Cost of employee health insurance: What you need to know

Cost of employee health insurance: What you need to know

Employee health insurance is a benefit provided to employees by their company. It not only covers the employee but also the rest of the family members who are covered by the policy. When a corporation offers health insurance, they pay the entire or a portion of the premiums for the health insurance policy. Employers are not compelled to provide health insurance to employees. Health insurance is often negotiated between an employer and its employees.


Health insurance coverage is typically employee prosperity and value plan developed or managed by an employer or a third party. It offers health care for members and their families through settlement insurance coverage. An individual can use employee health insurance benefits in times of need. Furthermore, because they have affiliations with hospitals and labs, employee health insurance policies allow you to get medical checks at predetermined intervals. Employee health insurance provides the same coverage that individuals would purchase for themselves.


Employee health insurance covers hospitalization costs, including pre-and post-hospitalization charges. Some employee health insurance policies may cover fees for specialists and other medical practitioners for different treatment checkups. Some employee health insurance policies include a hospital cash allowance, which covers everyday expenses such as travel. It also covers in-home care. Even pre-existing conditions are covered by employee health insurance policies, which often have a waiting period that varies depending on the coverage.


Employee health insurance benefits not just employees but also their companies. It allows employers to keep their most valuable asset, which is usually their people. Furthermore, an employee feels connected to the organization, which boosts productivity. This is the fundamental reason employers spend on employee health insurance.


Related: Employee Health And Why It Matters To HR

Practices of employee medical insurance in Zimbabwe

According to the ZIMSTAT 2019 labour force and child labour survey, around 8.1 million people were of working age, accounting for approximately 57% of the entire population. Of 8.1 million people, about 3.5 million (43 percent) were in the labour force, with 566 thousand (16 percent) unemployed. Employers, own-account workers, and contributing family workers accounted for 60% of the employed population.


In the 2015 Zimbabwe Demographic and Health Survey, a total of 9,955 women aged 15-49 and 8,396 men aged 15-54 were interviewed. Currently, 41% of women and 65% of men aged 15 to 49 are employed. Eighty-nine percent of women and eighty-eight percent of males do not have health insurance.


According to the 2019 Medical Assistance Practices and Policies Survey Report from Industrial Psychology Consultants, the trend is for the employer to pay 50 – 100 percent of medical aid coverage for the employee, employees spouse, and up to three children.


Related: What is Employer's Liability Insurance?

5 Crucial Facts About Employee Medical Insurance Plans



Definition and Scope

An employer purchases employee health insurance coverage for the benefit of the employees. It provides employees with affordable healthcare benefits. Because the risk is dispersed among a large population, the premium charged is lower. In this situation, the risk is spread throughout a companys employees. In some cases, the benefits of employee medical insurance policies can also be extended to the employees immediate family. These policies are known as group plans.


Fewer Complications

Employee health insurance policies, on the other hand, are extremely basic. This is because they are generic and intended for many people. As a result, there is no room for modification. This simplifies the buying of these policies. An employee insurance policy can help many people because it provides coverage with few problems. For example, regulations for pre-existing diseases, health checks, and so on are less stringent in a group plan than in an individual health policy.


Various Features and Coverage

Although the employee health insurance policy is generic, the features and coverage may vary depending on the insurance provider. Certain perks, such as cashless claims, maternity benefits, and so on, differ from one insurer to another.


Additional Protection

Employee health insurance should be viewed as a supplement to, rather than the sole source of, health insurance coverage. Unlike individual health insurance plans, employee health insurance programs do not provide the No Claim Bonus (NCB) feature. Thus, if you have both an individual and an employee health insurance plan, it may be beneficial to claim from the employee health insurance policy while not claiming on your individual plan.


What is the cost of employee health insurance?

According to SHRM, the average annual premium cost for an employee in 2021 for employer-sponsored health coverage was $3,331, up from $3,269 in 2020.. Another Mercer survey predicted that premiums would rise by 4.4 percent in 2022. However, figures show that many businesses are not increasing their employees part of the cost; workers are likely to continue to contribute 22 percent of the cost of their health plan premiums, unchanged from 2021.


Simultaneously, some firms attempt to reduce their employees healthcare costs by covering treatments or increasing their offerings. These services could be considered perks:

  • Telehealth services for behavioural mental health
  • Access to specialized drugs
  • Services for Concierge
  • Promotion of workplace health and wellness
  • access to excellence centres
  • Surcharges for spouses who work


What is the procedure for employer-provided health insurance?

Employees can earn significant discounts on their health insurance rates through employer health insurance. Employers frequently subsidize the cost of the health plans they provide, making them far cheaper for their employees, who may normally sign up for the insurance plan through the companys HR department. Employees typically have a limited number of employer health insurance plans to choose from, based on the health insurance program selected by the business owner. Companies might offer health maintenance organization (HMO), preferred provider organization (PPO) plans, or both.


Employer and employee costs are shared

Premiums are payments made to the health insurance in exchange for coverage. They are usually required on a monthly or quarterly basis. Employers and employees pay a percentage of the premium in most cost-sharing plans, with employers frequently paying the greater proportion. This means obtaining health insurance through an employer is almost always less expensive.


