Employee Benefits Benchmarking: How Mid-Size Employers Know If Their Health Coverage Is Truly Competitive in 2026

Every year, mid-size employers go through the same exercise. The renewal package arrives, the broker walks through the numbers, and the conversation narrows to a single question: how much is the rate going up this year? Sometimes there's a plan option to switch to. Sometimes there isn't. Either way, most employers make their decision based on year-over-year cost movement rather than any comparison to what the market actually looks like.

The question almost nobody asks is whether their benefits package is competitive. Not competitive against last year's renewal. Competitive against what a 50-person or 150-person company down the street is offering their people. That comparison tells you something the renewal sheet never does: whether your benefits investment is working hard enough to retain the people you already have and attract the ones you're trying to hire.

Benefits benchmarking is the process of measuring your company's health coverage design, cost per employee, and employee contribution rates against verified market data for employers of similar size and industry. When you see that comparison clearly for the first time, the renewal decision changes. So does the conversation with your broker.

What Employee Benefits Benchmarking Actually Measures

More Than Just What You Pay Per Month

A complete benefits benchmark covers five dimensions, not one. Premium cost is the starting point, but it only tells you what you're spending, not whether what you're getting for that spend is competitive. The five dimensions that matter are: total employer cost per employee per year, employee contribution rate (what your people pay out of pocket), plan design quality (deductibles, out-of-pocket limits, network breadth), plan type (HMO, PPO, HDHP with HSA, level-funded), and voluntary or supplemental benefits included alongside the core health plan.

When you compare all five dimensions to market averages, you get a genuine picture of where you stand. Some employers discover they're spending above market on premium but running a high-deductible design that employees find difficult to use. Others are paying below market but have designed their employee contributions so generously that their people are better protected than the benchmarks suggest. The combination of all five is what defines whether a package is truly competitive.

The 2026 Market Baseline for Mid-Size Employers

The most comprehensive data source for employer health benefits is the KFF Employer Health Benefits Survey, published annually with responses from thousands of employers across the United States. The 2024 edition (the most current available for 2026 planning) found that the average annual premium for employer-sponsored single coverage reached $8,951, with employees contributing an average of $1,368 of that amount.¹ For family coverage, the average total premium was $25,572, with employees contributing an average of $6,296.¹

Those are national averages across all employer sizes and industries. For mid-size employers specifically (the 20 to 250 employee range), actual costs vary significantly by region, industry, and the funding approach used. Employers in New York and Massachusetts consistently pay 15% to 25% above national averages due to state mandates and higher underlying medical costs. Employers in industries with older workforce demographics, including senior care, skilled trades, and certain manufacturing, often face premiums 10% to 20% above industry averages.

The average annual deductible for single coverage in employer-sponsored plans reached $1,787 in 2024, up from $1,735 the prior year.¹ That figure matters because it directly affects how your employees experience their coverage day-to-day. A plan with a below-market deductible is meaningfully more attractive to employees than the premium cost alone would suggest.

The Five Dimensions of a Competitive Benefits Package

Dimension 1: Total Employer Cost Per Employee Per Year

The most useful single number in a benefits benchmark is employer cost per employee per year, not the monthly premium per plan tier. Monthly premiums shift depending on how many employees elect single versus family coverage, and comparing two employers on monthly premium alone ignores that variable entirely.

According to KFF 2024 data, employers cover an average of 83% of the single-coverage premium and 72% of the family-coverage premium.¹ A mid-size employer spending $8,000 per year per enrolled employee on health coverage (employer portion only) is operating near the national average for single coverage. An employer spending $12,000 to $14,000 per enrolled employee is significantly above average, which may be intentional, or may reflect a legacy plan design that has never been reviewed.

Dimension 2: Employee Contribution Rates

How much your employees pay out of their paychecks for their coverage is one of the most visible parts of the total compensation picture, and one of the areas where employer practices vary most widely. The KFF 2024 survey found average employee contributions of $1,368 per year for single coverage and $6,296 per year for family coverage.¹ But those averages mask a wide range.

