Ever stared at a spreadsheet of employee benefits and felt your heart sink because you have no clue what a small business health insurance average cost really looks like?
You’re not alone. Most small‑business owners juggle payroll, taxes, and trying to keep the lights on, and the idea of adding health coverage can feel like stepping into a foggy maze.
But here’s the good news: the numbers aren’t as mysterious as you think. In 2021 the average annual premium for a single employee was roughly $7,800, which breaks down to about $650 a month. If you add a spouse or family members, the cost climbs, but many carriers offer tiered plans that let you tailor contributions to what your budget can handle.
Think about it this way—you’re essentially paying for peace of mind, the same way you’d invest in a solid fire alarm system. That monthly $600‑$800 might seem steep, yet compare it to the hidden price of an employee’s medical emergency without coverage. The savings in reduced turnover and happier staff often outweigh the premium.
So, what should you do next? First, sit down with a trusted insurance partner who can break down the average cost for your specific industry and location. Second, explore tax credits that can shave a few hundred dollars off that monthly bill. Finally, ask about flexible contribution models—maybe you cover 70 % of the premium and let employees handle the rest.
When you look at the small business health insurance average cost through that lens, it stops feeling like an insurmountable expense and starts looking like an investment in your team’s health and your company’s future.
Ready to turn those numbers into a clear plan? Let’s dive deeper and see how you can secure affordable, high‑quality coverage without breaking the bank.
Take the first step today and watch the cost become a clear, manageable part of your business plan.
TL;DR
The small business health insurance average cost is roughly $650 per employee each month, yet smart contribution splits and available tax credits can lower that outlay significantly. Talk to a broker, check state subsidies, and decide your share so the premium becomes an affordable, employee‑focused benefit for your business today.
Understanding the Factors Behind Small Business Health Insurance Average Cost
When you first see the headline “small business health insurance average cost,” it can feel like staring at a foggy dashboard with no speedometer.
But the cost isn’t a mystery; it’s the sum of a handful of predictable pieces that you can pull apart, examine, and even tweak.
First, the base premium is driven by the age, health status, and family composition of your workforce.
A 30‑year‑old employee costs far less than a 55‑year‑old, and adding spouses or dependents can add 30‑50 % to the per‑person rate.
Second, geography matters. Premiums in the Northeast or West Coast often sit a few hundred dollars higher than those in the Midwest, reflecting regional provider pricing and cost‑of‑living differences.
Third, the type of plan you pick—HMO, PPO, or high‑deductible health plan (HDHP) paired with a health‑savings account—directly shapes the monthly bill.
An HDHP usually looks cheaper up front, but you’ll pay more out‑of‑pocket when you need care, so the “average cost” you’re tracking must include both premium and expected utilization.
Fourth, employer contribution strategy adds another layer. If you cover 70 % of the premium, the employee’s share drops dramatically, but your out‑of‑pocket expense rises.
Finally, tax credits and subsidies can shave a few hundred dollars off the headline number, especially if your average employee salary is under $56,000 and you meet the SHOP contribution threshold.
So, how do you turn all these moving parts into a clear, actionable estimate?
Start by gathering your roster, noting each employee’s age bracket, family status, and zip code. Plug those details into a simple spreadsheet that multiplies the base rate by the appropriate geographic factor and then adds the plan‑type multiplier.
Next, decide how much you want to contribute. A common sweet spot for many owners is covering 60‑70 % of the premium, which balances affordability for the business and a meaningful benefit for staff.
Then, apply any available tax credit. The Small Business Health Care Tax Credit can cover up to 50 % of your contribution, but only if you meet the eligibility criteria—generally 25 or fewer full‑time equivalent employees and average wages below $56k.
Pull all those numbers together, and you’ll have a realistic “average cost” that reflects your unique situation—not a one‑size‑fits‑all national average.
If you want a ready‑made calculator, our own guide walks you through each step and even links to a quick quote tool that pulls real‑time rates based on the data you enter.
Industry risk classification can also shift the premium curve. Employers in high‑risk fields—like construction or manufacturing—may see a 10‑15 % uplift because insurers expect more workplace injuries and related medical claims.
On the flip side, offering wellness programs, preventive screenings, or on‑site health clinics can earn you discounts or lower your claims experience, which in turn pulls the average cost down over time.
Don’t forget the administrative side. Some carriers bundle enrollment fees, billing services, and compliance support into the premium, while others charge them separately. Those hidden fees can add $20‑$50 per employee each month, so always ask for a detailed cost breakdown before you sign.
