Small Business Health Insurance Costs Per Employee (2026)

Medically reviewed by Jawad Arshad, MD, FACEP. Last reviewed: September 23, 2026.

Small business health insurance costs about $768 per month for one employee on single coverage and about $2,171 per month for an employee with family coverage, based on KFF's 2025 survey of firms with 10 to 199 workers. The employer's share is usually $538 to $645 a month for single coverage (2024 AHRQ MEPS-IC and KFF 2025 data), and the employee pays the rest through payroll.

Those are averages. Your quote will move with your employees' ages, your ZIP code, and the plan you pick. This guide shows the real numbers from federal and KFF data, a full cost example for a 10-person company, and the five levers that actually lower the bill.

How Much Does Small Business Health Insurance Cost?

Small business health insurance costs $9,211 per year for single coverage and $26,054 per year for family coverage at firms with 10 to 199 workers, according to the KFF 2025 Employer Health Benefits Survey. Federal MEPS-IC data shows slightly lower 2024 averages for firms under 50 employees: $8,215 single and $23,170 family.

Those figures are the total premium. The total premium is the full price the insurance company charges, before anyone splits it. The employer and the employee then share that bill.

Here is how the two main national data sources compare.

One detail most cost guides skip: small firms do not get cheaper insurance per person. KFF found the single premium at small firms ($9,211) is close to the large-firm average ($9,361). Small firms mostly "save" by buying plans with higher deductibles. KFF reports the average single deductible at firms with 10 to 199 workers is $2,631, versus $1,670 at larger firms.

What Are Small Business Group Health Insurance Rates?

Small business group health insurance rates are the monthly premium an insurer charges your company for each enrolled employee, set by age, location, tobacco use, and plan level. Fully insured small group rates in most states follow Affordable Care Act (ACA) rating rules, which means your employees' health history cannot raise the price.

A small group plan is a health plan sold to employers with generally 50 or fewer full-time equivalent employees, as defined by the Peterson-KFF Health System Tracker. Under ACA rules, the insurer can only use four factors to set each person's rate:

• Age. Older employees cost more. Federal rating rules at 45 CFR 147.102 cap the gap at 3 to 1 between the oldest and youngest adults.
• Location. Rates differ by rating area within a state.
• Tobacco use. Insurers may add a tobacco surcharge of up to 1.5 to 1 where state law allows, under the same federal rule.
• Plan level. Bronze, silver, gold, and platinum plans pay different shares of care.

Rates are also rising fast. The Peterson-KFF Health System Tracker's August 2026 analysis of 295 small group insurers found a median proposed increase of 14% for 2027. Insurers put the underlying rise in medical costs at 10.8%. The same analysis found 59% of small group insurers are asking for increases between 10% and 20%.

State filings show the same pressure. In Michigan, insurers requested an average 9.6% small group increase for 2027, according to the Michigan Department of Insurance and Financial Services (DIFS) filing summary updated July 14, 2026.

If you want the state-by-state view, our 2027 premium increase map by state breaks out the filings.

How Much Does Group Health Insurance Cost for Small Business?

Group health insurance costs a small business about $6,460 a year ($538 a month) per single enrollee and about $15,186 a year ($1,266 a month) per family enrollee in employer share, based on 2024 MEPS-IC data for firms under 50 employees. The employee pays the remainder through payroll deductions.

MEPS-IC reports that employees at firms under 50 workers paid an average of $1,755 a year toward single coverage and $7,984 toward family coverage in 2024. Subtract those from the total premium and you get the employer's share.

Source: AHRQ MEPS-IC, private-sector firms with fewer than 50 employees, 2024.

Family coverage is where small employers make their biggest decision. KFF's 2025 survey found workers at firms with 10 to 199 employees pay an average of 36% of the family premium, versus 23% at larger firms. That works out to $8,889 a year, or about $741 a month, out of a small-firm employee's paycheck.

That $741 a month is exactly the kind of payroll deduction a Section 125 plan can move to pre-tax, which we cover below.

A Worked Example: 10 Employees, Real Numbers

Here is what a typical 10-person company would pay, using the 2024 MEPS-IC averages for firms under 50 employees. Assume 6 employees take single coverage and 4 take family coverage.

That company spends $99,504 a year, or $8,292 a month, on its share of health insurance. Its employees send another $42,466 a year, or $3,538.83 a month, out of their paychecks.

Now watch what happens if those $42,466 in employee contributions run through a Section 125 cafeteria plan. A Section 125 plan is an IRS-approved arrangement that lets employees pay certain benefits with pre-tax dollars. The contributions skip FICA tax, which is Social Security and Medicare tax, at 7.65% on each side, according to IRS Publication 15-B.

