US Health Insurance Explained for International Employers

If you have hired your first US employee, or you are about to, one of the first questions you face is: what health insurance do I need to provide, and what does any of it actually mean?

In the UK, this question does not exist. The NHS covers everyone. The equivalent conversation in Germany or the Netherlands is about supplementing statutory health insurance, not building a benefits package from scratch. In the US, you are starting from zero, and the terminology is entirely unfamiliar.

PPO, HMO, HDHP, EPO, deductible, copay, coinsurance, out-of-pocket maximum, in-network, open enrolment. Every one of these terms matters, because your US employees will ask about them before they accept your job offer and make decisions based on them every time they see a doctor.

This guide explains every term in plain language, gives you the verified 2025 and 2026 figures you need for budgeting, and tells you what good looks like when you are setting up health benefits as an international employer for the first time.

Why US Health Insurance Is Different From Anything You Know at Home

Before getting into the terminology, it helps to understand the structure.

In the UK, NHS coverage exists by default. Employer-sponsored private health insurance is an optional perk, used primarily for faster access to specialists. Most UK employees never think about their employer’s role in their healthcare.

In the US, employer-sponsored health insurance is the primary healthcare coverage for approximately 154 million Americans under age 65, according to the KFF 2025 Employer Health Benefits Survey. There is no universal public system for working-age adults. If your employee does not have employer-sponsored insurance, they must either buy their own through the Health Insurance Marketplace or go without.

This means two things for you as an international employer:

• Providing health insurance is not a perk. It is a core expectation. US candidates in professional roles will ask about your health plan as part of the hiring process. A poor plan, or no plan, is a material disadvantage in recruiting.
• You are responsible for selecting, funding, and managing the health plan. Unlike UK auto-enrolment for pensions, which is relatively standardised, US health benefits require real decisions about plan type, network, cost-sharing design, and employer contribution level.

The good news: if you are using an Employer of Record or a PEO+ arrangement, your employees access health insurance through the provider’s group plan. You do not choose the plan design from scratch. You benefit from group rates built on a much larger pool of employees than you have independently. That is one of the most tangible advantages of the EOR and PEO+ models for small international teams.

The Glossary: Every Term You Will Encounter

What Is a Premium?

A premium is the monthly amount paid to keep the health insurance policy active, regardless of whether the employee uses any healthcare that month. The employer pays most of it; the employee pays a portion through payroll deduction.

Verified figures from the KFF Employer Health Benefits Survey:

• Average annual premium for single coverage: $9,325 ($777 per month)
• Average annual premium for family coverage: $26,993 ($2,249 per month)
• Employees pay on average 16% of the single premium ($1,440 per year) and 26% of the family premium ($6,850 per year)
• Employer pays the remainder: approximately $7,957 for single coverage and $20,143 for family coverage per year

The premium is the fixed, predictable part of health insurance cost. The variable parts come after.

What Is a Deductible?

A deductible is the amount the employee must pay out of their own pocket before the insurance plan starts contributing toward most medical costs.

If the deductible is $1,500 and an employee needs a $3,000 procedure, they pay the first $1,500. After that, the plan starts to contribute.

According to the KFF 2025 survey, the average annual deductible for single coverage in 2025 is $1,886. That is up from $1,617 in 2020, a 17% increase over five years as employers shift more cost onto employees.

Some plan types (HMOs in particular) have lower deductibles or none at all. High-Deductible Health Plans (HDHPs) have much higher deductibles by design, in exchange for lower premiums.

Deductibles are per plan year, not per calendar year in all cases. Check the plan documents for the reset date.

What Is a Copay?

A copay (short for copayment) is a fixed amount the employee pays at the point of service, regardless of the full cost of the visit.

For example: a plan might have a $30 copay for a primary care visit. The employee pays $30. The insurance covers the rest. Copays typically apply after the deductible has been met, though some plans cover certain services (like primary care visits) with a copay even before the deductible is satisfied.

