What influences employer-based health insurance costs?

Most people get their health insurance through their employer.

When determining health insurance premium quotes, health insurers gather information from employers, including employee ages, the employer’s industry and the past year of employee medical claims.

"They generally consider the average age and gender of the employee,” says Gary Franke, owner of Achieve Alpha Insurance. “For example, women in their childbearing years are more expensive to insure but so are older men in their 50s or 60s, who are more prone to having a heart attack, stroke or other major issues.”

If your health insurance went up, this might be why. Employer plan premiums tend to increase year-over-year based on the prior year's expenses.

“So if your employer group is healthier than average in the prior year, the monthly price you and your employer will pay will go up by less," adds Franke.

Group plans are also commonly priced using "composite rate quoting," according to Marshall Darr, vice president of marketing and a licensed broker with Decent, a health insurance administrator.

"An employer submits the ages for all employees and their dependents. The carrier then provides a single rate that averages out the risk across the company, so that everyone pays the same," Darr explains. "But companies that skew older will have more expensive premiums."

The type of health plan also influences costs, including premiums and deductibles.

The most common employer-sponsored health plan is a preferred provider organization (PPO) plan, which usually costs more than a health maintenance organization (HMO) plan. PPO plans often have similar deductibles.

Meanwhile, a high-deductible health plan (HDHP) usually has much lower premiums than PPOs and HMOs, but much higher deductibles. You pay a deductible for health care services before a health plan chips in. A high deductible means you’ll pay more when you need care than if you had an HMO or PPO.

Another factor that goes into employer-sponsored costs is how much the business pays. Employers usually pay more than half of health insurance premiums, but that can vary.

Kaiser Family Foundation (KFF) estimated in 2023 employees paid an average annual employer-sponsored premium of $1,735 for single coverage and $6,575 for a family plan. Family plan premiums cost almost $24,000 on average, but employers paid nearly $17,000 of that amount on average with the employee picking up the rest. KFF does not have estimates for 2024 yet.

What influences ACA plan costs?

Individual health plans and plans on the Affordable Care Act’s Health Insurance Marketplace request key information from people when determining health insurance costs.

"Health insurance costs will vary significantly depending on your age, geography, family status and tobacco use," notes Brian Martucci, a personal finance expert with Money Crashers.

Plans can’t reject you or charge higher rates because of pre-existing conditions. The ACA ended that practice.

"Generally speaking, young, healthy non-smokers enjoy the lowest health insurance premiums, while older adults pay more – especially on the individual market," says Martucci.

Chris Orestis, the president of Life Care Xchange and a nationally recognized healthcare expert, echoes those thoughts.

"Our current system rewards people for being younger and healthier in both group or individual coverage. But the differences are much starker for individual coverage," says Orestis.

Darr says the ones who tend to pay the most overall are older folks who don't yet qualify for Medicare – such as 64-year-olds.

Franke says individual plan insurers can only charge an older person three times what it charges a younger person.

However, younger people tend to pay a higher relative premium every month for an ACA plan than older people, Franke notes.

"The problem is that younger people, in general, are more likely to go without insurance, since it is expensive relative to the cost. ACA insurance carriers need more younger people to even out the expenses of older people, so they charge younger policyholders more than they should be paying," says Franke.

How your health plan affects health insurance costs

The type of plan you choose also influences ACA plan costs. People with ACA plans through the Health Insurance Marketplace can choose a Platinum, Gold, Silver, or Bronze plan. The plans differ by premiums and out-of-pocket costs.

Here are the differences:

Bronze

  • Lower premiums than other ACA plans
  • Higher deductibles and out-of-pocket costs when you need care than the other ACA plans
  • Plan covers 60% of health care costs and you pay the other 40%

Silver

  • Higher premiums than Bronze, but lower premiums than Gold and Platinum
  • Higher deductibles and out-of-pocket costs than Gold and Platinum, but less than Bronze
  • Plan covers 70% of your health care costs and you pay the other 30%

Gold

  • Higher premiums than Bronze and Silver, but lower premiums than Platinum
  • Higher deductible and out-of-pocket costs than Platinum, but less than Bronze and Silver
  • Plan covers 80% of your health care costs and you pay the other 20%

Platinum

  • Higher premium than any other plan
  • Lower deductibles and out-of-pocket costs than any plan
  • Plan covers 90% of your health care costs and you pay the other 10%

The KFF reported that in 2024 the average monthly premium of an ACA plan without subsidies is $477 for an individual.  