Bottom line: the small business health insurance average cost you see in headlines is a starting point. By dissecting age, location, plan design, contribution levels, tax credits, industry risk, and administrative fees, you can build a customized picture that often lands well below the national average.
How to Calculate Your Small Business Health Insurance Average Cost
Okay, you’ve gathered the demographics, you’ve peeked at state averages, and now you’re staring at a spreadsheet that looks like a mystery novel. How do you actually turn all those numbers into a clear “small business health insurance average cost” you can trust?
Step 1: Pull the raw premium data
First, ask every carrier for the plain‑old premium amount they’d charge each employee. Don’t settle for a bundled quote that hides the employee‑only versus family cost – you need both. Write them down in three columns: employee‑only premium, family premium, and the employer’s contribution percentage.
Pro tip: If you’ve got a mix of full‑time and part‑time folks, treat them separately. Part‑time staff often qualify for a lower “minimum essential coverage” rate, which can shave a few hundred dollars off the average.
Step 2: Adjust for your rating area
Premiums aren’t the same across the country. Washington might be $517 per person, while the Northeast tops $800. Use the average‑premium tables that the IRS gets from HHS to see what the “baseline” looks like in your rating area. The IRS explains how those averages are calculated, and you’ll compare your carrier’s quote against that benchmark.
If your quote is higher, you can negotiate down or look for a different carrier. If it’s lower, you’ve already got a good deal.
Step 3: Factor in the employer contribution
Remember, the “average cost” you report to yourself should reflect what you actually pay, not the total premium. Take the employer‑paid portion for each employee, add them up, then divide by the total headcount. That gives you the true average out‑of‑pocket cost for your business.
Example: Four staff pay $6,000 each for employee‑only coverage, and you cover 50 % of each. Your contribution is $3,000 × 4 = $12,000. Divide by four and you get a $3,000 average annual cost – or $250 a month per employee.
Step 4: Apply the Small Business Health Care Tax Credit
If you meet the eligibility rules (pay at least 50 % of the premium, have ≤ 25 full‑time equivalents, and average wages under $56,000), you could snag a credit worth up to 50 % of that contribution. The IRS says you only count the employer‑paid portion when calculating the credit, and you compare it to the average premium in your rating area. The credit calculation details are spelled out there.
Take the $12,000 contribution from our example. If the average premium for employee‑only coverage in your state is $5,000, 50 % of that is $2,500 per employee. Since you paid $3,000 per employee, the credit caps at the lower figure – $2,500 × 4 = $10,000. Half of that ($5,000) could come back to you as a credit, effectively reducing your average cost to $250 – $417 a month, depending on the final credit amount.
Step 5: Use a cost‑estimator tool for sanity‑checking
Many states, like New York, offer online cost estimators that let you plug in your projected premiums, family composition, and expected subsidies. It’s a quick way to see if your numbers line up with what the marketplace expects. The NY State of Health estimator walks you through that process and even flags extra savings like silver cost‑sharing reductions.
Even if you’re not in New York, the tool’s layout is a good template – just replace the state‑specific numbers with the ones you pulled from your carriers.
Step 6: Build a living spreadsheet
Now that you have the raw data, the adjusted average, and the potential tax credit, create a simple three‑tab workbook:
- Tab 1 – Raw premiums and employer contributions.
- Tab 2 – Adjusted averages vs. state benchmarks.
- Tab 3 – Credit calculator (auto‑populate the IRS formulas).
Every quarter, update the premium quotes and re‑run the credit calculation. You’ll spot trends – maybe a new carrier offers a lower family rate, or your employee mix shifts younger, which could let you lower deductibles.
And if you need a visual walk‑through, check out this short video that walks you through the spreadsheet setup step‑by‑step:
Bottom line: calculating your small business health insurance average cost isn’t magic – it’s a series of data pulls, simple math, and a credit check. Do the steps above, keep the numbers fresh, and you’ll turn that foggy spreadsheet into a clear, actionable budget line.
Comparison of Popular Small Business Health Insurance Plans
So you’ve crunched the numbers and you know the small business health insurance average cost is hovering around $650 per employee per month. The next question is: which type of plan actually gives you the most bang for your buck?
Below you’ll see three of the most common choices small employers juggle – a traditional fully‑insured group plan, a Health Reimbursement Arrangement (HRA), and a high‑deductible health plan paired with a Health Savings Account (HDHP + HSA). Each one shifts costs and risk in a different direction, and the right fit depends on your workforce’s age, turnover and how much control you want over the dollars.
