Thursday, July 14, 2022

Employer-sponsored Health Insurance Yields 47% ROI for U.S. Businesses

A new report from Avalere Health analyzing the return on investment (ROI) of employer-sponsored health insurance (ESI) estimated a 47% ROI for U.S. employers in 2022—increasing to a predicted 52% return in 2026. The report was commissioned by the U.S. Chamber of Commerce and focused on employers with 100 or more employees.  

Avalere Health analyzed various benefits of offering ESI, such as reduced direct medical costs, productivity, recruitment, retention, short- and long-term disability, and tax benefits. Consider the following analysis of key drivers and their ROI:
  • Productivity—$275.6 billion in 2022 ($346.6 billion in 2026)
  • Tax benefits—$119.2 billion in 2022 ($139.7 billion in 2026)
  • Recruitment—$141 billion in 2022 ($167 billion in 2026)
  • Reduction in direct medical costs—$101 billion in 2022 ($108 billion in 2026)
The ROI growth is attributed to various factors, including growing employment, anticipated wage increases, a projected rise in per-employee spending on wellness programs, and relatively flat employee turnover rates.
Share of Benefits by Component, as % of ROI

Employer Takeaway

Companies offering such insurance could anticipate receiving an average of $1.47 back in financial benefits for every dollar invested in ESI. The report also demonstrated that employers offering higher quality coverage and wages could likely expect a higher return on their ESI programs. Additionally, industries in which employers generally made more significant investments in ESI, such as wellness programs, tended to result in larger ROI. Since costs associated with turnover and recruitment are positively associated with wages, a higher ROI is expected in higher-wage industries.

Full report, here.