Average Cost of Health Insurance for Small Businesses

Average Cost of Health Insurance for Small Businesses: What You Need to Know in 2025

As a small business owner, providing health insurance to your employees is an important benefit that increases job satisfaction and retention. But knowing the average cost of health insurance and how it affects your business is crucial for making the right decisions.

In 2025, the price of small business health insurance remains variable based on coverage type, location, and employee population. This article discusses the average prices, premium-influencing factors, plan types, and advice for selecting affordable health insurance. —

Why Health Insurance Is Important for Small Businesses

Offering health insurance benefits has several benefits for small businesses:

Recruiting and Retaining Talent: Competitive benefits, such as health coverage, enable you to recruit high-quality employees and minimize turnover.

Tax Incentives: Employers who provide health insurance can be eligible for tax credits under the Affordable Care Act (ACA).

Increased Employee Productivity: Healthy workers are typically more productive and engaged, minimizing absenteeism.

Compliance with ACA: Businesses with 50 or more full-time employees are required to offer health insurance or face penalties.

Average Cost of Health Insurance for Small Businesses in 2025

The average cost of health insurance for small businesses depends on factors such as the plan type, location, and employee demographics.

✅ National Averages in 2025:

Per-employee employer contribution: $7,800 – $10,500 per year (~$650 – $875/month)
Per-employee contribution: $1,500 – $2,400 per year (~$125 – $200/month)
Total annual cost per employee: $9,300 – $12,900 (~$775 – $1,075/month)

✅ Average family coverage:

Employer contribution: $15,000 – $20,000 per year (~$1,250 – $1,670/month)
Per-employee contribution: $6,000 – $8,500 per year (~$500 – $710/month)

– Annual cost per family: $21,000 – $28,500 (~$1,750 – $2,375/month)

Determinants of Health Insurance Costs

A number of factors influence the premiums and total cost of small business health insurance:

Business Location:

Insurance premiums differ widely by state because of local healthcare costs, regulations, and competition.
For instance, insurance premiums in California and New York are generally higher than in states such as Idaho or Nebraska.

Employee Demographics:

Age, gender, and health of employees affect the premium rates.
Older workers generally result in higher premiums because they pose higher health risks.

Coverage Type:

Individual vs. family plans: Family coverage is much more expensive than individual plans.
Coverage tiers: Gold and platinum plans offering greater coverage have more expensive premiums, compared to bronze plans.

Industry Type:

Some industries, like construction or manufacturing, can have higher insurance prices because of higher workplace risks.

Number of Employees:

– Larger companies usually have lower per-person rates because of risk spreading, while small companies can expect higher prices.

Small Business Health Insurance Plan Types

Small companies have a variety of health insurance plans from which to select:

1. Preferred Provider Organization (PPO)

Provides healthcare provider flexibility to choose.
Employees are allowed to visit specialists without referral.
More expensive premiums but wider provider choices.
✅ Ideal for: Small companies with workers requiring wide provider networks.

2. Health Maintenance Organization (HMO)

Needs workers to choose a primary care physician (PCP).
Referral required for specialists.
Less expensive premiums and out-of-pocket expenses.
✅ Ideal for: Companies looking for affordable coverage with regional provider networks.

3. Health Savings Account (HSA) Plans

Coupled with high-deductible health plans (HDHP).
Pre-tax money is saved by employees for medical costs.
Contributions from employers to HSAs are deductible. ✅ Best for: Budget-conscious companies with healthier, younger workers.

4. Exclusive Provider Organization (EPO)

Employees need to go to in-network providers to get coverage.
No referral necessary for specialists.
Less expensive premiums than PPOs.
✅ Ideal for: Companies that value cost-saving and simplicity.

How to Save on Small Business Health Insurance

The following are some measures to control and save on health insurance costs:

Select a Group Health Plan:

Group plans generally have lower premiums than personal plans because of risk pooling.

Contribute to HSAs:

Offering HSA-compatible plans with employer contributions can reduce overall costs.

Wellness Programs:

Encourage healthy lifestyles by providing wellness programs, reducing long-term healthcare expenses.

Shop Around for Quotes:

Compare quotes from multiple insurers to find the best value.
Use small business insurance marketplaces or brokers for competitive rates.

Consider Level-Funded Plans:

Blends self-funding and traditional insurance, with possible savings and refunds if claims are minimal.

Tax Credits and Incentives for Small Businesses

Small businesses providing health insurance can be eligible for tax credits under the ACA:

Small Business Health Care Tax Credit:
Pays up to 50% of the employer’s premium contribution.

For businesses with fewer than 25 employees and average salaries less than $50,000 per year.

Tips for Selecting the Best Health Insurance Plan

When choosing a health insurance plan for your small business, keep the following in mind:

Assess Employee Needs:

Determine your team’s healthcare needs and preferences.

Balance Coverage and Cost:

Select a plan that provides adequate coverage without overloading your budget.

Know the Network:

Make sure the plan includes local providers and desired healthcare centers.

Check the Deductibles and Copays:

– Increased deductibles usually result in lower premiums, but workers will have to pay more out-of-pocket.

✅ Conclusion

Offering health insurance is a substantial expense for small companies, but it has long-term advantages in terms of attracting and retaining employees, enhancing productivity, and avoiding regulatory issues. In 2025, the average cost per employee is between $9,300 and $12,900 per year, and family coverage is between $21,000 and $28,500.

To control costs, small companies may consider group plans, tax credits, wellness programs, and affordable coverage options. By choosing the appropriate plan, you can insure your employees’ health while containing your business costs effectively.

Invest in health insurance today to create a healthier, more secure business and employee future!