Traditional Fully‑Insured Group Plan
With a fully‑insured group plan, the carrier assumes the risk of claims. You pay a fixed premium each month, and the insurer covers most medical expenses after deductibles and co‑pays.
Pros: predictable budgeting, broad network, easy admin – you just hand the carrier a list of employees.
Cons: premiums can climb quickly if claims spike, and you have less flexibility to tailor contributions for different employee groups.
Health Reimbursement Arrangement (HRA)
An HRA lets you set a monthly reimbursement allowance that employees use to buy their own individual policies or to cover out‑of‑pocket costs. The IRS says HRAs are a “tool to help you compare coverage options” for small businesses on the Health Insurance Marketplace.
Pros: you control the exact dollar amount you’ll spend, and unused funds typically roll over year to year.
Cons: employees must be comfortable navigating the individual market, and the reimbursement may not cover high‑cost events without a larger allowance.
HDHP + HSA
A high‑deductible health plan paired with a Health Savings Account gives employees a tax‑advantaged bucket to pay for qualified expenses. The employer can contribute to the HSA, effectively lowering the “small business health insurance average cost” you see on your spreadsheet.
Pros: lower premiums than traditional plans, plus the HSA balance grows tax‑free and can be rolled over forever.
Cons: employees need enough cash flow to handle the deductible before the HSA kicks in, and you’ll spend more time explaining the mechanics.
Quick comparison table
| Plan type | Typical monthly premium (per employee) | Employer contribution flexibility | Key trade‑off |
|---|---|---|---|
| Fully‑insured group | $600‑$800 | Fixed % (e.g., 70 %) | Predictable cost, less control over claim risk |
| HRA | Varies – you set the allowance | Exact dollar amount you reimburse | More admin for employees, but caps your outlay |
| HDHP + HSA | $450‑$600 | Can contribute to HSA each year | Lower premiums, higher upfront deductible for staff |
Which one feels like a fit for your team? If most of your crew is young, tech‑savvy and comfortable buying on their own, an HRA or HDHP + HSA can shave a few hundred dollars off that $650 average. If you have a mixed age group and want a simple, “set‑and‑forget” solution, the fully‑insured group plan might be worth the premium premium.
Don’t forget the state factor. Kansas‑based employers often see the average individual cost sit at about $517 per month, according to the state insurance filing data from the Kansas Department of Insurance. That regional benchmark can be a handy bargaining chip when you negotiate with carriers.
Action step: Pull the three quotes, plug them into the table above, and see which option lands closest to your target average cost. Then schedule a quick call with a Life Care Benefit Services advisor – we’ll walk you through the numbers, point out hidden fees, and help you lock in the plan that protects both your bottom line and your people.
Strategies to Reduce Your Small Business Health Insurance Average Cost
Ever looked at your payroll spreadsheet and wondered why the small business health insurance average cost feels like a stubborn leak you can’t plug? You’re not alone. The good news is that most of the “leak” comes from choices you can actually control.
1. Do a quick audit and cut the dead weight
First thing’s first: grab your latest plan documents and ask yourself, “Do our people really use this benefit?” If you spot a dental rider that only 5% of staff use, or an vision add‑on that sits untouched, consider dropping it. A leaner plan immediately trims the premium you pay.
And don’t forget the hidden fees – enrollment fees, carrier service charges, and “administrative” surcharges often add up. Pull those line items into a simple table and see where a few dollars a month disappear.
2. Switch to a flexible HRA model
Health Reimbursement Arrangements (HRAs) give you a predictable budget because you set the exact reimbursement amount. Whether you choose an ICHRA that lets you reimburse any individual policy, or a QSEHRA with set contribution limits, you keep control while still offering a meaningful benefit.
Take Command points out that businesses using HRAs can save “up to 20‑35% on benefits” because the employer‑funded amount is fixed and tax‑free for employees according to their cost‑reduction guide. That alone can shave a few hundred dollars off the average cost.
3. Pair HRAs with a high‑deductible health plan (HDHP)
HDHPs come with lower monthly premiums. When you add an HRA on top, you can cover part of the higher deductible, making the combo feel affordable for both sides. Employees get the peace of mind of a safety net, and you keep the premium low.
It’s a win‑win, especially if you’ve got a younger workforce that’s comfortable handling a $1,500‑$2,000 deductible.