Some employers in competitive labor markets contribute 100% of single-coverage premiums as a recruitment tool, shifting the family coverage portion to employees. Others run cost-sharing arrangements where employees contribute 30% to 40% of the total premium. The right answer depends on your workforce demographics, your labor market competitiveness, and what you are trying to signal to candidates and current employees about how you value them.

Dimension 3: Deductibles and Out-of-Pocket Exposure

Employees increasingly evaluate benefits by what they actually experience when they use them, not just what they pay in contributions. A plan with a $3,500 deductible feels very different from a plan with a $500 deductible, even if the premium difference doesn't fully account for that gap. The national average deductible of $1,787 for single coverage provides a useful reference point.¹

High-deductible health plans (HDHPs) paired with Health Savings Accounts (HSAs) represent a meaningful share of employer-sponsored coverage. According to KFF, 57% of covered workers are enrolled in HDHPs with deductibles that qualify for HSA pairing.¹ Whether that structure works for your workforce depends heavily on your employees' actual healthcare utilization and their financial capacity to absorb deductible exposure before coverage kicks in. Benchmarking your deductible design against industry averages tells you whether your plan is asking more of employees than the market norm.

Dimension 4: Plan Type and Network Breadth

The plan architecture your employees are offered (HMO, PPO, HDHP, point-of-service, or hybrid designs) affects both the cost of the plan and how freely your employees can access care. PPO plans offer broader network access and are generally preferred by employees who have existing specialist relationships or live in areas with multiple competing health systems. HMO plans restrict to a defined network but often carry lower premiums. For many mid-size employers, the plan type is inherited from the initial carrier selection and never revisited.

Network breadth matters more in some markets than others. In Massachusetts and New York, where dominant academic medical systems drive significant out-of-network risk, network quality is a material factor in plan value. An HMO that excludes a major regional hospital system creates real employee friction that doesn't show up in the premium comparison.

Dimension 5: Voluntary and Supplemental Benefits

The Bureau of Labor Statistics 2024 Employer Costs for Employee Compensation (ECEC) data shows that benefits represent 30.6% of total compensation costs for private-sector workers.² Health coverage dominates that figure, but voluntary benefits, including dental, vision, short-term disability, life coverage, employee assistance programs, and financial wellness tools, contribute meaningfully to how employees perceive the total package.

A benchmark that covers only health coverage premiums misses a portion of the competitive picture. Employers who offer a comprehensive voluntary benefits menu alongside their core health plan are providing measurably more total compensation than those who offer health coverage alone, even when the health coverage premium is identical. In tight labor markets, that difference shows up in retention data.

How to Run a Benefits Benchmark for Your Company

Benchmarking your current package against the market does not require a consultant engagement or a lengthy data project. Most mid-size employers can run a meaningful benchmark with data they already have, along with a few hours of structured comparison.

The process has five steps. First, collect your actual costs: total premium paid, employer share, employee share, and how many employees are enrolled in single versus family coverage. Second, calculate your cost per enrolled employee per year (not per plan tier, but averaged across your actual enrollment mix). Third, compare that number to the KFF benchmark for your state and company size. Fourth, compare your deductible and out-of-pocket maximum against the national average. Fifth, list the voluntary benefits you offer and note which ones carry an employer contribution.

When you complete this comparison, you will land in one of three categories. Your package may be above market: competitive or generous on most dimensions, which is a retention asset worth communicating explicitly to your team. It may be at market: neither a disadvantage nor a standout, which is a common position for employers who have renewed annually without renegotiating. Or it may be below market on one or more dimensions, which is the finding that opens a real conversation about plan redesign or alternative funding.

What Benchmarking Reveals About Your Funding Options

One of the most useful things a benefits benchmark does is expose the gap between what you are currently paying and what is structurally possible. Most mid-size employers are on fully insured commercial plans where premiums are set by the carrier based on your group's demographics and sometimes claims history. The carrier builds in a profit margin, a reserve, and an administrative load that fully insured employers cannot see or negotiate directly.

When you benchmark that fully insured cost against alternative funding structures, the comparison often reveals options that your current broker has never presented. It is not because they do not exist, but because the broker's compensation structure doesn't incentivize showing them to you.

