + 3 × $24,176 = $135,766 a year in total premium.

3. Employee contributions at the small-firm average

   7 × $1,924 + 3 × $7,760 = $36,748.

4. Employer cost

   $135,766 − $36,748 = $99,018 a year, or $8,252 per employee on payroll.

5. Contribution policy matters more than plan choice

   Paying 100% of single coverage (the policy of 29% of covered workers at firms with 10 to 199 workers⁠²) adds 7 × $1,924 = $13,468.

The ACA employer mandate in 2026

No federal law requires a firm with fewer than 50 full-time employees, counting full-time equivalents, to offer health coverage, and there is no federal penalty if it doesn’t⁠¹⁰. Once a business averaged at least 50 full-time employees, including full-time equivalents, during the previous calendar year, it is an applicable large employer (ALE) for the current year⁠⁴. A full-time employee is one who averages at least 30 hours of service a week, or 130 hours in a month⁠⁴.

An ALE owes an employer shared responsibility payment only if at least one full-time employee buys Marketplace coverage with a premium tax credit⁠⁴. The 2026 amounts come from IRS Rev. Proc. 2025-26⁠⁵:

For 2026, coverage is affordable if the employee’s contribution for the cheapest self-only plan offering minimum value does not exceed 9.96% of household income⁠⁶. Because employers do not know household income, the IRS allows three safe harbors based on Form W-2 wages, rate of pay or the federal poverty line⁠⁴. A plan provides minimum value if it covers at least 60% of total allowed costs and substantially covers inpatient hospital and physician services⁠⁴.

Worked example (our calculation): an ALE with 80 full-time employees offers no coverage, and one employee gets a premium tax credit. The 2026 payment is (80 − 30) × $3,340 = $167,000. If the same employer offers coverage that is unaffordable for six employees who get credits, it owes 6 × $5,010 = $30,060. The payment is calculated month by month, so these annual figures assume the facts hold all year⁠⁴.

The small business health care tax credit

The credit reimburses part of the employer’s premium contribution. To qualify, a business must⁠⁷:

• have fewer than 25 full-time equivalent employees, counting 2,080 hours as one FTE and leaving out sole proprietors, partners, more-than-2% S corporation shareholders, more-than-5% owners and their family members;
• pay average annual wages below the inflation-adjusted limit;
• pay at least 50% of the cost of employee-only coverage for each employee;
• buy a qualified health plan through the SHOP Marketplace (with a limited exception).

The maximum credit is 50% of the employer’s premium contributions, or 35% for tax-exempt employers, and it can be claimed for only two consecutive tax years⁠⁷. Contributions above the credit remain deductible as a business expense⁠⁷. The base for the credit is the smaller of what you actually paid and what you would have paid if each employee had enrolled in a plan at the average small-group premium for the rating area, as determined by HHS⁠⁹.

The credit phases down on two scales⁠⁹. It falls by 1/15 for each FTE above 10, and in proportion to how far average wages exceed the base amount, which is $34,100 for tax years beginning in 2026⁠⁸. It reaches zero at 25 FTEs or at twice the base, $68,200 (our calculation).

Worked example (our calculation, assuming premiums at or below the state average): eight FTEs, average wages of $42,000, and $50,000 of employer contributions to SHOP premiums in 2026. The base credit is 50% × $50,000 = $25,000. No FTE reduction applies, because there are 10 or fewer FTEs. The wage reduction is $25,000 × ($42,000 − $34,100) ÷ $34,100 = $5,792. The credit comes to about $19,208, roughly 38% of the contribution, for each of the two years.

SHOP is open to businesses with generally 1 to 50 employees. Employers can start coverage at any time of year and can enroll through a SHOP-registered agent or broker⁠¹⁰.

Paying for individual policies instead: QSEHRA and ICHRA

Two arrangements let an employer reimburse employees, tax-free, for individual-market premiums instead of buying a group policy. They fix the employer’s cost at a dollar amount you choose. The premium no longer depends on the group.

