There is no single federal law requiring employers to pay a specific dollar amount or percentage toward employee health insurance premiums. What exists instead is a patchwork: federal affordability rules for large employers, state mandates in a handful of places, and contribution minimums set by insurance carriers themselves. The answer depends on your company’s size, your state, and your insurer.
Large Employers: The Affordability Rule
Businesses with 50 or more full-time employees (called Applicable Large Employers, or ALEs) must offer health coverage to at least 95% of their full-time workforce under the Affordable Care Act. The law doesn’t say “you must pay X% of the premium,” but it does cap what employees can be asked to pay. If the employee’s share of the cheapest self-only plan exceeds a set percentage of their household income, the coverage is considered unaffordable, and the employer faces penalties.
That percentage adjusts each year. For 2025, the threshold is 9.02% of household income. For 2026, it rises to 9.96%. In practical terms, if an employee earns $40,000 a year, the most they can be charged for self-only coverage in 2025 is about $3,608 annually ($301 per month). The employer must cover whatever premium cost remains above that cap. Since most employer-sponsored plans cost $8,000 to $10,000 per year for single coverage, this typically means the employer picks up at least 60% to 70% of the premium, though that number varies with plan costs and employee wages.
Because employers rarely know each worker’s household income, the IRS allows three safe harbors: basing affordability on the employee’s W-2 wages, their hourly rate of pay multiplied by 130 hours per month, or the federal poverty line. Using any of these correctly shields the employer from penalties even if the coverage turns out to be unaffordable based on actual household income.
What Happens If an Employer Doesn’t Comply
An ALE that fails to offer coverage to enough employees can owe roughly $2,970 per full-time employee per year (the 2024 figure, adjusted annually). If coverage is offered but isn’t affordable or doesn’t meet minimum value standards, the penalty is about $4,460 per employee who ends up receiving a government premium tax credit instead. These aren’t small numbers for a company with hundreds of workers.
Small Employers: No Federal Requirement
If your business has fewer than 50 full-time employees and full-time equivalents, federal law does not require you to offer health insurance at all, let alone contribute a minimum amount. Many small employers do offer coverage voluntarily to attract and retain workers, but the contribution level is entirely their choice under federal rules.
Small businesses that do offer coverage and want to claim the Small Business Health Care Tax Credit must meet a specific bar: they need to pay at least 50% of the cost of employee-only premiums. The credit is worth up to 50% of the employer’s contribution (35% for tax-exempt organizations), but it’s only available to businesses with fewer than 25 full-time equivalent employees whose average annual wages fall below a certain threshold. So while 50% isn’t a legal mandate for all small businesses, it’s the minimum to unlock this particular tax benefit.
What Insurance Carriers Require
Even where the government doesn’t set a floor, your insurance company likely does. Most group health insurance carriers require employers to contribute a minimum percentage of the premium, typically 50% of the employee-only cost, before they’ll issue a policy. Carriers also set minimum participation rules, requiring a certain percentage of eligible employees to enroll. These aren’t laws; they’re underwriting requirements that vary by insurer and state. Federal regulations explicitly allow insurers in the small group market to set their own employer contribution and group participation rules, as long as they comply with state law.
This means the practical minimum for most employers offering group coverage is 50% of the employee-only premium, not because the federal government requires it, but because insurers won’t sell you a plan otherwise.
States With Their Own Mandates
A few states go further than federal law. Hawaii stands out with the most aggressive employer mandate in the country. Under the Hawaii Prepaid Health Care Act, employers must pay at least half the premium cost, and the employee’s share cannot exceed 1.5% of their monthly wages. If 1.5% of an employee’s wages is less than half the premium, the employer picks up everything above that amount. For lower-wage workers, this often means the employer covers well over 50% of the cost.
Other states have varying rules around contribution levels, particularly for small group plans. Some states set minimum contribution percentages that insurers must accept, while others defer entirely to carrier underwriting standards. Checking your state’s insurance division is the most reliable way to find your local rules.
Dependent and Family Coverage
One important distinction: the federal affordability requirement applies only to the employee’s own coverage, not to coverage for spouses or children. ALEs must offer dependent coverage (meaning it has to be available), but there’s no rule saying the employer has to make it affordable. An employer could cover 80% of the employee’s premium and 0% of dependent premiums without violating the ACA.
This gap previously created a problem called the “family glitch,” where families couldn’t afford employer-sponsored family coverage but also didn’t qualify for marketplace subsidies because the employee’s self-only coverage was technically affordable. A 2022 rule change fixed this by allowing family members to qualify for marketplace premium tax credits based on the affordability of family coverage, not just the employee’s plan. But the underlying rule remains: employers have no federal obligation to subsidize dependent premiums.
How to Calculate Your Actual Obligation
Start with your company size. If you have fewer than 50 full-time employees, you have no federal contribution obligation. If you want the small business tax credit, plan on covering at least 50% of employee-only premiums.
If you have 50 or more full-time employees, work backward from the affordability threshold. Take your lowest-paid full-time employee’s annual income, multiply by the current affordability percentage (9.02% for 2025, 9.96% for 2026), and that’s the maximum you can charge them for self-only coverage. Your contribution is whatever the plan costs above that amount. Then check your state’s rules and your carrier’s minimum contribution requirements, and use whichever standard demands the highest employer share.
For most employers, the insurance carrier’s 50% rule and the ACA’s affordability cap work together to set a functional floor somewhere between 50% and 75% of the employee-only premium, depending on plan costs and workforce wages.