Taft-Hartley Multiemployer Plans and Nonprofit Pricing

Taft-Hartley multiemployer plans are a category of health coverage that most mid-size employer brokers never discuss. These are collectively bargained plans operated by nonprofit trusts, originally established for unionized industries but increasingly accessible to non-union employers through participating employer arrangements. Because they operate on a nonprofit basis and pool risk across thousands of participating employees, they can offer premium stability that fully insured commercial plans cannot.

A mid-size employer whose workforce includes a significant proportion of hourly, blue-collar, or trade workers may find a Taft-Hartley arrangement structurally better suited to their situation than a standard commercial plan, both on cost and on the predictability of annual renewal increases. Multiemployer plans typically see rate adjustments in the 2% to 5% annual range rather than the 8% to 15% commercial market increases that have become common since 2020.

PEO-Sponsored Coverage and Instant Market Access

Professional Employer Organizations (PEOs) offer a different path to below-market health coverage for mid-size employers. By co-employing your workforce alongside thousands of other small and mid-size companies, a PEO can offer access to carrier rates that would otherwise only be available to very large employers. The National Association of Professional Employer Organizations (NAPEO) found in a 2023 study that companies working with PEOs experienced 9.8% lower employee turnover rates than comparable employers without PEO relationships.³

For a growing company with 30 to 75 employees that currently buys fully insured coverage from a major commercial carrier through the open market, a PEO arrangement may offer access to those same carrier networks at meaningfully lower per-employee costs. The comparison is worth running before each renewal. The PEO arrangement bundles HR administration, workers compensation, and payroll alongside the benefits, so the cost comparison requires looking at the full administrative picture, not just the health coverage premium.

Level-Funded Plans for Employers Above 25 Employees

Level-funded plans sit between fully insured and self-funded on the risk spectrum. The employer pays a fixed monthly amount (making budgeting predictable), and that payment is allocated across a claims fund, stop-loss protection, and administration rather than going directly to an insurer. If claims come in below the funded amount, the employer receives a refund. If claims exceed the stop-loss threshold, the stop-loss carrier covers the excess.

For employers with a relatively young, healthy workforce, level-funded arrangements can reduce total costs by 10% to 20% compared to fully insured plans with equivalent benefits. The benchmark comparison is straightforward: take your current fully insured premium, request a level-funded illustration from a carrier willing to underwrite your group, and compare the maximum annual exposure under the level-funded plan to your current premium. In many cases, the level-funded maximum exposure is lower than the fully insured premium, meaning even in a bad claims year, you come out ahead.

Reading Your Benchmark Results: What to Do Next

If Your Package Is Below Market

A below-market benefits package creates a retention tax that most employers can't see on a spreadsheet. The SHRM 2024 Employee Benefits Survey found that 60% of employees rate benefits as a major factor in their decision to stay with or leave an employer.⁴ When your package falls below what comparable employers are offering, you are paying a premium in turnover costs that often exceeds what it would cost to bring the benefits in line with market.

The first step is quantifying that cost. If your average employee makes $55,000 per year and you have 20% annual turnover, replacing each departing employee costs an estimated $11,000 to $16,500 in recruiting, onboarding, and productivity loss, based on SHRM's estimate that replacing an employee costs 50% to 200% of their annual salary depending on role complexity.⁴ At a 75-person company with 20% turnover, that's 15 replacements per year and $165,000 to $247,500 in total replacement cost. A benefits upgrade that costs $40,000 to $60,000 per year in additional employer premium may reduce turnover enough to pay for itself in year one.

If Your Package Is At or Above Market

An at-market or above-market benefits package is a retention and recruitment asset, but only if your employees know it. One of the most consistent findings in benefits research is that employees routinely underestimate the dollar value of their employer-sponsored coverage. The KFF 2024 survey puts average employer spending on a family plan at over $19,000 per year, a number most employees could not tell you within $5,000.¹

If your benchmarking reveals that you are at or above market, the immediate action is communicating that clearly. A total compensation statement that shows the employee's salary plus the employer's benefits contribution, itemized in plain language, often changes how employees perceive their compensation. It also creates a concrete talking point for your recruiting team when candidates compare your offer to a competitor's.

