Average cost of small business health insurance

What employer health insurance costs in 2025

According to the KFF 2025 Employer Health Benefits Survey (the most recent available), the average annual premium for employer-sponsored coverage reached $9,325 for single coverage and $26,993 for family coverage. Family premiums rose about 6% year over year.

• Single coverage: $9,325 per year on average
• Family coverage: $26,993 per year on average
• Workers contributed an average of $6,850 toward family coverage
• On average, workers pay 16% of the single premium and 26% of the family premium

What small businesses specifically pay

Small firms (10–199 workers) pay roughly the same as large firms for single coverage and a bit less for family coverage — but their employees shoulder a much larger share of the cost.

Per KFF 2025, small-firm workers contribute 36% of the family premium on average (about $8,889), versus 23% (about $6,227) at large firms.

• Small-firm single premium: $9,211 / year
• Small-firm family premium: $26,054 / year
• Small-firm worker family contribution: 36% (~$8,889) vs 23% at large firms

Why small-business premiums keep climbing

Small employers have the least negotiating power, face annual renewal increases, and often must meet participation minimums to keep a group plan. The result is a cost that rises every year and is hard to predict.

The predictable alternative: ICHRA

With a group plan, the insurer sets your cost and raises it at renewal. With an ICHRA, you set a fixed monthly allowance and reimburse employees tax-free for individual coverage — so your benefits budget is a number you choose, not one handed to you. For small businesses squeezed by rising premiums, that predictability is the real saving. Use our ICHRA calculator to model a budget.

Sources & methodology

Premium and contribution figures are from the KFF 2025 Employer Health Benefits Survey, the most widely cited annual source for U.S. employer coverage costs. Figures reflect the 2025 survey and are updated annually; treat them as current-year benchmarks, not quotes. Individual results vary by location, plan, and workforce.

What drives your specific number

No two employers pay the same. Your actual cost depends on a handful of factors insurers price in — which is exactly why a flat quote is rarely accurate.

• Employee ages — premiums rise on a federal age curve, so an older workforce costs more.
• Location — premiums vary widely by state and rating area (your county and ZIP).
• Plan tier — Bronze, Silver, Gold, and Platinum trade premium for out-of-pocket cost.
• Single vs. family enrollment — dependents multiply premium.
• Participation — group plans often require a minimum share of employees to enroll.

Group vs. ICHRA: two different cost models

With a group plan, the insurer sets the premium and typically raises it every renewal, so you absorb whatever increase they hand you. With an ICHRA, you set a fixed monthly allowance per employee, so your benefits line item is a number you choose and control.

That difference is the whole point for cost-conscious employers: you trade an unpredictable annual premium for a budget you set in advance.

A realistic budgeting example

Illustrative only. Suppose you have 10 employees and set a 500-dollar monthly ICHRA allowance. Your maximum benefits spend is 10 x 500 x 12 = 60,000 dollars a year — fixed, regardless of how the individual market moves. If an employee's plan costs less than their allowance, you reimburse only the lower amount, so real spend is often below the ceiling.

Compare that with a group plan, where a double-digit renewal can add thousands you did not budget for.

Costs people forget to count

The sticker premium is not the whole story. When you compare options, factor in the extras that quietly add up.

• Administration and compliance work, or fees to outsource it.
• Broker and HR time spent managing renewals.
• Renewal shock — mid-year budget hits from group increases.
• The payroll tax you would owe if you paid the same money as a taxable bonus instead of a tax-free reimbursement.

How to lower your cost without cutting benefits

You have more levers than a group plan gives you.

• Set the allowance by employee class (for example full-time vs. part-time) so you fund where it matters.
• Use the Federal Poverty Line affordability safe harbor to meet compliance without over-funding.
• Review the allowance annually instead of accepting an automatic renewal increase.
• Let employees choose their own plan tier so they can buy down premium if they prefer.