The Cost of Carrying Health Benefits

I shared this via a tweet this morning and I wanted to share it here as well:

One of the more surprising things that new / first-time founders encounter as they build a growing business is the actual cost of carrying health benefits and insurance for your team.

Adding a "nuclear family" (two parents + 1-2 kids) and providing coverage can be an additional $4-5k per month!! It really does blow your mind.

So, as a simple mathematical example, if you hire a new employee @ $40k per year and provide health insurance on top of their base salary, it could effectively cost the business upwards of $90k per year for the full-time hire (and their family).

Naturally, these are costs that we must think of before we make the commitment to hire staff. But, it's also an exciting signal that things are headed in a positive direction.

Fun times.

  1. 5

    A few of the companies I worked at only covered the cost of the employees's insurance, the employee covered the cost of their family if they had one.

    I really don't understand the problem a lot of people in America have with universal healthcare, I'd love a public option at least.

    I find it crazy that my healthcare is tied to my current employer.

    1. 4

      it really is. there's nothing good about this system.

  2. 4

    Does not apply in the UK and most (all?) European countries. Thank god for that!

    1. 2

      (ᵟຶ︵ ᵟຶ)

  3. 3

    @mjwhansen and @Leenyburger talked about this exact topic on the latest episode of the Software Social podcast and it was eye-opening as well!

    1. 3

      love it! i'll take a look!

    2. 2

      Thanks for listening! It's crazy how complicated it is. I also wrote up a blog post with some of my learnings/tips for the process: https://mjwhansen.com/health-insurance-options-for-bootstrapped-entrepreneurs-a-guide/

  4. 3

    Health insurance costs are absolutely ridiculous.

    I think there must be a business opportunity to pool together a bunch of indiehacker businesses to negotiate a group health insurance package.

    When I left my job years ago, I was the sole income-earner for my family and I paid for my own health insurance to cover me, my wife and 3 kids. It cost $27k annually through Blue Shield of CA's silver plan. At least it was tax deductible, but still, absolutely crazy. Only options in my region were Blue Shield of CA and Kaiser. Health insurance companies know individuals and small businesses have no choices and no negotiating leverage, and so they charge an arm and a leg.

    After a couple years, my wife got a job a large financial firm and so we switched to coverage under her plan. It cost $7k annually for a FAR better plan under Anthem than what BSCA was giving us for $27k.

    1. 1

      i've done that (and asked for it for myself from employers). +1.

  5. 2

    You forgot to put "fun" in quotes. :(

  6. 2

    "Naturally, these are costs that we must think of before we make the commitment to hire staff."

    There's nothing "natural" about your system at all. The fact that healthcare is tied to employment is bonkers. I think it will take decades to fix. Good luck.

    1. 1

      this is what we have to deal with in the US. i don't like it. but, this is one of the "costs" of doing business here.

      makes you think about all the energy spent on "warehousing" money in offshore accounts... i think that's a reaction to some of this stuff.

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