Health Savings Accounts (HAS) are tax-free savings accounts that can be used to pay future medical bills. Certain high-deductible insurance plans can be combined with an HSA. Employees do not have to spend their entire HSA balance each year because the funds can be rolled over. Employees may contribute to an HSA on their own or with the assistance of their employer. To learn more, consult our HSA guide for employers.


FSAs, or flexible spending accounts, are pre-tax funds that offset healthcare costs not covered by insurance, such as copays and deductibles. The company sets aside FSA monies, which the employee must utilize by the end of the year. Non-used funds are returned to the employer.


When is it necessary for an employer to provide health insurance?

Technically, businesses are never obligated to provide PPO or HMO health insurance, and employees do not have the explicit legal right to demand insurance from their employers. However, the fines imposed by the Affordable Care Act (ACA) on certain firms that do not provide health insurance are so severe that employers are more likely to provide health insurance to avoid these monetary consequences.


The ACA requires employers with 50 or more full-time employees (defined as employees who work 30 or more hours per week) or an equivalent number of part-time employees to provide health insurance to 95 percent of their full-time employees. If an employer fails to meet this requirement, they must pay the IRS (Internal Revenue Service) a yearly fee per employee. Furthermore, a business with 50 or more full-time employees that provide health insurance to one employee is legally required to extend it to all "similarly situated" employees - individuals with similar titles, incomes, and job duties.


Firms with 50 or more full-time employees must provide health insurance that fulfills the ACAs minimum coverage and cost criteria to comply with the ACA. Employees dependents must also have access to employer-sponsored health insurance. Under the age of 26, biological and adoptive children are considered dependents, but spouses, stepchildren, and foster children are not.


How might employers reduce healthcare costs?

Business owners can take these methods to reduce health insurance costs for themselves as employers and their employees:


Compare prices with an insurance agent or broker

"With so many different possibilities, it can be difficult to understand and ultimately choose the correct health insurance plan," Stahl added. "The key is to work with an unbiased agent who can show you all of your possibilities."


These options may include group health-sharing plans, typical group plans, ACA marketplace plans, or even level-funded plans, which offer rebates at the end of the year if employees make few healthcare claims.


"By having the option to learn and compare from different carriers, you can be confident that you are obtaining the finest benefits structure at the best costs available," Stahl explained.


Encourage proactive healthcare

According to Rudolf Berzins, president and senior risk advisor of Apex Benefit Group, proactive healthcare consumers pay less for insurance. Many insurance companies provide incentives to firms that urge employees to participate in workplace exercise programs or visit their primary care providers regularly. Check to see if insurance companies offer discounts or rebates for proactive health efforts in the workplace before choosing one.


Transfer cost-sharing responsibilities to employees

Employers might choose health plans that shift more costs onto employees to lower small company insurance prices. While these contributions may be tax-deductible, the employee may receive a lesser paycheck due to this type of plan. Furthermore, while this method may help business owners save money, it may hinder their capacity to recruit and keep personnel.


Look for prescription medication discounts

"Pharmacy and prescription coverage [have] a huge impact on overall insurance prices," said Berzins. Berzins recommends researching whether the insured can gain direct discounts in addition to saving money on insurance costs by seeking generic prescription alternatives inside an insurance plan. "For possible coupons or reductions, contact the pharmaceutical company directly."


How much does employer-provided health insurance cost?

According to a Kaiser Family Foundation study, the average annual employer healthcare insurance premium for single coverage in 2021 will be $7,739, up 4% from the previous year, and $22,221 for family coverage, up 4% from 2020. According to survey data, 58 percent of small businesses provide coverage to their employees. In comparison, 99 percent of large companies did. Several factors determine exact costs, including the state in which the firm is located and whether the insurance plan is an HMO or PPO.


What is the bare minimum for an employers contribution to health insurance?

There is no national standard governing the minimum employer contribution for health insurance. Many state legislatures have implemented legislation requiring companies to contribute at least 50% of employee health insurance expenses, but the Kaiser Family Foundation estimated that in 2021, the typical employer contributed 83 per cent of the premium for solo coverage and 73 percent for family plans.


10 Factors That Affect Premiums

Many factors that influence how much you pay for health insurance are beyond your control. Nonetheless, its useful to grasp what they are. Here are the top ten factors that influence the cost of health insurance premiums.

Factors influencing health insurance

  • Federal and state laws Legislation - It governs what health insurance policies must cover and how much insurers can charge.
  • Insurance classification - The amount you pay depends on whether you are covered through your employers group plan or purchase it independently.
  • Level of income - Low-wage workers pay more through their employers but may pay less through a federal or state exchange due to subsidies.
  • Size of the employer - Insurance is typically less expensive at large corporations.
  • Residence state - The cost of a premium varies by state and county.
  • Community kind -  Premiums are typically lower in metropolitan areas than in rural locations.
  • The county where you live -  Some counties only have one plan, whilst others have greater competition, which can assist  to lower the costs.
  • Type of plan - The most expensive plans are preferred provider organizations (PPOs) and platinum plans through the federal Health Insurance Marketplace.
  • Age - Health insurance prices rise as a policyholder age, with the greatest increases occurring after age 55.
  • Tobacco consumption - Tobacco users pay up to 50% more in premiums.

