Top 5 Things to Know About Employer-Sponsored Insurance

Author: Samantha Bridge, RN, MSN, MBA-HCM, IQCER
Date: April 11, 2025

If you’ve ever chosen a health plan through your job, you might’ve assumed the insurance company was calling the shots. But here’s the twist: in most cases, your employer is the real power behind your plan—and the choices they make directly affect your coverage, costs, and care.

Let’s break down the top five things every employee should know about how employer-sponsored insurance really works. Whether you’re reviewing your benefits for open enrollment or wondering why your deductible is so high, this is the real story behind the scenes.

1. Your Insurance Is Paid with Both Employer and Employee Money

Let’s start with the basics. When you hear “you have insurance through work,” it sounds like your employer is footing the whole bill. But in reality, both you and your employer contribute to the cost of your plan.

Here’s how it typically works:

• Your employer pays a large portion of the monthly premium, often 70–90% for employee coverage.
• You pay the rest of the premium, plus any deductibles, copays, and coinsurance when you actually use care.
• Employers often contribute less for family members or dependents, so those costs can feel significantly higher for employees with families.

In 2023, the average annual premium for employer coverage was:

• $8,435 for single coverage
• $23,968 for family coverage

On average, employees contributed about 17% of the premium for individual coverage and 29% for family coverage (KFF 2023 Employer Health Benefits Survey).

📌 Key takeaway: Just because your employer offers coverage doesn’t mean it’s free—and understanding the breakdown helps you make smarter choices during enrollment.

2. You’re Part of a Risk Pool—And That Affects Everyone’s Costs

Health insurance is based on risk pooling. Everyone enrolled in the same plan (or group of plans) contributes to a shared pool of money. That pool pays for claims when someone gets sick, injured, or needs surgery.

The idea is simple:

• Some people will use a lot of healthcare services
• Others won’t use much at all
• The pooled money covers everyone—and spreads the risk

But here’s where it gets tricky: if many employees or dependents rack up high claims, the plan’s costs go up—and those increases usually get passed on to everyone the following year.

💡 Example: Let’s say your company has 10,000 employees. If one employee’s family member has a complex diagnosis requiring $2 million in care, that’s paid from the shared pool. Multiply that by several high-cost conditions across the company, and the plan’s expenses spike—triggering higher premiums or plan design changes next year.

📌 Key takeaway: Even if you didn’t go to the doctor all year, you could still see your costs go up—because group plans rise or fall based on everyone’s usage.

3. Your Employer Designs the Plan—With the Insurance Company

This is one of the biggest “aha” moments for most people.

Most large employers don’t just “buy” a plan from an insurance company. Instead, they self-fund their plans, which means:

• The employer uses their own money to pay medical claims.
• The insurance company (like Aetna, UHC, or Cigna) acts more like an administrator—handling paperwork, networks, and ID cards.

Even for smaller employers who use fully insured plans (where they pay premiums and the insurance company takes the risk), they often choose from pre-set plan designs and decide:

• What services are covered (or excluded)
• Whether prior authorization is required
• What your deductible, copay, and out-of-pocket max will be

Two people with “Blue Cross” on their card might have very different benefits depending on how their employers customized their plans.

📌 Key takeaway: Your coverage is less about the brand name on the card—and more about the choices your employer made when they designed the plan.

4. High Spending Drives Premium Increases for Everyone

Employers watch plan spending trends like hawks. If too many people hit their deductible, go out of network, or have complex claims, it’s a signal that costs are rising.

To keep the plan financially sustainable, your employer (alongside their brokers or consultants) may respond by:

• Increasing your premiums
• Raising deductibles or copays
• Dropping certain providers or services
• Changing plan tiers or networks

💡 Visual example: Imagine a 10,000-person company with a $50 million annual budget for healthcare. If 1% of the population accounts for $10 million in costs (which is common), that affects what’s left for everyone else—and creates pressure to adjust plan design.

And yes—if the plan gets hit too hard, some employers may even drop spousal or dependent coverage or increase employee contribution percentages the following year.

📌 Key takeaway: Your insurance plan is a financial product. When the cost to the employer goes up, they pass some of that cost back to employees—either directly or indirectly.

5. What You Don’t Use Still Affects Your Costs

Let’s say you barely used your insurance all year. You didn’t hit your deductible, skipped the flu shot, and never opened your explanation of benefits (EOB). You might think that means you saved the plan money—and that next year’s premium increase isn’t your problem.

But here’s the truth: underusing certain types of care can also contribute to rising costs.

For example:

• Skipping preventive care may mean a bigger problem goes undetected
• Not managing chronic conditions (like diabetes or high blood pressure) increases the risk of expensive complications
• Going to the ER instead of urgent care (or in-network providers) costs the plan thousands more

💡 Side note: Choosing brand-name drugs over generics—even when clinically equivalent—can cost the plan 5x–20x more per prescription.

📌 Key takeaway: Being a mindful user of your insurance benefits doesn’t just help your health—it helps control system-wide costs for you and your coworkers.

Final Thoughts

Most of us were never taught how health insurance works—let alone how employer-sponsored plans operate behind the scenes. But the more you understand about who designs your plan, where your premium dollars go, and how the system responds to usage, the better prepared you’ll be to navigate your options.

Whether it’s open enrollment or just a midyear check-in, remember:

• Ask questions.
• Compare options.
• Advocate for clarity and transparency.

And when in doubt? Ask Nurse Sam. 🩺

📚 Sources:

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• KFF 2023 Employer Health Benefits Survey
• Health Affairs: Employer Trends in Plan Design
• Society for Human Resource Management (SHRM): Self-Funded vs. Fully Insured Plans
• National Business Group on Health: Large Employer Health Care Strategy & Plan Design Survey