• QSEHRA. This is for employers with fewer than 50 full-time employees that offer no group health plan. It must be offered on the same terms to all full-time employees, though amounts may vary by age and family size⁠¹¹. For 2026, reimbursements cannot exceed $6,450 for self-only coverage or $13,100 for family coverage⁠⁸. The family cap is below AHRQ’s 2025 average small-firm employer share for family coverage, $16,416⁠¹, so a QSEHRA cannot fund what a typical small group plan pays toward a family.
• ICHRA, now called a CHOICE Arrangement on HealthCare.gov. Employers of any size can offer one. There is no federal dollar cap. The amount must be the same within each permitted class of employees (for example full-time, part-time, hourly, salaried or by work location), and may vary only by age (up to 3:1) and number of dependents⁠¹². You can offer a group plan to one class and an ICHRA to another, but not a choice of both to the same class⁠¹². For 2026 plans, the offer counts as affordable if the employee’s lowest-cost silver self-only premium, minus the monthly reimbursement, is below 9.96% of one-twelfth of household income (10.22% for 2027); an employee with an affordable offer cannot get the premium tax credit⁠¹².

Few employers use them yet. In 2025, KFF found that 4% of firms offering health benefits, and 9% of firms that did not, gave some employees money to buy individual coverage⁠².

What changes the bill, and what doesn’t

• Contribution policy. This is the lever a small employer controls most directly. In AHRQ’s 2025 data, small-firm employees paid $514 more toward family coverage than employees of larger firms, on a family premium $2,426 lower (our calculation from⁠¹). The tax credit and SHOP require at least 50% of employee-only coverage⁠⁷, and insurers may enforce their own minimums⁠¹⁴.
• Plan design. KFF’s 2025 premium gap between HDHP/SO and PPO plans was $1,198 single and $2,893 family (our calculation from⁠²); the lower premium comes with the higher deductible that defines an HDHP.
• Location and workforce age. Under ACA small-group rules, these are rating factors you cannot negotiate⁠¹³. KFF found higher premiums at firms where at least 35% of workers are 50 or older: $9,599 single, against $9,068 at firms with fewer older workers⁠².
• Trend. Premiums rose 5% for single and 6% for family coverage in 2025, against 4% wage growth and 2.7% inflation (KFF)⁠². Budget for the renewal increase, not this year’s rate.

Group health sits alongside, not inside, the employer’s other required benefits. Injuries at work belong to workers’ compensation, and several states require disability or paid-leave contributions whether or not you offer health coverage.

Sources

1. 1
   Agency for Healthcare Research and Quality (AHRQ), Medical Expenditure Panel Survey, Insurance Component (MEPS-IC) 2025, private-sector data by firm size and state (Series II) Checked 13 Oct 2026 · Back to text ↑
2. 2
   KFF, 2025 Employer Health Benefits Survey, summary of findings (published Oct. 22, 2025) Checked 13 Oct 2026 · Back to text ↑
3. 3
   U.S. Bureau of Labor Statistics, Employer Costs for Employee Compensation, June 2026 (released Sept. 9, 2026) Checked 13 Oct 2026 · Back to text ↑
4. 4
   Internal Revenue Service, Questions and answers on employer shared responsibility provisions under the Affordable Care Act Checked 13 Oct 2026 · Back to text ↑
5. 5
   Internal Revenue Service, Rev. Proc. 2025-26: 2026 adjusted section 4980H payment amounts Checked 13 Oct 2026 · Back to text ↑
6. 6
   Internal Revenue Service, Rev. Proc. 2025-25: 2026 required contribution percentage Checked 13 Oct 2026 · Back to text ↑
7. 7
   Internal Revenue Service, Small business health care tax credit and the SHOP Marketplace (reviewed Oct. 1, 2026) Checked 13 Oct 2026 · Back to text ↑
8. 8
   Internal Revenue Service, Rev. Proc. 2025-32: 2026 inflation adjustments (sections 45R and 9831(d)) Checked 13 Oct 2026 · Back to text ↑
9. 9
   Office of the Law Revision Counsel, U.S. House of Representatives, 26 U.S.C. 45R, Employee health insurance expenses of small employers Checked 13 Oct 2026 · Back to text ↑
10. 10
    HealthCare.gov (CMS), SHOP Marketplace overview Checked 13 Oct 2026 · Back to text ↑
11. 11
    HealthCare.gov (CMS), Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) Checked 13 Oct 2026 · Back to text ↑
12. 12
    HealthCare.gov (CMS), CHOICE Arrangements (formerly individual coverage HRAs) Checked 13 Oct 2026 · Back to text ↑
13. 13
    eCFR, Office of the Federal Register, 45 CFR 147.102, Fair health insurance premiums Checked 13 Oct 2026 · Back to text ↑
14. 14
    eCFR, Office of the Federal Register, 45 CFR 147.104, Guaranteed availability of coverage Checked 13 Oct 2026 · Back to text ↑

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