4. Leverage the Small Business Health Care Tax Credit
If you pay at least 50% of the premium and have ≤ 25 full‑time equivalents, you could qualify for a credit that covers up to half of your contribution. Run the numbers with the IRS calculator – it’s often an easy “free money” boost that drops your average cost dramatically.
5. Bundle and negotiate like a pro
Just as you might bundle internet and phone services, you can bundle health benefits with other employee perks – wellness programs, tele‑health subscriptions, or even a group dental plan. Carriers love bundled business and will often give you a better rate when you increase the overall spend.
Ask for a “blended rate” if you have remote workers in lower‑cost states. A mixed‑location premium can be lower than a one‑size‑fits‑all quote.
6. Keep the plan design simple and transparent
Complex benefit designs create admin overhead and confusion, which can translate into higher costs. Stick to a clear contribution formula (e.g., 70% employer, 30% employee) and communicate it in plain language. When employees understand the trade‑off between premium and out‑of‑pocket, they’re more likely to choose the option that actually lowers your average cost.
7. Encourage wellness without breaking the bank
Small, consistent incentives – like a $30‑a‑month gym‑membership stipend or quarterly flu‑shot clinics – can reduce claim frequency. Over time, fewer ER visits mean lower renewal premiums.
Track participation and share the savings with your team; they’ll appreciate seeing their effort pay off.
So, what’s the next step? Pull your current plan data, run a quick HRA feasibility check, and schedule a brief call with a Life Care Benefit Services specialist. We’ll walk you through the numbers, show you where the biggest leaks are, and help you lock in a plan that brings your small business health insurance average cost down to a level you can actually manage.
Ready to cut costs and keep your crew happy? Read more about the full cost landscape and then give us a ring – let’s design a strategy that works for you.
Call today, request a quote, or schedule a free consultation. Your next‑level benefits plan is just a conversation away.
Tax Implications and Regulatory Considerations
When you start looking at the small business health insurance average cost, the numbers on the spreadsheet are only half the story. The other half lives in the tax code and the rules that keep you from getting a nasty penalty.
Understanding the Small Business Health Care Tax Credit
First off, if you’re paying at least half of your employees’ premiums and you have 25 or fewer full‑time equivalents, the federal government may hand you a credit that can cover up to 50 % of what you actually spend. That’s not a “maybe” – it’s a dollar‑for‑dollar reduction that shows up on your tax return.
How does it work? The credit is calculated against the average premium you pay for a single employee, then compared to the benchmark premium for your state. If your contribution exceeds half of that benchmark, you get the full credit; if it’s lower, you get a proportional amount.
Think about a bakery in Ohio that pays $5,800 per year per employee. The state benchmark might be $6,200. Because the bakery’s contribution is above 50 % of the benchmark, the credit could be the full 50 % of its $2,900 contribution – a $1,450 reduction on each worker’s cost.
Qualified Small Employer HRA (QSEHRA) Rules
Another way to shape the average cost is through a QSEHRA. The IRS allows businesses with fewer than 50 employees to reimburse employees tax‑free for medical expenses, up to a yearly limit that the agency updates each calendar year. The key is that you can’t offer a group health plan at the same time, and the reimbursement can’t exceed the annual limit (for 2024 it was $5,850 for individuals, $11,800 for families).
Because the money you reimburse is excluded from payroll taxes, both you and your team keep more of each dollar. And because the reimbursement is capped, you can predict exactly how much you’ll spend each month – a handy tool for keeping the “average cost” from spiraling.
For the official definition of what counts as a QSEHRA‑eligible plan, see the HealthCare.gov QSEHRA page. It spells out the minimum essential coverage requirement and the enrollment window you need to respect.
Compliance Checklist for the ACA
Even if you’re not required to offer coverage (the employer mandate kicks in at 50 FTE), you still have to make sure any plan you do offer meets the Affordable Care Act’s “minimum value” and “affordability” tests. In practice that means:
- Coverage must pay at least 60 % of the total allowed cost of a typical “standard” plan.
- The employee’s share of the premium can’t exceed 9.12 % of their household income (the exact figure is updated each year).
- You must provide a written Summary of Benefits and Coverage (SBC) to every participant.
If you miss any of those boxes, you could face a penalty that instantly wipes out any tax credit you thought you were earning.
Real‑World Example: Midwest Manufacturing Co.
Imagine a 22‑person metal‑fabrication shop in Indiana. The owner chose a high‑deductible plan with a $600 monthly premium per employee and decided to cover 70 % of that cost. That puts the employer’s out‑of‑pocket at $420 per person, or $10,080 a year total.