Broken down by plan type, the average monthly premiums by metal level with no subsidies are:

  • Bronze: $364
  • Silver: $468
  • Gold: $488

How income affects health insurance rates

There’s another factor in what you pay for an ACA plan – your income. You can qualify for subsidies that lower your monthly premiums based on your income compared to the federal poverty level (FPL). As of 2024, the calculation works on a sliding scale. If your income is 250% FPL, you must only pay up to 4% of your household income toward healthcare premiums. The 250% FPL benchmark in 2024 is $36,450 for an individual and $75,000 for a family of four.

If your FPL is 400% or higher, you pay no more than 8% of your household income on healthcare premiums. In 2024, 400% FPL is $58,320 for an individual or $120,000 for a family of four. 

Kaiser Family Foundation offers a tool that estimates health insurance costs for a marketplace plan.

How your state affects health insurance costs

Where you live and your state of residence can also affect what you pay for individual insurance and an ACA plan.

"Many states have taken steps in recent years to stabilize their internal health insurance markets and drive down premiums," Martucci says. "For instance, at least 10 states – including Minnesota, Oregon, New Jersey, Maryland and Wisconsin – have established or applied to establish reinsurance funds that cover a portion of high-cost claims, easing the burden on insurers."

Darr adds that states also run their own health insurance exchanges and can make decisions about insurance matters, including when to make special open enrollment periods available.

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COBRA

Consolidated Omnibus Budget Reconciliation Act
People who lose their employer-sponsored health insurance may qualify for a COBRA plan. COBRA lets you keep your former employer's health plan, but you're responsible for paying all of the costs, including your former employer's portion.
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Medicare

People who are 65 and over qualify for Medicare. You can choose Original Medicare (also called Parts A and B), which is offered by the federal government, or Medicare Advantage (also called Part C), which private insurers provide. The average annual premium for Original Medicare is about $1,600. Medicare Advantage's average yearly premium is $336, but you may have higher out-of-pocket costs than Original Medicare.
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Medicaid

Low-income Americans qualify for Medicaid. Thirty-eight states expanded Medicaid eligibility, so lower-middle-class Americans may also be eligible in those states. Medicaid offers comprehensive benefits, but at little to no cost depending on your income. Each state has its own eligibility. Some states are flexible with Medicaid eligibility for people who are pregnant, a parent or disabled. If your household income is below 138% of the federal poverty level, you're likely eligible for Medicaid if you live in a Medicaid expansion state. That level is $17,609 for an individual, $23,791 for a family of two, $29,974 for a family of three and $36,156 for a family of four. Non-Medicare expansion states have stricter income guidelines. Check with your state's Medicaid program to see if you qualify.
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Parent's employer-based health insurance

The Affordable Care Act lets children stay on a parent's health plan until the age of 26. Having a child on a parent's health plan may or may not increase premiums. It depends on whether you already have family coverage when adding the child to the plan. If a parent already has family coverage, adding a child won't likely increase premiums. However, going from single or couple to family coverage could cause premiums to skyrocket. The average single coverage employer-sponsored plan premium is $1,186. The average family plan is $5,447.
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Spouse's employer-based health insurance

Most employers allow employees to add spouses to their health insurance. Going from single health coverage to a family plan may triple or quadruple your premiums. The average single coverage employer-sponsored plan premium is $1,186. The average family plan is $5,447. Not all jobs allow for spouse's coverage, so you'll want to check with your employer to make sure it's an option.
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Employer-based health insurance

Most people with private health insurance get their coverage through a job. employer-sponsored health insurance is usually cheaper than individual health insurance unless you qualify for Affordable Care Act subsidies. Job-based plans are generally less expensive because businesses often pick up more than half of employer-sponsored health insurance premiums. Kaiser Family Foundation estimates the average premiums for a single coverage employer-sponsored health plan is $1,186 and the average family plan is $5,447 annually.
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  • PPO
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Employer plans are often one of these types of four plans. Click on each one to find out more.
  • PPO
  • HMO
  • HDHP
  • EPO