Common copay structures:

• Primary care visit: $20 to $40
• Specialist visit: $40 to $80
• Emergency room visit: $100 to $350
• Urgent care: $50 to $100
• Generic prescription drugs: $10 to $30

Copays are separate from deductibles. They are predictable, fixed costs your employees will encounter regularly.

What Is Coinsurance?

Coinsurance is the percentage of costs the employee pays after the deductible has been met, with the insurance covering the remainder.

If a plan has a $1,500 deductible and 20% coinsurance, the employee pays the first $1,500 in full. For costs after that, they pay 20% and the plan pays 80%.

Coinsurance is usually expressed as a ratio. 80/20 is common, meaning the plan pays 80% and the employee pays 20%. A better plan for the employee might be 90/10. A more cost-sharing plan might be 70/30.

What Is an Out-of-Pocket Maximum?

The out-of-pocket maximum (OOP max) is the most an employee will pay in a plan year. Once they hit this limit, the plan covers 100% of covered in-network costs for the rest of the year.

The OOP max includes deductibles, copays, and coinsurance but does not include premiums. Premiums keep being paid regardless.

For 2026, IRS and ACA rules cap out-of-pocket maximums for non-grandfathered plans at:

• Single coverage: $10,600
• Family coverage: $21,200

These are the maximums allowed. Many plans have lower OOP maximums. The lower the OOP max, the better the protection for your employee in a serious medical event.

What Is Prior Authorisation?

Prior authorisation (also called pre-authorisation or pre-approval) is a requirement that the employee’s doctor obtains approval from the insurance company before certain procedures, specialist referrals, or prescriptions are covered.

This is a concept that does not exist in the same form in the NHS or most European health systems. In the US, without prior authorisation for a service that requires it, the insurance company can refuse to pay the claim entirely, even if the procedure is medically necessary.

Common services requiring prior authorisation include:

• MRI, CT scans, and other advanced imaging
• Elective surgery
• Certain specialist referrals (particularly in HMO and POS plans)
• High-cost or brand-name prescription drugs
• Mental health inpatient treatment

Your US employees need to know to check whether prior authorisation is needed before a procedure, not after. This is one of the most common and most avoidable sources of unexpected medical bills.

What Is In-Network vs Out-of-Network?

Every health plan contracts with a specific group of doctors, hospitals, and healthcare facilities. This is the network.

In-network: Providers who have agreed to negotiated rates with the insurance company. Your employee pays significantly less when they use in-network providers.

Out-of-network: Providers who are not under contract. Your employee pays much more, and depending on the plan type, the insurance may not contribute at all.

Network quality matters enormously. A plan that looks affordable on paper but has a narrow network, covering few local doctors or hospitals, creates real problems for employees. When evaluating plans, network breadth is as important as cost.

One practical warning: being treated at an in-network hospital does not guarantee that every provider working inside it is also in-network. An anaesthesiologist or radiologist may be contracted separately and bill as out-of-network. The federal No Surprises Act, in force from 2022, provides some protection against unexpected out-of-network bills in emergency settings and for certain scheduled procedures, but its protections are narrower than most employees assume. Your US employees should confirm both the facility and individual providers are in-network before any scheduled procedure.

What Is an EOB?

An EOB (Explanation of Benefits) is a statement sent by the insurance company after a medical claim is processed. It shows what was billed, what the insurance paid, what was adjusted under negotiated rates, and what the employee owes. It is not a bill. It is an explanation of how the claim was handled.

US employees receive EOBs after every healthcare visit and prescription. As an employer, understanding that your employees will be reading these regularly helps you anticipate the questions they will bring to you about their coverage.

What Is Open Enrolment?

Open enrolment is the annual window during which employees can choose or change their health insurance plan. Outside this window, employees can only change their coverage if they experience a qualifying life event (marriage, birth of a child, loss of other coverage, etc.).

For employer-sponsored plans, open enrolment typically runs in the autumn for coverage beginning 1 January. Your employees need clear communication about when open enrolment is, what options they have, and what happens if they miss it.

This is an administrative obligation that catches many international employers off guard. An EOR or PEO manages open enrolment on your behalf.

