If you’ve thought about offering health insurance to your employees, requesting a quote is a good way to ruin your day. One look at those premiums and you’re suddenly questioning all your life decisions.
Health insurance is key to attracting and retaining top talent, but is it worth it for your business? Here’s what to know about small business health insurance costs beyond just the sticker price.
Health insurance comes with a hefty price tag
According to KFF’s 2026 Employer Health Benefits Survey, average total annual premiums for employer-sponsored health insurance were $9,804 for one person and $28,303 for a family.
For businesses with 10 to 199 employees, averages were slightly lower: $9,593 for individual coverage and $27,288 for family coverage. Yes, that’s for one year. No, the comma isn’t in the wrong place.
Keep in mind that these figures include both the employer’s and the employee’s contributions, not just what your business pays. The final price also depends on factors like location, employee ages, the type of plan, and who’s covered.
How much of that bill are you actually paying?
Fortunately, you aren’t responsible for paying the entire premium yourself – unless you’re just feeling extra generous. Employees typically cover a portion through payroll deductions.
According to KFF, employees paid an average of 18% of individual premiums and 27% of family premiums in 2026. And company size makes a difference. Employees at businesses with 10 to 199 workers paid an average of 37% of family premiums, compared with 25% at larger organizations.
Let’s put some dollars behind those percentages. Let’s say your company has 10 employees, and each is enrolled in individual coverage that costs $9,593 annually. If your business pays 75% of those premiums, your share comes to approximately $71,948 per year, or $5,996 per month.
You may be able to tweak your numbers slightly. For example, you may contribute more toward employee-only coverage than dependent coverage. But before you do that, make sure you check plan rules and tax-credit conditions first.
And just when you thought you’d accounted for everything, health insurance has a few more surprises.
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The expenses that didn’t make the quote
The monthly premium is the attention hog, but there are other costs that can add up quickly.
You may have to pay for enrollment assistance, benefits software, or third-party administration. Someone also has to compare plans, answer employee questions, update enrollment information, and deal with renewals. Those hours have a cost, and it isn’t rolled into the premium.
Then there’s compliance. You may be required to distribute required notices, meet reporting obligations, and follow coverage rules. For instance, federal COBRA continuation requirements usually apply to employers with at least 20 employees, although some states have rules that affect smaller businesses.
You also need to think about premium renewals. This isn’t your cell phone provider that locks you into a rate for the next three years. Insurance that is a good fit this year may be a tight squeeze for your budget next year.
At least there’s a tax break
If you’re sitting there picturing your bank balance in freefall status, there is some good news. Employer-paid group health insurance premiums are usually deductible as a business expense.
Before you start celebrating, understand this: as a deduction, it only lowers taxable income, so it isn’t going to reimburse the full cost. This gives you some relief, but the IRS isn’t volunteering to pay the entire bill for you.
Some employers may also qualify for the Small Business Health Care Tax Credit, worth up to 50% of qualifying premium contributions, or 35% for eligible tax-exempt businesses.
To qualify, you’ll usually need to meet the following requirements:
- Fewer than 25 full-time equivalent (FTE) employees
- Average wages below an inflation-adjusted threshold
- Contribution of at least 50% toward employee-only premiums
- Qualifying Small Business Health Options Program (SHOP) coverage
Note that SHOP plans aren’t available in every area, so make sure you check before plugging those savings into your budget spreadsheet. The tax credit is limited to two consecutive tax years, and not every business will qualify.
Is health insurance worth it?
A health plan may make your business more attractive to job applicants, help retain experienced employees, and improve employee satisfaction. For a smaller company that’s competing with bigger employers, that’s pretty huge.
But a benefit only works if you can afford to keep offering it. While it may seem like a good idea now, look beyond the first year to see if the expense is sustainable. Health insurance for the short term isn’t going to benefit anyone if you’re struggling to keep the doors open.
The cost of offering health insurance is more than the number on the quote, but it doesn’t have to fall entirely on your business. Employee contributions and potential tax savings can make coverage more manageable.
So before you go all-in, request quotes based on employees’ ages, locations, and coverage needs. Compare premiums, administrative costs, and employee contributions. The goal is to offer benefits that create a healthy workforce without putting your budget on life support.
