Large and small employers invest incredible amounts of time ensuring that the wages they pay are competitive in their markets to attract and retain employees. Similarly, employers are no strangers to ensuring that the employee benefits packages they offer are attractive while being sustainable for their businesses, particularly health insurance. What is often overlooked is the amount of disposable income your employees will have after paying for their contribution to health insurance and how it compares to other markets. This figure will continue to grow in importance as the workforce becomes more mobile and remote work becomes permanent.

Thompson Aderinkomi is CEO and co-founder of Nice Healthcare, a company that is solving systemic pain points by bringing primary care directly to the patient with in-home visits, lab tests and x-rays.

Income by any other name

The key question then is which states have the highest average disposable income. First, we need to look at states by their cost of health insurance. I found that the states with the highest insurance premiums for a single employee are correlated with the states with the lowest household incomes. The methodology I used to make this assessment included dividing the states and DC into three groups based on the average cost of health insurance premium. I grouped the lowest-cost states in one group, the middle in another group, and the highest in the last group, placing 17 states into each group.

Next, I compiled averages for household income, employee premium contribution for a family, and rent for a 2-bedroom apartment. The rent expense helps to normalize the final figure of disposable income so that cost of living would be considered.

One would think that in states with higher incomes and higher cost of living that the cost of health care would follow suit and be higher. This is not the case, in fact, the opposite is true; states with higher incomes and cost of living had lower levels of employee contributions to health insurance than high health insurance premium states in 2020. The cost of health care appears to violate normal economic principles with the devastating effect of crippling the financial prospects of average-wage households.

The hidden costs of insurance premiums

So then, what is the actual impact on your employees from high health care costs? In 2020, after paying for health insurance and rent, the average family in the top third of high-cost insurance premium states was $42,888 while in the lowest third the amount left over was $59,357. What this means is that in states with the lowest cost of health insurance, the average family has on average, an additional $16,469 annually in disposable income to spend on things like childcare, transportation, education, and entertainment compared to the 17 states in the high-cost group.

If an employer is merely focused on locally competitive wages and a competitive benefit set, they would miss this critical nuance, especially when competing for talent nationally. Employers in high health insurance premium states need to be cognizant of the fact that the proportion of employee premium contributions to income is significantly higher than in low-cost health insurance premium states.

The bottom line is that the problem with health care is the price. The only solution is to implement strategies that lower the cost of insurance premiums and subsequently decrease employee contributions in line with a local market's average wages and cost of living. To do this, employers must invest time in strategies that lower the out-of-pocket cost to employees today, not in 2-5 years. There are many programs touting to achieve these goals that fail to deliver.

However, one promising approach is the direct primary care (DPC) movement. This type of program, when implemented by vendors that charge fees below $25 per employee per month with no visit fees, has the ability to lower employee out of pocket costs immediately upon implementation. DPC can also immediately reduce health insurance premiums if employers and their consultants are able to jointly pressure insurance carriers to recognize the positive impact of this meaningful, alternative model.

In this highly competitive environment, there is little room for error to attract and retain talent. Make sure that your benefits don't diminish your value by making it hard for your employees to live on the income left after paying their share of health insurance. Reducing the price of health care is not only the right thing to do but can help you become an employer of choice.

Read more: 

• KFF: Annual family premiums for employer-sponsored health insurance average $22,221
• Will an avalanche of health care costs hit employers this year?
• Health care costs and coronavirus stoke employee anxiety: How employers can help