Employer Health Insurance Costs: What You Pay, What Your Employer Pays, and How to Compare Plans

August 20, 2026 8 Min Read

The cost of employer-sponsored health insurance is under renewed pressure. Aon projects U.S. employer health care costs to rise 9.5% in 2027, continuing a period of unusually high medical cost growth.

For employees, however, the important question is not simply how much employers spend on health care. It is how much of that cost comes out of your paycheck and how much you may pay when you actually use your insurance.

Employer health insurance costs include premiums, deductibles, copayments, coinsurance, and other forms of cost sharing. Understanding each part can help you compare plans and avoid choosing coverage based only on the monthly premium.

What Is Employer-Sponsored Health Insurance?

Employer-sponsored health insurance is coverage offered through a workplace. The employer generally pays part of the premium, while the employee pays the remaining share through payroll deductions.

In 2025, the average annual premium for employer-sponsored coverage was $9,325 for single coverage and $26,993 for family coverage, according to KFF’s Employer Health Benefits Survey.

These are total premiums, not necessarily the amount employees pay themselves.

How Much Does an Employee Pay for Health Insurance?

Employees usually contribute only part of the total premium.

KFF found that workers paid an average of 16% of the premium for single coverage and 26% for family coverage in 2025. The average annual employee contribution was $1,440 for single coverage and $6,850 for family coverage.

That means an employee’s payroll deduction can be considerably lower than the total cost of the health plan.

However, premiums are only one part of the expense. Employees may also pay when they receive medical care.

Premiums Are Not the Same as Total Health Care Costs

A health insurance premium is the amount paid to maintain coverage.

Other costs arise when you use the plan.

These can include:

Deductibles
Copayments
Coinsurance
Prescription costs
Other covered cost-sharing expenses

For this reason, a plan with a low premium is not automatically the cheapest plan.

A worker who rarely uses health care may benefit from lower monthly premiums, while someone who expects regular treatment may save money with a plan that has higher premiums but lower cost sharing.

What Is a Health Insurance Deductible?

A deductible is the amount you generally pay toward covered services before the plan begins sharing costs for services subject to the deductible.

Among workers with employer coverage and a general annual deductible, the average deductible for single coverage was $1,886 in 2025, according to KFF.

Deductibles vary considerably between plans.

A plan with a $1,000 deductible and a plan with a $3,000 deductible can have very different financial consequences even if their monthly premiums are similar.

Some services may be covered before the deductible, depending on the plan.

What Is a Copayment?

A copayment, or copay, is a fixed amount you pay for a covered service.

For example, a plan may charge a fixed copay for a primary care visit or a prescription.

Copays make some health care expenses easier to predict because the amount is established by the plan.

What Is Coinsurance?

Coinsurance is the percentage of the allowed cost of a covered service that you pay after meeting the applicable deductible.

For example, with 20% coinsurance, you may pay 20% of the covered allowed amount while the insurer pays the remaining 80%, subject to the plan’s terms.

Coinsurance becomes particularly important when medical services are expensive.

What Is an Out-of-Pocket Maximum?

The out-of-pocket maximum is the annual limit on your cost sharing for covered, in-network services, subject to the plan’s rules.

Once you reach the applicable limit, the plan generally pays 100% of covered in-network benefits for the rest of the plan year.

The out-of-pocket maximum is different from the deductible.

The deductible is one part of your cost sharing. The out-of-pocket maximum provides a broader ceiling on covered cost-sharing expenses.

When comparing employer health plans, this number is especially important because it shows your potential financial exposure during a year when you need significant medical care.

How Much Does an Employer Pay?

Employers generally cover most of the premium for workers, but the exact contribution varies by company and plan.

KFF reported that 89% of covered workers in 2025 were in plans where the employer contributed at least half of the premium for both single and family coverage.

The employer contribution can make a major difference in the value of workplace coverage.

Two companies could offer plans with similar benefits but leave employees with very different payroll deductions because their employer contributions differ.

Employer Health Insurance Cost: Single vs. Family Coverage

Family coverage is substantially more expensive than employee-only coverage.

Coverage	Average Annual Premium, 2025	Average Worker Contribution
Single	$9,325	$1,440
Family	$26,993	$6,850

Source: KFF 2025 Employer Health Benefits Survey.

The difference matters when evaluating a job offer or deciding whether to add a spouse or children to an employer plan.

Family coverage can also have different contribution rules depending on the employer.

Why Are Employer Health Insurance Costs Rising?

Several factors can increase the cost of employer-sponsored health coverage.

Greater Use of Health Care

When employees use more medical services, total claims spending can increase.

Aon identified rising health care utilization as one of the factors contributing to higher employer costs.

Chronic Conditions

People managing chronic conditions may require ongoing medical visits, medications, tests and other services.

Higher prevalence of chronic conditions can therefore increase overall health plan spending.

High-Cost Medical Claims

A relatively small number of expensive claims can have a significant effect on an employer’s total health care costs.

Complex treatments, serious illnesses and specialty care can generate particularly high claims.

Prescription Drugs

Prescription drug spending is another major source of cost pressure.

Aon specifically identified specialty medications and continued adoption of GLP-1 therapies as contributors to rising employer health care spending.

These pressures can affect the cost of providing coverage even when an individual employee’s own health care use has not changed.