Preferred-provider Organization (PPOs)

  • Pay higher premiums with a lower deductible
  • You have access to more providers, but pay much more for health insurance
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You want the ability to get out-of-network care
Preferred-provider organization (PPOs) plans are the most common type of employer-based health plan. PPOs have higher premiums than HMOs and HDHPs, but those added costs offer you flexibility. A PPO allows you to get care anywhere and without primary care provider referrals. You may have to pay more to get out-of-network care, but a PPO will pick up a portion of the costs.
Find out more about the differences between plans

Health maintenance organization (HMO)

  • Pay higher premiums with a lower deductible
  • Restricted network of providers with lower premiums
  • You want to choose a primary care physician
  • You don't mind getting a referral
  • You don't care about the ability to get out-of-network care
Health maintenance organization (HMO) plans have lower premiums than PPOs. However, HMOs have more restrictions. HMOs don't allow you to get care outside of your provider network. If you get out-of-network care, you'll likely have to pay for all of it. HMOs also require you to get primary care provider referrals to see specialists.
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High-deductible health plans (HDHPs)

  • Pay lower premiums with a higher deductible
High-deductible health plans (HDHPs) have become more common as employers look to reduce their health costs. HDHPs have lower premiums than PPOs and HMOs, but much higher deductibles. A deductible is what you have to pay for health care services before your health plan chips in money. Once you reach your deductible, the health plan pays a portion and you pay your share, which is called coinsurance.
Find out more about the differences between plans

Exclusive provider organization (EPO)

  • Restricted network of providers with lower premiums
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You don't care about the ability to get out-of-network care
Exclusive provider organization (EPO) plans offer the flexibility of a PPO with the restricted network found in an HMO. EPOs don't require that members get a referral to see a specialist. In that way, it's similar to a PPO. However, an EPO requires in-network care, which is like an HMO.
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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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People who would prefer to pay lower premiums with a higher deductible may want the below plans
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Silver is the second most popular plan in the ACA exchanges, with 35% of people with a Silver plan. Silver has lower premiums than any plan except for Bronze. However, it has lower out-of-pocket costs than Bronze. Silver plans pick up 70% of the costs, while members pay 30% The average single coverage in a Silver plan is $481 monthly and $1,179 for a family plan.

Bronze is the most popular type of plan in the ACA exchanges, with 41% of members with a Bronze plan. These plans have the lowest premiums, but also the highest out-of-pocket costs in the exchanges. Bronze plans pick up 60% of the costs, while members pay 40%. The average single coverage monthly cost in a Bronze plan is $440 and $1,080 for a family plan.

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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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People who would prefer to pay higher premiums with a lower deductible may want the below plans
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Platinum plans have the highest premiums but the lowest out-of-pocket costs. So, you pay more for the coverage initially but less than other plans when you need health care services. Platinum plans pick up 90% of the costs, while members pay 10%, Not many health insurers offer Platinum plans. Only 2% of members in ACA plans have a Platinum plan, so you may have trouble finding one. The average monthly premiums for single coverage in a Platinum plan is $706 and the average family coverage costs $1,460.

Gold plans have lower premiums than Platinum, but higher premiums than Silver and Bronze. Gold also has lower out-of-pocket costs than Silver and Bronze, but higher than Platinum. Gold plans pick up 80% of the costs, while members pay 20%. The average monthly premium for a single Gold plan is $596. Family coverage averages $1,426 per month.

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Health insurance costs in 2024

Health insurance cost increases have outpaced inflation for many years. That’s likely to continue.

The WTW Global Medical Trends Survey projected that the cost of healthcare benefits in the U.S. will increase by almost 9% in 2024. Costs increased by 8.2% in 2023.

These findings are echoed by studies by the KFF, which said ACA marketplace insurers increased premium costs from 2% to 10% depending on location and other factors. The insurers said that these increases were necessary due to higher medical care and prescription drug prices as well as recent inflationary pressures. Furthermore, insurers said that people are using their healthcare more, similar to how they utilized services before the COVID-19 pandemic. 

Sources: