How Much Should Employers Contribute Toward Health Insurance in 2027?
When a company receives another large health insurance renewal, one of the first questions is usually:
How much of this increase should the company absorb, and how much should we pass on to employees?
There is no universal percentage that every employer should contribute toward health insurance.
For employers with 50, 100, 250 or 500+ employees, a better approach is to establish a contribution strategy based on employee affordability, recruiting objectives, compensation philosophy, ACA requirements and the company's total healthcare budget.
That distinction is becoming increasingly important.
Employers expect health-benefit cost per employee to increase 8.2% on average in 2027 even after planned cost-reduction measures, according to preliminary results from Marsh's National Survey of Employer-Sponsored Health Plans. Without changes to their existing plans, employers estimate costs would increase approximately 11%.[1]
Simply splitting that increase between the company and employees may balance this year's budget.
It does not necessarily create a sustainable benefits strategy.
How Much Do Employers Typically Pay Toward Health Insurance?
Employers generally pay a substantial portion of employee health insurance premiums, but contribution strategies vary significantly by company.
Some employers pay 100% of employee-only coverage and require employees to pay much of the cost of dependent coverage.
Others establish a fixed employer contribution.
Some use a percentage-based approach.
Still others contribute differently depending on which plan an employee selects.
The important point is that "What percentage do other companies pay?" should be a benchmark—not the strategy itself.
Two companies with 200 employees may appropriately use very different contribution structures.
One may employ highly compensated professionals and compete nationally for talent.
Another may employ a large number of hourly workers for whom a $75 increase in monthly payroll deductions could materially affect enrollment.
The correct contribution strategy should reflect the workforce.
Why Contribution Strategy Matters More in 2027
Healthcare affordability is becoming increasingly difficult for both employers and employees.
Mercer reported that average employer-sponsored health-benefit cost reached $17,496 per employee in 2025 and projected it would exceed $18,500 in 2026.[2] Prescription drug spending among employers with 500+ employees increased 9.4% in 2025.
The pressure is continuing.
For 2027, 48% of large employers surveyed by Mercer said they expect to make medical-plan changes—such as increasing deductibles or copays—that result in higher employee out-of-pocket costs.[3]
This creates a difficult cycle:
Healthcare costs increase → employer premiums increase → employee contributions increase → benefits become less affordable → participation and employee satisfaction can suffer.
At some point, shifting costs stops solving the problem.
It simply changes who is paying it.
Start With the Employer's Benefits Philosophy
Before deciding what employees should pay, leadership should decide what the company is trying to accomplish with its health plan.
There are several fundamentally different philosophies.
Strategy 1: Health Insurance as a Recruiting Tool
Some organizations deliberately subsidize health insurance heavily because they view benefits as part of compensation.
For a company competing for engineers, executives, healthcare professionals, salespeople or other difficult-to-recruit employees, a richer employer contribution may differentiate the organization.
In that case, the company might absorb a larger portion of renewal increases rather than allowing employee payroll deductions to rise significantly.
Strategy 2: Shared Cost
Other organizations intentionally share healthcare costs with employees.
The company might establish a target contribution percentage and maintain that relationship as premiums increase.
This can create a relatively predictable philosophy, but leadership should still monitor whether employee contributions remain affordable.
Strategy 3: Defined Employer Contribution
Another approach is to establish a specific employer contribution and allow employees to select among several plans.
The employer's cost becomes more predictable while employees who want richer coverage pay more for it.
This philosophy can also align with strategies such as an ICHRA, although the mechanics and compliance requirements are different.
Strategy 4: Protect Lower-Paid Employees
Employers with significant wage differences may decide that a single contribution strategy creates very different outcomes across the workforce.
A $150 monthly contribution may be manageable for a senior executive but substantial for an hourly employee.
Some employers therefore evaluate salary-based contributions or other structures designed to improve affordability for lower-paid workers.
These approaches require careful design and compliance review, but the underlying objective is important:
Employee affordability should be measured in dollars employees can actually feel—not simply percentages on a spreadsheet.
What Does the ACA Require Employers to Contribute?
This is where contribution strategy becomes a compliance issue for employers with 50+ full-time employees, including full-time equivalents.
Applicable Large Employers are generally subject to the Affordable Care Act's employer shared responsibility provisions.
For plan years beginning in 2027, the IRS has set the applicable affordability percentage at 10.22%.[4]
That does not mean an employer should simply charge every employee 10.22% of income.
ACA affordability calculations have specific rules, and employers may use applicable safe harbors when determining affordability. Plan design and minimum-value requirements also matter.
