Health insurance cost per employee for small businesses
Use KFF survey premiums carefully, separate employer and worker contributions, and budget for your actual coverage mix.
Updated October 2026 · 9 minute read
Health insurance can be the largest benefit expense after salary. The number that matters to your business is not necessarily the full premium. It is the employer contribution for each enrolled employee, plus any separate administration costs and benefit funding you choose to provide.
KFF's 2025 Employer Health Benefits Survey provides a public benchmark with clear definitions. It reports average annual premiums of $9,325 for single coverage and $26,993 for family coverage. Those are survey averages for covered workers, not a price promise to a small firm. They also describe 2025, so use actual renewal proposals when preparing a 2026 budget.
| Coverage | Full premium | Worker share | Derived employer share |
|---|---|---|---|
| Single | $9,325 | $1,440 | $7,885 |
| Family | $26,993 | $6,850 | $20,143 |
| Derived employer monthly equivalent | Not a new quote | Annual share divided by 12 | $657.08 to $1,678.58 |
Separate the premium from the employer contribution
KFF reports average annual worker premium contributions of $1,440 for single coverage and $6,850 for family coverage in 2025. Subtracting those from the corresponding premiums produces employer contribution benchmarks of $7,885 and $20,143. These are derived figures, not additional survey quotes, and the calculation is shown in the table.
The range across coverage tiers does not describe variation among identical policies. Family and single coverage are different products with different enrolled populations. If most staff choose single coverage, using the family figure for every person will overstate the budget. If several people cover dependants, a single coverage assumption can leave a substantial gap.
Employee deductions affect who funds the premium; they do not reduce the insurer's full bill. Make the employer share, employee share and total payment visible in payroll records. A premium increase can affect both the business and staff even when the contribution percentage stays the same.
Understand what the survey does and does not represent
KFF changed its survey sample in 2025 to employers with 10 or more workers, removing firms with 3 to 9 workers from the sample universe. That limits direct evidence for the smallest businesses. A company with 4 employees should not describe the national figures as an observed average for companies its own size.
The survey includes different plans, locations and employer arrangements. A benchmark can help test whether a quote needs further explanation, but it cannot establish that a broker's proposal is wrong. Compare the actual benefits, provider network, contribution rules and eligible population before making that judgement.
Use the year and coverage definition next to the figure. Do not rename the 2025 average as a 2026 market rate or apply an assumed annual inflation percentage without evidence. If your renewal price is higher or lower, explain the quote and its effective date rather than forcing it to match a national average.
What drives the cost up or down
Coverage mix changes the employer total. Ask employees to make actual elections through an appropriate process and budget for the options you offer. Do not pressure someone to disclose private medical information just to estimate cost. The information needed for pricing and administration should be handled through authorised channels.
The employer contribution policy matters. You might fund a fixed share or a defined amount, subject to applicable rules and the plan arrangement. Model how the policy affects single and dependant coverage separately. A contribution that looks generous for one tier may leave another unaffordable.
Plan design can change premiums and out of pocket exposure. Compare deductibles, copayments, prescription cover and network access, not just the premium. A cheaper plan that makes necessary care hard to obtain may not meet the business's aim of providing a useful benefit.
Administration and eligibility rules also matter. Confirm participation requirements, waiting periods, employer eligibility and any broker or service charges. Ask whether a displayed service fee includes medical premiums or only access to administration. A benefits platform subscription is not the cost of the health plan itself.
Compare coverage approaches carefully
The IRS explains that applicable large employers generally face shared responsibility rules based on workforce size, including full time equivalent calculations. The common threshold is 50 full time employees including equivalents, subject to the detailed rules. A small employer still needs to check plan, tax and state requirements rather than assuming no obligations apply.
HealthCare.gov explains the Small Business Health Options Program and the conditions for the small business health care tax credit. Eligibility is specific. Do not deduct an assumed tax credit from your annual cash budget before checking workforce, wage, contribution and other requirements with appropriate advice.
Reimbursement arrangements need separate analysis. The IRS publishes rules for qualified small employer health reimbursement arrangements, and other arrangements have their own requirements. An allowance informally labelled health money is not automatically a compliant reimbursement plan. Compare what the arrangement permits and how it interacts with other coverage.
Ask for a full annual illustration using the same employees and coverage tiers across proposals. Include employer contributions, administration and any separate account funding. Keep dental, vision, retirement and workers' compensation outside the medical premium total unless you explicitly add them as separate benefit categories.
Worked example: a 12 employee consulting business
Assume a consulting business has 12 enrolled employees. To isolate coverage mix, use KFF's 2025 national average employer shares rather than pretending to quote a plan. In the first scenario, 10 choose single coverage and 2 choose family coverage. The derived employer premium budget is 10 × $7,885 plus 2 × $20,143, or $119,136 annually.
In the second scenario, 8 choose single and 4 choose family. The calculation becomes 8 × $7,885 plus 4 × $20,143, or $143,652 annually. That is a planning range of about $119,100 to $143,700, generated by changing the assumed coverage mix. It is not a survey range for consulting companies and does not forecast a 2026 renewal.
The average employer amount per enrolled person in those scenarios is $9,928 to $11,971. Staff contributions are already excluded from the employer total. The calculation also excludes administration, separate account contributions and other benefits. Replace the benchmarks with actual tier prices and your chosen contribution policy before approving the budget.
Frequently asked questions
Is $9,325 the amount my company pays?
It is KFF's 2025 national average full premium for single coverage, not necessarily the employer share. The survey reports an average worker contribution of $1,440. The derived employer share is $7,885. Your actual plan price and contribution policy can differ.
Does this survey cover businesses with 5 employees?
The 2025 sample covers employers with 10 or more workers. It does not directly establish a current average for firms with 5 employees. Use the national figures as context only and request quotes suited to your workforce and location.
Are these verified 2026 premiums?
No. They are clearly labelled 2025 survey figures. No unverified 2026 premium average or inflation adjustment is used here. Your 2026 budget should use dated proposals or renewal notices and the contribution arrangement the business actually chooses.
Can employee deductions lower the total premium?
They change the share paid by the employer, not the full insurer premium. Keep the total premium and both funding shares distinct. When comparing offers, check whether a displayed amount is a full premium, employer contribution or administrative fee.
Can a small business claim a health care tax credit?
Possibly, but HealthCare.gov and IRS rules impose specific eligibility conditions. Do not assume the credit applies or subtract it from the cash bill without checking. A tax benefit, if available, can have different timing from the monthly insurance payments.
Sources
- KFF 2025 Employer Health Benefits Survey. 2025 premiums and worker contributions. The sample covers employers with 10 or more workers; these are not 2026 quotes.
- IRS: Employer Shared Responsibility. Applicable large employer rules and the 50 employee threshold, including equivalents.
- HealthCare.gov: Small Business Health Care Tax Credit. Credit eligibility and SHOP considerations.
- IRS: Qualified Small Employer Health Reimbursement Arrangements. Official rules and guidance for QSEHRAs.