Because the workforce average wage was $48,000, the business qualified for the Small Business Health Care Tax Credit. Using the credit formula, the owner reclaimed $5,040 – roughly half of what he was spending.
At the same time, the shop set up a QSEHRA with a $4,000 annual reimbursement limit. Employees who opted for a cheaper Marketplace plan ended up paying $150 a month out‑of‑pocket, while the employer’s tax‑free reimbursement covered most of that. The net effect? The “small business health insurance average cost” on the owner’s books dropped from $420 to about $260 per employee per month.
Actionable Steps to Keep Your Costs in Check
Ready to take control? Here’s a quick 5‑point checklist you can run through before your next renewal:
- Run the credit calculator. Pull your payroll data, plug the numbers into the IRS’s small‑business credit worksheet, and see if you qualify.
- Map employee demographics. Split your team by age or family status and consider tiered contributions or separate QSEHRA limits.
- Confirm ACA compliance. Double‑check the minimum value and affordability thresholds; a simple spreadsheet can flag any outliers.
- Set a QSEHRA cap. Choose a reimbursement limit that aligns with your budget and the typical premium in your rating area.
- Document everything. Keep enrollment forms, SBCs, and your credit calculation files for at least three years – the IRS likes paperwork.
If you follow those steps, you’ll not only lower the headline “small business health insurance average cost,” you’ll also avoid surprise penalties and keep more cash in the bank for the things that matter – like that coffee machine you’ve been eyeing.
Need a personalized walkthrough? Give Life Care Benefit Services a call, request a quote, or schedule a free consultation. We’ll crunch the numbers, run the credit analysis, and design a tax‑smart benefits strategy that fits your team’s needs.
Additional Benefits: Group Coverage, Employee Retention, and More
Imagine you’ve finally cracked the small business health insurance average cost puzzle and you’re looking at the line‑item on your budget. That number isn’t just a bill – it’s a lever you can pull to attract talent, boost morale, and keep turnover low.
Does it feel weird that a health plan can be a hiring magnet? Trust me, it’s not. When you offer genuine group coverage, you’re saying, “We’ve got your back.” That simple message resonates with a worker who’s juggling a mortgage, kids’ school fees, and a side hustle.
Why group coverage matters more than the premium tag
First off, a group plan creates a sense of belonging. Employees see themselves as part of a collective risk pool, which often translates into lower per‑person costs than buying individual policies. Even if the average cost looks a bit higher than a DIY marketplace plan, the peace of mind you deliver can shave years off your recruiting cycle.
Second, the tax‑friendly structure of many small‑business options – like QSEHRAs paired with a group plan – means the money you spend on premiums is often deductible, further softening the impact on your bottom line.
Retention: the hidden ROI of health benefits
Ever notice how a junior employee who gets a raise leaves a month later? It’s usually not about the salary. It’s about the overall package. A solid health benefit can increase employee tenure by 12‑18 % according to industry surveys. Think about it: a worker who knows their family’s doctor visits are covered is less likely to jump ship for a slightly higher paycheck elsewhere.
And here’s a quick mental model: if you lose a seasoned employee who costs $70,000 a year in salary, plus $15,000 in hiring and onboarding, that’s $85,000 gone. If a modest $200 per month benefit keeps that person around, you’re saving roughly $2,400 a year – a tiny fraction of the loss.
Beyond health: ancillary perks that amplify the value
Group coverage can be the gateway to other perks without blowing your budget. For example, many carriers bundle tele‑health, wellness coaching, and even mental‑health subscriptions at no extra charge. Those services show up on the payroll stub as a “free” benefit, yet they can cut future medical claims and keep your workforce healthier.
Another low‑cost win is a stipend for fitness or a quarterly wellness challenge. Employees love a $30‑a‑month gym credit, and the collective reduction in ER visits can nudge your small business health insurance average cost down a notch at renewal.
Actionable checklist: turn benefits into retention gold
1. Map out your current turnover cost. Grab the salary, recruitment, and training numbers for the last 12 months – you’ll be surprised how big the figure is.
2. Match your group plan’s contribution level to that cost. If a 70 % employer contribution saves you $5,000 in turnover, it’s worth the extra premium.
3. Add one “nice‑to‑have” perk (tele‑health, mental‑health app, or gym stipend). Track utilization for six months and use the data when you renegotiate rates.
4. Communicate the story. Send a short video or a one‑page flyer that says, “We care about your health, and here’s how that protects your paycheck.” When employees see the direct link, engagement spikes.
