Category: Facts and Research

Contrary to the popular belief that healthcare expenses are becoming a larger part of total employee compensation, new data from the Bureau of Labor Statistics suggests that employers paid the lowest amount for health insurance as a percentage of total compensation since 2011.  Specifically, health insurance costs equaled 7.6% of total compensation for private employers in September.  This is equivalent to $2.44 per hour worked.  This is the lowest percentage of total compensation since March 2011.  The cost for health insurance as a percentage of total compensation peaked at 7.9% in March 2014.

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It is important to note that using the percentage of total compensation does not mean total health insurance costs per employee did not go up during this period.  The percentage could be impacted by a number of factors, such as wage increases and shifts in costs to employees.  The rise in high-deductible healthcare plans is certainly contributing to the latter.

Also contrary to popular belief is that smaller employers are being disproportionately impacted by rising healthcare costs by having to pay more per employee than their larger counterparts.  Companies with 50 to 99 employees spend $1.94 per hour worked, which amounts to 7.0% of total compensation.  This is lower than the spend for companies with 100 to 499 employees and companies with more than 500 employees, which spend $2.77 (8.5%) and $4.28 (9.0%) per hour worked, respectively.

Regardless of how health insurance expenses as a percentage of total compensation is trending, employers remain deeply concerned about budgeting for health insurance.  Outside of wages and salaries, health insurance still comprises the largest portion of total compensation spending.  In the highly competitive global economy, human capital management continues to be critical to success and getting the most productivity from total compensation dollars is key.  This is why total compensation and benefit plans need to be optimized to recruit and retain talent as well as assist employees in being productive at work.