Reasons Why Companies Should Offer Employee Health Insurance

For the following reasons, businesses may consider purchasing a Group Health Insurance Plan:

Employee Advantage

Employee health insurance policies are quite beneficial, especially for individuals who cannot afford private health insurance. Employees are not required to pay a premium under this plan. The employer pays it on the employees behalf. Employees receive free health insurance coverage in this manner.


Basic Protection

People may choose not to get health insurance for a variety of reasons. Some may lack the resources to do so, others may be preoccupied with their daily struggles, and others may be unaware of the benefits. Employee Health Insurance provides employees with the advantages of basic health insurance coverage. This can be quite useful in the event of emergency hospitalization.


Excellent Medical Care

Employee Health Insurance providers have affiliations with top-tier hospitals that provide exceptional medical care. These facilities are known as Network Hospitals. As a result, if the employee is covered by the coverage and requires hospitalization, they can be admitted to these facilities. Medical care may be prohibitively expensive in the absence of such coverage.


Recruitment and Retention

Employee Health Insurance has become the norm for people-oriented businesses. While such a perk may not be the sole reason for an employee to join or remain with the company for an extended period, it may surely be a consideration. Thus, providing Employee Health Insurance might be another check in the Hiring and Retention box.


Tax Advantages

Companies that pay the premium for Employee Health Insurance may be eligible for tax incentives. The benefit will be determined by the premium paid and the provisions of The Income Tax Act.


There is no waiting period.

The majority of Individual Health Insurance Plans have set Waiting Periods. This is the period during which policyholders must wait before filing a claim and managing their expenses without the insurers assistance. However, such waiting periods may be waived in some Employee Health Insurance plans. Maternity Coverage is one noteworthy example of such a schemes. Individual plans for this type of coverage typically have a waiting period of more than a year, but this is not the case with Employee Health Insurance.


Preventive Health Care

New-age health insurers are prioritizing preventive health care programs. They are not limited to performing health examinations. Other programs include fitness tracking software, rewards for good habits, discounts on gym memberships, and so on. Some of these are also covered by employee health insurance. Such preventive actions can assist the employee in remaining active and, as a result, productive.


No-hassle Claims

Third-party Administrators (TPAs) in Employee Health Insurance ensure that the company/employer does not have to deal with claims. The claims procedure is now smoother than a decade ago, thanks to internet-based technological developments.



To make the insurance experience more convenient, digital-first health insurance businesses have responsive websites and mobile-friendly apps. Telemedicine services, for example, are provided by tech-savvy insurers through Employee Health Insurance Plans. Such services are extremely beneficial, particularly during COVID-19.


Corporate Culture

A comprehensive Employee Health Insurance Plan provided by a technologically advanced organization might be viewed as a significant benefit by employees. With such a policy, employees can feel that the organization is concerned about their well-being and does not view them as merely a resource. It can be a motivating factor in developing a people-first company culture that benefits both the employer and the employee.


The Difficulties of Offering Group Health Insurance

Aspect of Cost

Providing this type of insurance benefit might be costly for smaller businesses. However, they should evaluate the long-term benefits of such coverage and choose an affordable plan to get things started.


Lack of Personalization

This policy provides blanket coverage to all employees. As a result, there is no room for individualization. However, depending on the insurance carrier, you may be able to tailor the entire coverage. The appropriate employee will pay for such enhancements. Furthermore, if the employee wants enhanced coverage, it can be obtained by paying an additional premium.


Inadequate Awareness

Overall, companies need to learn more about these new-age Group Insurance Schemes to benefit from them while keeping their aims in mind.


The most significant drawback of an employee health insurance policy is that it is based on the employees duration with the company. If a person leaves the company, they are no longer an employee of the company and are not covered by the employees health insurance coverage. Because the insurance is generic, it may not provide the coverage required to remain fully covered. Furthermore, the insurance provider and coverage may change based on the employers requirements.


In summary

Most employers provide medical insurance for their employees, spouses, and three children on average. This is a very beneficial technique, but it must be managed properly to save money. At this point, it is prudent to split the expense of medical aid coverage with the employee (50/50). While restructuring this benefit, please make certain that the employee has the option of choosing who should be on their medical aid. For example, if an employee is not married but has a mother and brothers to cover the four dependents, may they be included in the business medical aid scheme? Why not, is the answer. Why should they be treated differently because they do not have children? The easiest way to manage this is to say, "the scheme covers the employee and three dependents of the employees choice, and contributions will be split 50/50." Due to how their systems are designed, several corporations face massive medical aid payments. Examine your medical assistance program to make it more equal and sustainable.

Charlene Dzonga
This article was written by Charlene a Consultant at Industrial Psychology Consultants (Pvt) Ltd

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