The Summary of Benefits and Coverage (SBC): Every ACA-compliant health plan must provide a standardised SBC document that clearly states the deductible, out-of-pocket maximum, covered services, and what employees pay for common medical events. When comparing plans, the SBC is the most reliable document to use. Your EOR or PEO will provide these for the plans they offer. If evaluating plans independently, always request the SBC before making any decision.

The Plan Types: PPO, HMO, HDHP, EPO, POS

There are five main plan types in the US employer health insurance market. Understanding the difference between them is the most important decision you make when selecting or evaluating a health plan.

What Is a PPO?

A PPO (Preferred Provider Organization) is a health plan that gives employees the freedom to see any doctor or specialist without a referral, both in-network and out-of-network. In-network care costs less; out-of-network care is covered but more expensive.

PPOs are the most common plan type in the US. According to the KFF 2025 survey, 46% of covered US workers are enrolled in a PPO.

PPO in brief:

• No referral needed to see a specialist
• In-network and out-of-network care both covered
• Higher premiums than HMO or HDHP
• Most flexibility for employees

2025 average PPO premiums (KFF):

• Single coverage: $9,818 per year
• Family coverage: $28,272 per year

PPOs are preferred by employees who want freedom of choice and are willing to pay a higher premium for it. For international employers setting up benefits for the first time, a PPO is typically the safest choice because it gives employees the broadest access to care.

What Is an HMO?

An HMO (Health Maintenance Organization) is a plan that restricts employees to a specific network of providers. Employees choose a primary care physician (PCP) who coordinates all their care. Seeing a specialist requires a referral from the PCP first. Out-of-network care is not covered except in emergencies.

12% of covered US workers are enrolled in an HMO, per KFF 2025.

HMO in brief:

• Requires a designated primary care physician (PCP)
• Referral required to see specialists
• No out-of-network coverage (emergency exceptions only)
• Lower premiums than PPO
• Less flexibility, more cost predictability

HMOs work well for employees who have a regular doctor they trust and do not anticipate needing specialist care frequently. They are less suitable for employees who travel frequently or who live in areas where the HMO network is narrow.

What Is an HDHP?

An HDHP (High-Deductible Health Plan) is a plan with a higher-than-average deductible and lower monthly premiums. The trade-off is that employees pay more out of pocket before coverage kicks in, but they pay less each month.

33% of covered US workers are enrolled in an HDHP, per KFF 2025, making it the second most common plan type. This is up from 27% in 2024, the largest single-year shift in plan-type enrolment in the survey’s recent history, as employers move toward lower-premium options.

For 2026, IRS Revenue Procedure 2025-19 defines an HDHP as a plan with:

• Minimum deductible of $1,700 for single coverage or $3,400 for family coverage
• Maximum out-of-pocket of $8,500 for single or $17,000 for family coverage

Important: $1,700 is the regulatory floor, not a typical real-world figure. Most employer HDHP plans carry deductibles between $3,000 and $8,000 for single coverage. The IRS minimum defines when a plan qualifies for HSA pairing, not what employers actually offer.

HDHP in brief:

• Lower monthly premiums
• High deductible before coverage starts
• Eligible to be paired with a Health Savings Account (HSA)
• Best for healthy employees who rarely need care

2025 average HDHP premiums (KFF):

• Single coverage: $8,620 per year
• Family coverage: $25,379 per year

The key feature of an HDHP is its compatibility with a Health Savings Account.

What Is an HSA?

An HSA (Health Savings Account) is a tax-advantaged savings account that can only be used alongside an HDHP. Employees (and employers) contribute pre-tax money that can be used to pay for qualified medical expenses.

The HSA has a triple tax advantage: contributions are pre-tax, growth is tax-free, and withdrawals for medical expenses are tax-free.

For 2026, IRS Rev Proc 2025-19 sets HSA contribution limits at:

• $4,400 for individual coverage
• $8,750 for family coverage
• $1,000 additional catch-up contribution for HSA account holders aged 55 and over

Employees own their HSA. It rolls over year to year and goes with them if they leave. An HDHP with meaningful employer HSA contributions can be a competitive and cost-effective benefits package. Without employer contributions to the HSA, an HDHP is effectively cost-shifting to the employee.

What Is an EPO?

An EPO (Exclusive Provider Organization) is a plan that combines elements of HMO and PPO models. Like a PPO, employees do not need a referral to see a specialist. Like an HMO, there is no out-of-network coverage except in emergencies.

EPOs are less common and are often categorised within PPO data by KFF. They sit between HMO and PPO in terms of cost: lower premiums than a PPO, more flexibility than an HMO.

EPO in brief:

• No referral required for specialists
• In-network only (emergency exceptions)
• Lower premiums than PPO
• Good middle ground for employees in areas with strong networks

What Is a POS Plan?

A POS (Point of Service) plan combines features of HMO and PPO plans. Like an HMO, a PCP is required and referrals are needed for specialists. Like a PPO, out-of-network care is partially covered at a higher cost.

9% of covered US workers are enrolled in a POS plan, per KFF 2025. POS plans are less common than they once were and are rarely the optimal choice for a new employer setting up benefits.

Comparing the Plan Types at a Glance

What Employers Must Offer: The ACA Rules

The ACA Employer Mandate

The Affordable Care Act (ACA) sets specific obligations for large employers. As confirmed by IRS Revenue Procedure 2025-26, an Applicable Large Employer (ALE) is any employer with 50 or more full-time equivalent employees.

If you are an ALE, you must:

• Offer minimum essential coverage (MEC) to at least 95% of full-time employees and their dependents
• The coverage must meet minimum value covering at least 60% of expected healthcare costs
• The coverage must be affordable. The employee’s contribution for self-only coverage cannot exceed 9.02% of their household income in 2025 (9.96% in 2026)

Penalties for non-compliance in 2026:

• Penalty A (failing to offer coverage to 95% of employees): $3,340 per year per full-time employee, minus the first 30
• Penalty B (offering coverage that fails affordability or minimum value): $5,010 per year per employee who receives a marketplace subsidy

For a company with 60 full-time employees that fails to offer any coverage: Penalty A = $3,340 x (60 – 30) = $100,200 per year. Our guide to budgeting for your first US hire shows how health insurance fits into the full employer cost model.

What If You Have Fewer Than 50 Employees?

If you have fewer than 50 full-time equivalent employees, the ACA employer mandate does not apply. You are not legally required to offer health insurance.

However, in practice you almost certainly need to. US employees expect health coverage. A professional-level hire who has no health insurance offer from their employer will typically look elsewhere. The mandate is a legal floor. The market is the real driver for smaller employers.

This is one of the reasons EOR and PEO+ arrangements matter so much for small international teams. Our US vs UK employment costs comparison puts the full health insurance cost in context alongside every other employer cost difference. Your employees access group health coverage through the EOR or PEO’s plan from day one, without you needing to meet any employee count threshold or navigate insurer negotiations independently.

What Good Looks Like: Benchmarks for International Employers

When a US candidate asks about your health benefits, they are not just asking whether you offer insurance. They are evaluating:

1. The plan type. A PPO signals flexibility and generosity. An HDHP-only offering is more cost-efficient but signals cost-shifting to some candidates, particularly those with families or ongoing health conditions.
2. The employer contribution. Large employers (200+ workers) cover approximately 84% of the single premium and 74% of the family premium on average per KFF 2025. At firms with 10 to 199 workers (the category most international companies starting out in the US fall into), the pattern is similar for single coverage but employee contributions for family coverage are higher, with 28% of workers at small firms in plans where the employee contributes $12,000 or more toward family coverage annually. Matching large-employer contribution levels on single coverage is both achievable and important. Family coverage is where international employers most commonly undershoot market norms.
3. The network quality. Does the plan include the major hospitals and specialist networks in your employee’s city? A narrow network can make a generous-looking plan much less valuable in practice.
4. The deductible level. The average single deductible across all plans in 2025 is $1,886. A plan with a deductible well above this level will draw negative comparisons. A plan with a deductible at or below this level is competitive.
5. The out-of-pocket maximum. The lower this is, the better the protection for your employee in a serious medical situation. A low OOP max is a mark of a quality plan.
6. Additional benefits. Dental and vision insurance are separate from medical coverage in the US and expected as standard. Our 401(k) guide for international companies covers the retirement benefits piece of the same conversation. Mental health parity requirements mean plans must cover mental health and substance use disorder services comparably to medical coverage.

Dental and Vision: The Separate Conversation

US health insurance does not include dental or vision coverage by default. These are separate insurance products with separate premiums, networks, and deductibles.

Dental insurance typically covers:

• Preventive care (cleanings, X-rays) at 100%
• Basic restorative care (fillings) at 80%
• Major restorative care (crowns, root canals) at 50%
• Annual benefit maximum typically $1,000 to $2,000

Typical employer cost: $300 to $600 per employee per year.

Vision insurance covers eye exams and contributes toward glasses or contact lenses.

Typical employer cost: $100 to $200 per employee per year.

Both are expected by US employees in professional roles. Dental coverage in particular is seen as a standard benefit. Not offering it is noticeable.

COBRA: What Happens When Employees Leave

COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that requires employers to offer departing employees the option to continue their health insurance coverage for up to 18 months after leaving.

Under COBRA, the employee pays the full premium, including both the employer’s share and their own, plus up to 2% for administration. This is significantly more expensive than their in-employment contribution and most employees do not take it up unless they have no alternative.

Your obligations as an employer:

• Notify your plan administrator of the qualifying event within 30 days of the employee leaving
• The plan administrator then has 14 days to send the COBRA election notice to the employee (44 days total if you are both the employer and plan administrator)
• Failure to comply carries DOL penalties of up to $110 per day per affected beneficiary, plus potential IRS excise taxes
• Federal COBRA applies to employers with 20 or more employees. Below that threshold, state “mini-COBRA” laws may still require you to offer continuation coverage

This is another administrative obligation that EOR and PEO arrangements handle on your behalf. If you are employing directly, you need a system for managing COBRA notifications and compliance.

Self-Funded vs Fully Insured Plans: What You Need to Know

As your US headcount grows, you may encounter the concept of self-funded (or self-insured) health plans. According to KFF 2025, 67% of covered US workers are in self-funded plans, including 27% at small firms and 80% at large firms.

Fully insured plans work the way most international employers expect: you pay a fixed premium to an insurance carrier, and the carrier pays the claims. Risk is with the insurer. This is what EOR and PEO group plans typically offer.

Self-funded plans mean the employer pays employee medical claims directly from company funds, often using a third-party administrator to process claims. Stop-loss insurance limits catastrophic exposure. Self-funded plans can be more flexible and cost-effective at scale but require cash flow to absorb claims and sophisticated administration.

For international companies with small US headcounts, fully insured plans through an EOR or PEO are almost always the right model. Self-funding becomes worth considering only when you have a sizeable US team and established US financial infrastructure.

How an EOR or PEO Simplifies All of This

For international companies making their first US hires, the complexity of US health benefits is one of the strongest arguments for using an Employer of Record or PEO+ model.

Through an EOR or PEO, your employees access health insurance through the provider’s existing group plan. This means:

• Group rates: your employees benefit from pooled purchasing power across hundreds or thousands of workers. The rates and plan quality are significantly better than a small foreign employer could access independently.
• No plan selection burden: the EOR or PEO has already negotiated plan designs, carrier relationships, and contribution structures. You do not start from zero.
• Benefits administration handled: open enrolment, qualifying life events, COBRA notices, HSA administration, dental and vision coordination: all of it is managed by the provider.
• ACA compliance: the EOR or PEO monitors ACA affordability thresholds, tracks eligibility, and handles IRS reporting (Forms 1094-C and 1095-C for ALEs).

At Foothold America, our EOR and PEO+ clients access competitive group health plans across all 50 states. Our guide to PEO vs payroll service explains why a transactional payroll provider cannot give your employees this kind of coverage.

We manage benefits administration, open enrolment, and COBRA compliance on behalf of our clients. When you work with us, your US employees are set up properly from day one, with health coverage that is competitive in their local market.