5. Review annually. The market shifts, your team grows, and your needs change. Set a calendar reminder for the same week you file taxes – that way you compare the new average cost against the retention savings you’ve logged.
Does this sound doable? Absolutely. The magic isn’t in spending more; it’s in spending smarter. By aligning your health plan with retention goals, you turn a line‑item expense into a strategic advantage.
Ready to see how the right group coverage can lower your small business health insurance average cost while keeping your best people happy? Give Life Care Benefit Services a call, request a personalized quote, or schedule a free consultation today. Let’s design a benefits package that protects both your team’s health and your profit margin.
Conclusion
So, after digging through premiums, tax credits, and the levers you can pull, the picture’s clearer: you can actually shape the small business health insurance average cost instead of watching it drift.
Remember the three‑step habit we built – pull raw data, adjust for your rating area, then factor in contributions and credits. Each step is a tiny experiment, and the results add up fast.
If you’ve already trimmed unused riders, set up a flexible HRA, or added a modest wellness stipend, you’ve likely shaved a few hundred dollars per employee off that average cost.
What’s next? Grab your spreadsheet, plug in the latest quotes, and schedule a quick call with Life Care Benefit Services. We’ll walk you through the numbers, point out any hidden fees, and help you lock in a plan that protects both your team’s health and your profit margin.
And don’t forget to revisit the plan each year – a calendar reminder around tax time keeps the numbers fresh and the savings rolling.
Ready to turn the average cost into a strategic advantage? Call today, request a personalized quote, or set up a free consultation. Let’s make your benefits work for you.
Because every dollar saved on insurance can be redirected to growth, new hires, or that coffee machine you’ve been eyeing – the choice is yours.
FAQ
What is the small business health insurance average cost and why does it vary?
The small business health insurance average cost is the typical amount a company pays per employee each month after you factor in premiums, employer contributions, and any tax credits. It isn’t a fixed number because rates shift based on where you’re located, the age and health of your workforce, the plan design you pick, and whether you qualify for the federal Small Business Health Care Tax Credit. In practice you’ll see a range from $400 to $800 per person per month.
How can I calculate my own small business health insurance average cost?
Start by pulling every quote you have—employee‑only and family premiums—from each carrier. Put those numbers into three columns: employee‑only premium, family premium, and the percentage you plan to contribute. Next, adjust each premium for your state’s rating area using the IRS‑published benchmark tables. Then total the employer‑paid portion across all staff and divide by your headcount; that gives you the raw average. Finally, run the numbers through the IRS credit calculator; any credit you earn drops the average cost even further.
What tax credits are available to lower the small business health insurance average cost?
The biggest saver is the Small Business Health Care Tax Credit, which can cover up to 50 % of the employer’s contribution if you have 25 or fewer full‑time equivalents and pay at least half of the premium for employees earning under $56,000. You’ll also want to check whether a Qualified Small Employer HRA (QSEHRA) or an Individual Coverage HRA (ICHRA) lets you reimburse tax‑free, effectively reducing the out‑of‑pocket amount you report. Both options show up as a credit on your federal return, so be sure to keep every enrollment form and calculator screenshot for the audit trail.
How does employee size affect the small business health insurance average cost?
Because insurers view risk in blocks, a team of five employees usually pays a higher per‑person premium than a group of twenty. The reason is that the administrative overhead is spread over fewer lives, and the actuarial tables have less data to smooth out individual spikes. If you can grow past the 25‑employee threshold, you also unlock the full Small Business Tax Credit, which can shave a few hundred dollars off that average cost each month.
Can I use a Health Reimbursement Arrangement (HRA) to lower the average cost?
Absolutely. With an HRA you set a fixed monthly allowance that you reimburse tax‑free, so the employer‑paid portion becomes a predictable line item on your spreadsheet. Employees then shop the individual market for the coverage that fits their needs, often finding plans that cost less than a one‑size‑fits‑all group policy. Because the reimbursement amount is capped, you know exactly how much you’ll spend, and that caps the average cost you report.
What’s the best way to keep the average cost low year after year?
Treat your benefit plan like a quarterly financial review. At the start of each year, pull the latest carrier quotes, run the IRS credit calculator, and compare the numbers against your last‑year spreadsheet. Look for any dead‑weight riders—dental or vision add‑ons that only a handful of staff use—and drop them. Then experiment with a small tweak, like moving 5 % of employees to a high‑deductible plan paired with an HRA, and measure the impact. Rinse and repeat, and you’ll watch the average cost drift downward without a major overhaul.
