For small business owners, the decision to offer group coverage to employees isn't the only choice that has to be made. What about employees' families? It can be a big financial leap to go from single employee coverage to family coverage. Here's some guidance on how to approach the decision.

Treat it like customer acquisition

Offering group family coverage may be a make-or-break for prospective employees. “A business should be very savvy about how they get their employees," says Antara Dutta, a mentor for SCORE, a small business counseling organization. “Employee acquisition and retention should be looked at in exactly the same way customer acquisition and retention is looked at."

In other words, in the same manner that you weigh your time and efforts to sign and keep a customer, you would also do the math on what it takes to attract and retain your employees. That could include anything from training to workday start and end times to health benefits.

To a certain extent, some of this is influenced by what your competitors are doing. “If you are a niche business and you're having a hard time retaining employees, you absolutely should be looking at [family coverage]," Dutta says.

That said, if you're running a minimum wage business and labor is plentiful, offering group health coverage may not make financial sense.

Covering premiums at different rates is the norm

There is no requirement to cover premiums for dependents, but if you do, the employer contribution does not need be the same for single and family coverage. When it comes to national averages, employers typically cover about 83% of single employee premiums and 73% of family premiums, according to Kaiser.1 And covering family premiums at a different rate isn't unusual. "This has been standard practice, even for large employers," Dutta says.

Adding families may lower rates for everyone

Depending on the makeup of your workforce, adding employees' families may diversify your coverage group in a way that lowers rates for everyone. For instance, if you own a hair salon and you employ primarily women in their 20s, your healthcare premiums may be higher due to the potential of pregnancy-related costs.

Including their spouses and children adds diversity to the group, helping to spread out the healthcare cost risks. “When you have employees with similar risks in the same pool, diversification is going to give you a better financial advantage," Dutta says. For that reason, it’s a smart move to obtain quotes both ways before making a decision.

Finally, consider that employees consider health insurance more important than any other benefit.2 Offering group health benefits is one of the best ways to show employees that you value them – and their families -- an important factor when it comes to retention.

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  1. “2020 Employer Health Benefits Survey,” Kaiser Family Foundation, last accessed January 20, 2021,, opens new window.
  2. “Company Benefits and Perks: Are You Keeping Up?” Monster, last accessed January 20, 2021,, opens new window.

This material provided is a general summary and does not address all your organization’s specific issues. This material is for informational purposes only. It is not intended or written to be used, and it cannot be used, as legal advice or a legal opinion. It should not be relied upon in lieu of consultation with your own legal advisors. Insurance and tax laws and interpretations of those laws are complex and subject to change. None of the information herein is intended or written to be used, and it cannot be used, for the purpose of avoiding taxes or penalties that may be imposed.

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