Frequently Asked Questions About Benefits Benchmarking

How often should a mid-size employer benchmark their benefits package?

Benchmarking once a year, timed to arrive 90 to 120 days before your plan renewal date, gives you enough time to act on the findings. If you benchmark inside the 60-day window before renewal, your options narrow significantly because carrier quotes and alternative funding proposals need lead time to develop. The annual rhythm also means you're measuring against fresh data, since KFF and SHRM update their benchmark surveys annually.

What data do I need to run a benefits benchmark?

You need your current plan's total monthly premium (employer and employee shares combined), the number of employees enrolled in single versus family coverage, your plan's annual deductible and out-of-pocket maximum, and a list of any voluntary benefits you offer alongside the core health plan. Your broker or HR platform can generate all of this data from your current plan documents. If your broker can't or won't produce it, that is itself a signal worth paying attention to.

What does it mean if my company is spending above the benchmark average?

Spending above the national average is not automatically a problem. It depends on what you're getting for that spend and whether it's working as a retention tool. Some employers intentionally offer above-market coverage as a competitive differentiator, especially in industries where turnover is expensive and benefits quality drives candidate decisions. The question to ask is whether your above-average spend is producing below-average turnover and above-average offer-acceptance rates. If it is, the investment is working. If turnover and recruiting are still challenges despite above-market benefits spending, the issue may be plan design rather than premium cost. Employees may not be fully using or understanding what they have.

Can a company with 25 to 50 employees realistically access PEO or Taft-Hartley pricing?

Yes, and this is where mid-size employers often find the most meaningful cost improvements. PEOs typically work with companies as small as five employees, though the economic benefit becomes most pronounced in the 25 to 150 employee range where fully insured commercial pricing is least competitive. Taft-Hartley multiemployer plans have varying participation thresholds, but many are accessible to employers with 20 or more employees in qualifying industries. The PEO health coverage guide at PEO4YOU covers the comparison in detail for employers weighing both options.

How does benefits benchmarking connect to my overall compensation strategy?

Benefits represent 30.6% of total compensation for the average private-sector worker, according to BLS data.² When you benchmark only salary against the market and ignore the benefits side of the equation, you're looking at less than 70% of the picture. An employer paying $5,000 per year above market in salary but $4,000 per year below market in benefits is actually offering a below-market total compensation package, even though the salary line looks competitive. Benchmarking both sides of the ledger gives you an accurate read on your total market position and helps you make better decisions about where to invest your compensation budget. See also: the employee benefits guide at PEO4YOU for a framework on connecting benefits decisions to total compensation strategy.

What is the "Benefits Cost Gap" and how do I calculate it for my company?

The Benefits Cost Gap is the difference between what your current plan costs and what a structurally equivalent plan would cost under an alternative funding arrangement or through a PEO or multiemployer trust. It's calculated by taking your current employer cost per employee per year and comparing it to an illustration from a competing arrangement at your same headcount, demographics, and benefit design. For many employers in the 30 to 100 employee range, the Benefits Cost Gap is $800 to $2,400 per employee per year, a meaningful number at any size. The Benefits Savings Strategy Builder at PEO4YOU helps you identify the specific levers that close that gap for your situation.

References

1. Kaiser Family Foundation. "2024 Employer Health Benefits Survey." October 2024. kff.org
2. Bureau of Labor Statistics. "Employer Costs for Employee Compensation, December 2024." March 2025. bls.gov
3. National Association of Professional Employer Organizations. "PEOs: Good for Businesses and Their Employees." 2023 White Paper. napeo.org
4. Society for Human Resource Management. "2024 Employee Benefits Survey." June 2024. shrm.org
5. Kaiser Family Foundation. "Employer Health Benefits Survey, Section 6: Worker and Employer Contributions for Premiums." 2024. kff.org
6. Bureau of Labor Statistics. "National Compensation Survey: Glossary of Employee Benefit Terms." bls.gov

This content is provided for educational purposes and does not constitute legal, tax, or benefits advice. Consult your compliance counsel and a licensed benefits advisor for guidance specific to your organization.