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Small-Sized and Medium-Sized Business Employers

Small business employers

Typical Plan Costs and Cost-Sharing

Health plan costs vary greatly. Many factors contribute to a plan's costs, including access to and choice of health care providers, hospitals, and medical services, preventive care, company size, and overall health of employees.

Finding an affordable health insurance plan for your employees that is within your company's budget is very important factor in your decision to offer employees health insurance and the type of coverage you can offer. The cost of small employer group health insurance coverage and HDHPs and HSAs in Alabama may be different from the national averages cited below. To learn more about the actual costs of health plan options offered in Alabama go to Alabama Health Plans.


Almost all companies require employees to share in costs of the health plan benefits and services. How employers structure cost-sharing greatly affects what they and their employees contribute to the health plan costs. It can also influence employees' participation in the health plan benefit.

  • Employee cost—sharing is generally divided between:
    • Premium contributions—These are overall health plan benefit costs paid by the employer and deducted from the employee's paycheck.
    • Cost-sharing at the time of service—This may include co-payments at the time employees obtain medical services (including hospital stays and prescription drug purchases), co-insurance , and deductibles.

Overall Health Plan Premium Costs: Employer/Employee Contributions

The following statistics are from a 2005 Employer Health Benefits Study conducted by the Kaiser Family Foundation. Employers from across the United States participated.

  • In 2005, almost all employers (who participated in the study) contributed at least 50% or more to overall health plan premium costs.* The majority of employers contributed between 75% and 100% for single coverage and between 50% and 100% for family coverage (defined as a family of four).
  • In 2005, the annual premium for a health plan averaged $4,026 for single coverage and $10,008 for family coverage. Employees contributed $610 annually or $51 monthly to the overall health benefit premium contribution for single coverage and $2,713 or $226 monthly for family coverage.
  • Employees in smaller businesses with 199 or fewer workers tend to contribute significantly more to their premiums. For example, workers in smaller companies contributed $3,170 annually for family coverage compared workers in larger companies with 200 or more workers who paid $2,487 annually for a family coverage.

* Health plan premiums for managed care type plans (HMOs, POs, and POS). high-deductible health plan costs are not included.

Average Annual Health Plan Premiums in 2005 by Plan Type for Single and Family Coverage

The 2005 Employer Health Benefits Study reported the following employer/employee contributions to health plan premiums for conventional, health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) health plan options.

Health Plan Type of Coverage Annual Employer Contribution Annual Employee Contribution Total
Conventional Single $498 $3,284 $3,782
Conventional Family $2,321 $7,568 $9,979
HMO Single $3,203 $563 $3,782
HMO Family $2,604 $7,852 $10,456
PPO Single $603 $3,547 $4,150
PPO Family $2,641 $8,449 $11,090
POS Single $731 $3,183 $3,914
POS Family $3,250 $7,551 $10,801

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