The practical takeaway is simpler:
An employer's contribution strategy cannot be designed solely around what the company wants to spend. ACA affordability must also be considered.
The IRS has also increased the potential employer shared-responsibility payment amounts for 2027 to $3,780 and $5,670 annually, depending on which provision applies.[5]
Employers should have their broker, benefits counsel or other qualified advisor review affordability before finalizing employee contributions.
Should Employers Pay 100% of Employee Health Insurance?
Sometimes.
Paying 100% of employee-only coverage can be a powerful recruiting and retention benefit.
It also makes the employee's decision to enroll relatively easy.
But paying 100% is not automatically the optimal strategy.
For example, consider a company offering three medical plans.
If the employer pays 100% of the richest plan, employees have little financial reason to consider a lower-cost option.
Alternatively, an employer might fully fund—or nearly fund—a strong base plan while allowing employees to "buy up" into richer options.
That can provide employees with meaningful coverage while preserving consumer choice.
The objective should be intentional plan design rather than simply choosing the most generous contribution percentage the company can currently afford.
Should Employers Pay for Dependent Coverage?
Dependent contributions are one of the biggest levers in a health-plan budget.
An employer may heavily subsidize employee-only coverage while requiring employees to contribute more toward spouse or family coverage.
That can substantially reduce employer expense.
But dependent affordability matters to employees.
A health plan that looks generous because employee-only coverage costs $50 per month may feel very different to an employee paying $900 per month to cover a family.
This is particularly important for organizations competing to retain experienced employees who are more likely to have spouses and children.
HR leaders should therefore evaluate contribution strategy across every coverage tier, not just employee-only coverage.
A Practical Example: The 200-Employee Employer
Consider a hypothetical company with 200 employees facing a 12% health insurance renewal.
Leadership could respond several ways.
Option A: Pass Through the Increase
The company keeps its existing contribution percentage and employees absorb their share of the higher premium.
This protects the employer budget but increases payroll deductions.
Option B: Absorb the Increase
The employer increases its contribution enough to keep employee deductions relatively flat.
That protects employees but increases company benefit expense.
Option C: Change the Plan
The employer increases deductibles, copays or out-of-pocket exposure to reduce premium.
The payroll deduction may remain manageable, but employees pay more when they actually use healthcare.
Option D: Change the Financing Strategy
Instead of simply dividing a larger premium, the company evaluates whether its underlying financing model is still appropriate.
That could mean comparing:
Fully insured coverage
Level funding
Self-funding
An employee benefits captive
ICHRA
Alternative network strategies
This is where the conversation becomes more interesting.
If the company can reduce the underlying cost of financing healthcare, it may not have to choose between hurting its budget and hurting employees.
Before Increasing Employee Contributions, Ask Why the Plan Is Increasing
A 15% renewal does not automatically mean employees should pay 15% more.
First ask:
Why did the plan increase?
Was it:
Medical utilization?
A handful of large claims?
Specialty pharmacy?
GLP-1 medications?
Hospital pricing?
Carrier underwriting?
Stop-loss premiums?
Network economics?
An unfavorable fully insured renewal?
The answer matters.
If an employer is experiencing structural healthcare inflation, contribution changes may be unavoidable.
But if the underlying financing arrangement is inefficient, repeatedly increasing employee contributions may simply mask the real problem.
Contribution Strategy and Fully Insured Plans
Fully insured employers have relatively limited control over the underlying claims financing.
The carrier establishes the renewal, the employer negotiates and shops the market, and leadership determines how much of the resulting premium employees will pay.
This simplicity can be valuable.
But for employers reaching 100, 200 or 500 employees, another question becomes increasingly relevant:
Are we spending too much time deciding how to divide the premium instead of asking whether we should be financing healthcare differently?
That is where level funding and self-funding become important alternatives.
Contribution Strategy and Level-Funded Plans
Level funding can provide predictable monthly payments while giving employers some of the advantages associated with self-funding.
Depending on the arrangement, employers may receive greater claims visibility and potentially participate in favorable claims experience.
For an employer that has historically been fully insured, level funding can sometimes serve as an intermediate step toward greater control.
But employers should understand the stop-loss contract, surplus provisions, claims liability and renewal methodology.
A low first-year rate does not automatically create a sustainable long-term strategy.
Contribution Strategy and Self-Funding
Self-funding changes the conversation considerably.
Instead of treating health insurance primarily as a premium, the employer begins managing actual healthcare spending.
That can create opportunities to evaluate:
Pharmacy arrangements
Stop-loss coverage
High-cost claims
Provider networks
Centers of excellence
Care navigation
Employee utilization
Captive arrangements
For employers with sufficient scale and the right risk profile, improving these underlying economics can be more powerful than repeatedly changing employee contributions.