Does a Rise in Employer Health Costs Mean Your Premium Will Rise by the Same Amount?

Not necessarily.

Aon’s 9.5% projection is an estimate of underlying employer health care cost growth before employers take additional mitigation measures. It is not a prediction that every worker’s payroll premium will increase by 9.5%.

Employers can respond to higher costs in different ways.

They may:

Increase their share of employee premiums
Increase employee contributions
Change deductibles
Adjust copayments or coinsurance
Change provider networks
Modify prescription benefits
Offer different plan options

As a result, two employees could experience very different changes even during the same year.

How to Compare Employer Health Insurance Plans

When your employer offers multiple plans, compare the total potential cost, not just the premium.

Look at these factors:

1. Annual Premium

Calculate how much will come out of your paycheck over the entire year.

2. Deductible

Check how much you may need to pay before the plan begins sharing costs for applicable services.

3. Out-of-Pocket Maximum

Consider the maximum amount you could pay for covered, in-network care during the plan year.

4. Provider Network

Check whether your preferred doctors, hospitals and specialists are included.

5. Prescription Coverage

Review the formulary and your expected medication costs.

6. Employer Contribution

Find out how much of the premium your employer pays.

7. HSA or FSA Eligibility

If available, tax-advantaged accounts can affect the overall value of a plan.

Which Is Better: Low Premium or Low Deductible?

There is no universal answer.

A lower-premium plan with a higher deductible may be attractive if you rarely use medical services.

A higher-premium plan with a lower deductible may be more suitable if you expect regular appointments, prescriptions or treatment.

The best choice depends on your expected health care use and your ability to handle unexpected medical expenses.

How to Estimate Your Yearly Health Insurance Cost

A simple comparison is:

Annual employee premiums + expected out-of-pocket health care costs = estimated yearly cost

You should also check the out-of-pocket maximum for a worst-case scenario.

For example, if Plan A has a lower premium but substantially higher cost sharing, it may look cheaper at first but become more expensive if you need frequent medical care.

Comparing both normal and high-use scenarios gives a more realistic picture.

What Should You Check During Open Enrollment?

Before selecting your plan, review:

Employee premium
Employer contribution
Deductible
Copays
Coinsurance
Out-of-pocket maximum
Doctor and hospital network
Prescription coverage
HSA or FSA eligibility
Family coverage cost

Also check whether your current doctors and medications remain covered.

A plan that worked well last year may not be the best option after its premiums, network or cost-sharing rules change.

How Can Employees Reduce Health Insurance Costs?

Employees cannot control the overall cost of employer health care, but they can make decisions that reduce their own expenses.

Using in-network providers, comparing available plans, checking prescription coverage and taking advantage of eligible preventive services can help control costs.

Employees who have access to an HSA or FSA may also be able to use tax-advantaged funds for eligible health expenses.

The most effective strategy is usually to choose coverage based on expected health care needs rather than selecting the plan with the lowest paycheck deduction.

Employer Health Insurance vs. Individual Health Insurance

Employer-sponsored coverage is not the same as buying an individual health plan.

With employer coverage, the company generally contributes toward the premium. With individual coverage, the consumer generally pays the premium directly, although eligible Marketplace enrollees may qualify for financial assistance.

The better option depends on the plans available, household income, family needs and eligibility for subsidies.

What Rising Health Care Costs Mean for Workers

Rising employer health care costs do not automatically translate into the same increase in employee premiums.

Instead, the impact can appear in several places:

Higher payroll deductions
Higher deductibles
Higher copays
Higher coinsurance
Changes in provider networks
Changes in prescription benefits

That makes it important to evaluate the whole health plan rather than focusing on one number.

Bottom Line

Employer health insurance is a shared financial arrangement. Employers typically pay a substantial portion of the premium, while workers contribute through payroll deductions and cost sharing when they use health care.

The latest Aon forecast shows why employer coverage remains under cost pressure, but the more useful lesson for employees is how to evaluate the coverage itself.

When comparing plans, look beyond the premium. The deductible, out-of-pocket maximum, provider network, prescription coverage and employer contribution can have a much greater effect on what you ultimately spend.

Frequently Asked Questions

How much does employer health insurance cost?

The cost varies by employer and plan. In 2025, the average total premium was $9,325 for single employer coverage and $26,993 for family coverage, according to KFF.

How much do employees pay for employer health insurance?

In 2025, covered workers contributed an average of $1,440 annually for single coverage and $6,850 for family coverage.

What is the average employer health insurance deductible?

For workers with single coverage and a general annual deductible, the average deductible was $1,886 in 2025.

Does a higher premium mean better health insurance?

Not necessarily. A higher premium may come with lower deductibles or cost sharing, but the best plan depends on your expected medical needs.

What is the difference between a premium and a deductible?

A premium is the amount paid to maintain coverage. A deductible is the amount you generally pay toward applicable covered services before the plan begins sharing costs.

How can I choose the best employer health insurance plan?

Compare the premium, employer contribution, deductible, out-of-pocket maximum, network, prescription coverage and expected medical expenses. Do not choose based on the premium alone.

Can employer health insurance costs change each year?

Yes. Employers can change employee contributions, deductibles, networks, benefits and available plans when a new plan year begins.