The Employer as Purchaser

Employer-sponsored insurance covers 154 million people under the age of 65. No single entity in that group is large enough to move a market on its own, and the group as a whole has no coordinated purchasing strategy. That combination explains most of what follows in this course.

What coverage costs

The 2025 figures set the scale:

Measure	Single coverage	Family coverage
Average annual premium	$9,325	$26,993
Worker contribution	16 percent, $1,440	26 percent, $6,850
Increase from 2024	5 percent	6 percent

Family premiums rose 26 percent over the five years from 2020 to 2025. A family plan now costs roughly the price of a new car every year, and that is before deductibles and coinsurance.

Who actually pays

The table above shows what workers pay visibly. It substantially understates what they bear. The employer contribution is not a gift from profits, it is part of total compensation, and dollars going into premiums are dollars not going into wages.

This matters for a practical reason. Employers frequently describe health benefits as a cost they absorb on behalf of employees, which frames cost control as generosity foregone. Treating the premium as deferred wages reframes it: an employer that overpays for care is spending its workers’ money, not its own. That framing is the foundation of the fiduciary obligations covered in Module 4.

Why employers are weak purchasers

Medicare buys care for 68 million people through a single set of administered prices set by rule. Employers buy care for 154 million people through thousands of separate negotiations conducted mostly by intermediaries. The structural consequences are severe:

• No individual employer has meaningful leverage against a dominant hospital system in its market.
• Most employers do not negotiate at all. They buy access to a network their carrier or administrator already assembled.
• Health benefits are rarely anyone’s full-time job outside the largest firms, and the people responsible are usually in human resources rather than in a purchasing or clinical function.
• The purchaser is not the patient. The employer chooses the plan, the employee uses the care, and neither sees the price at the point of decision.

Worth remembering: the commercial market is often described as more market-driven than Medicare, with the implication that it should be more efficient. The next module shows that it pays substantially more for the same services. A market with fragmented buyers, concentrated sellers, and prices hidden from everyone is not a functioning market in the sense the word usually implies, and expecting competitive discipline from it without fixing those three conditions has not worked.

Key takeaways

• Employer-sponsored insurance covers 154 million people under 65.
• Average 2025 premiums were $9,325 for single and $26,993 for family coverage, with family premiums up 26 percent since 2020.
• The employer contribution is part of total compensation, so overpaying for care spends workers’ money.
• Fragmented purchasing against concentrated sellers is the defining structural weakness of this market.

Sources

• KFF, 2025 Employer Health Benefits Survey (opens in a new tab)
• KFF, Medicare 101: Key Facts (opens in a new tab)