Don't Let the Renewal Determine Your Benefits Strategy
This is one of the most common mistakes employers make.
The carrier delivers a renewal.
Finance determines how much additional cost the company can absorb.
HR determines how much employees can tolerate.
Then everyone works backward into a contribution strategy.
That is reactive.
A stronger approach is to establish the company's benefits philosophy before the renewal arrives.
Leadership should determine:
What percentage of compensation should benefits represent?
How affordable should employee-only coverage be?
How much dependent coverage does the company want to subsidize?
How does the strategy compare with recruiting competitors?
What happens to lower-paid employees?
How much annual healthcare inflation can the company reasonably absorb?
At what point should the organization reconsider its funding strategy?
Those answers create a framework that can survive more than one renewal cycle.
Frequently Asked Questions
How much should an employer contribute toward employee health insurance?
There is no universal percentage that is appropriate for every employer. Contribution strategy should reflect employee affordability, recruiting goals, compensation philosophy, plan design, ACA requirements and the company's overall healthcare budget.
Are employers required to pay 50% of employee health insurance?
There is no universal federal rule requiring every employer with 50+ employees to pay exactly 50% of premiums. Applicable Large Employers do, however, need to consider ACA employer shared-responsibility, affordability and minimum-value requirements. Carrier participation rules and state requirements can also affect particular arrangements.
What is the ACA affordability percentage for 2027?
For plan years beginning in 2027, the IRS required contribution percentage used for ACA affordability purposes is 10.22%.[4] Employers should apply the appropriate affordability rules or safe harbors rather than treating 10.22% as a simple employee contribution target.
Should an employer pay more toward employee-only coverage than family coverage?
Many employers structure contributions differently by coverage tier. Whether that strategy makes sense depends on budget, workforce demographics, recruiting objectives and employee affordability.
Should employers increase employee contributions when premiums increase?
Not automatically. Employers should first understand what is driving the increase and model the effect on employees. A contribution increase may be appropriate, but repeated cost shifting can eventually undermine affordability and the value employees perceive in the benefits package.
Can changing from fully insured to self-funded reduce employee contributions?
Potentially, but savings are never guaranteed. Alternative funding arrangements can give an employer greater visibility and opportunities to manage underlying healthcare costs. Whether those opportunities translate into lower employer or employee costs depends on the employer's claims, workforce and plan strategy.
The Bottom Line
The question "How much should employees pay for health insurance?" sounds like a budgeting question.
For an employer with 50–500+ employees, it is actually a benefits-strategy question.
The best contribution structure balances four things:
what the company can sustainably afford, what employees can reasonably afford, what the organization needs to compete for talent, and what the underlying healthcare plan actually costs.
And when those four things stop fitting together, simply changing the contribution percentage may no longer be enough.
It may be time to reconsider the health plan itself.
Proper Benefits Brokerage helps employers evaluate contribution strategy, plan design, fully insured, level-funded and self-funded alternatives to build a benefits program that works for both the company and its employees.
If your organization has 50+ employees and is preparing for its 2027 renewal, we can model the impact before you decide how much of the next increase to pass on to employees.
Talk with Proper Benefits Brokerage about your 2027 benefits strategy.
Footnotes / Sources
[1] Marsh/Mercer, September 2, 2026 — 2027 employer health-benefit cost projection. More than 1,800 U.S. employers responded; projected cost growth is 8.2% after planned cost-reduction actions and approximately 11% with no changes.
Marsh/Mercer — 2027 employer health-benefit cost projection
[2] Mercer, November 18, 2025 — National Survey of Employer-Sponsored Health Plans. Average cost reached $17,496 per employee in 2025 and was projected to exceed $18,500 in 2026.
Mercer — Employer health-benefit cost and affordability research
[3] Mercer, June 11, 2026 — Survey on Health and Benefit Strategies for 2027. 48% of employers with 500+ employees expected medical-plan changes that increase employee out-of-pocket costs; 31% offered or planned to offer a nontraditional medical plan in 2027.
Mercer — 2027 Health and Benefit Strategies
[4] Internal Revenue Service, Revenue Procedure 2026-26, published July 27, 2026. The required contribution percentage for plan years beginning in 2027 is 10.22%.
IRS — 2027 affordability percentage
[5] Internal Revenue Service, 2027 employer shared-responsibility indexing. The indexed §4980H amounts for 2027 are $3,780 and $5,670 annually, depending on the applicable provision.
IRS — 2027 employer shared-responsibility amounts