• Employer FICA saved: $42,466 x 7.65% = $3,248.65 a year.
• Employee tax saved (12% federal bracket plus 7.65% FICA): $42,466 x 19.65% = $8,344.57 a year across the team, before any state income tax savings.

Is a Section 125 Plan Worth It at These Premium Levels?

A Section 125 plan is worth it when your employees' pre-tax elections average more than about $457 per employee per month, because that is where 7.65% employer FICA savings exceed Summit Health Benefits' $35 per employee per month (PEPM) fee. Below that level, the main win is the employee's tax savings, not the employer's.

I will be direct about the 10-person example above. Premium contributions alone average $353.89 per employee per month. Employer FICA savings of $3,248.65 a year would not cover a $4,200 annual fee ($35 x 10 employees x 12 months). A premium-only setup at that level mainly helps employees, who keep $8,344.57 more across the team.

The math flips when elections get bigger. Summit Health Benefits' full Section 125 design adds qualified pre-tax benefits on top of premiums, which is why our typical employer FICA recapture runs $91 to $136 PEPM. After the $35 fee, that is a net employer benefit of $56 to $101 PEPM, and employees typically see take-home pay rise $70 to $110 a month. The fee is paid out of the reduced FICA deposit on IRS Form 941, not from operating cash.

For the full FICA math, read our guide on maximizing FICA tax savings. If you are new to cafeteria plans, start with the Section 125 cafeteria plan guide.

What Are the Cheapest Ways to Lower Small Business Health Insurance Costs?

The cheapest way to lower small business health insurance costs is to change how the bill is structured, not just shop carriers. The five levers with real data behind them are plan type, contribution strategy, funding method, tax credits, and pre-tax payroll through Section 125.

1. Pick a lower-premium plan type. KFF's 2025 survey shows high-deductible plans with a savings option average $8,620 for single coverage, versus $9,818 for PPOs. That is a $1,198 gap per employee per year.
2. Set contributions by tier. Paying 100% of single coverage and a smaller share of family coverage keeps you competitive for hiring. KFF found 29% of covered workers at firms with 10 to 199 workers get employee-only coverage fully paid.
3. Consider level funding. KFF reports 37% of covered workers at firms with 10 to 199 workers are in level-funded plans in 2025. These plans can cost less for healthy groups, but the Peterson-KFF Health System Tracker notes they are medically underwritten and not guaranteed renewable. See our level-funded health plan guide.
4. Claim the Small Business Health Care Tax Credit. Under IRC Section 45R, employers with fewer than 25 full-time equivalent employees and average wages under $68,200 in 2026 can get a credit of up to 50% of premiums they pay, per IRS Revenue Procedure 2025-32. The credit requires buying coverage through the Small Business Health Options Program (SHOP), per the IRS.
5. Move employee contributions pre-tax. A Section 125 plan cuts both sides' payroll taxes on every dollar employees contribute, as shown in the example above.

If a traditional group plan does not fit your budget at all, compare the options in our guide to small business health insurance alternatives, including ICHRA and QSEHRA.

How Much Will Small Business Health Insurance Cost in 2027?

Small business health insurance will likely cost 10% to 18% more in 2027 for most fully insured groups, based on the Peterson-KFF Health System Tracker's analysis of 295 small group insurer filings. The median proposed increase is 14%, with the 25th percentile at 10% and the 75th percentile at 18%.

Apply that 14% median to the KFF 2025 small-firm average single premium of $767.58 a month, and the illustration lands near $875.04 a month. Your renewal will differ, but that is the planning range most owners should budget against. Insurers in the Peterson-KFF analysis named rising hospital and physician prices, specialty drugs, GLP-1 drug use, and behavioral health use as the main drivers.

One more trend to watch: the tracker reports fully insured small group enrollment fell from about 17 million people in 2013 to about 10 million in 2024. Insurers say healthier groups are leaving for level-funded plans, which pushes fully insured rates higher for the groups that stay.

Frequently Asked Questions

Sources: KFF, 2025 Employer Health Benefits Survey, Summary of Findings (October 2025); Agency for Healthcare Research and Quality (AHRQ), Research Findings #54, MEPS-Insurance Component 2008 to 2024 (December 2025); Peterson-KFF Health System Tracker, "How much and why premiums are going up for small businesses in 2027" (August 6, 2026); Michigan Department of Insurance and Financial Services, 2027 Michigan Health Insurance Rate Change Requests (updated July 14, 2026); IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits (2026); IRS Revenue Procedure 2025-32; Internal Revenue Code Sections 45R, 125, and 162; 45 CFR 147.102 (ACA fair health insurance premiums).