Would You Rather Have a Raise or Health Insurance? What Employers May Be Missing | 125 Managed Health
A $2-an-hour raise is easy to picture because it shows up on the next paycheck. At 40 hours a week for 52 weeks, it adds $4,160 in gross wages over a year. For an employee whose rent just increased, childcare bill changed, or credit-card balance carried over from last month, that money already has somewhere to go.
That same employee may also be paying for a monthly prescription, recurring specialist visits, or an unexpected medical test. A raise can matter when the household budget is stretched. S~ght employees would respond if more compensation were available.
Eighty-one percent agreed workers would prefer a $2-per-hour raise rather than health insurance. Forty-six percent cited insurance cost as their main reason for not offering coverage. (Source: KFF)
The key limit is easy to miss: KFF asked employers. The 81% figure reflects employer belief rather than a direct worker vote.
Employers subject to Affordable Care Act employer shared responsibility rules also need to account for applicable coverage obligations. (Source: IRS)
Why a Raise May Matter More to Some Employees
An employee already covered through a spouse or another source may look at the choice differently. Extra pay could cover a rent increase, childcare, transportation, or a debt payment that has become harder to absorb.
Health insurance can still leave employees with substantial costs. KFF reports average 2026 employer-sponsored premiums of $9,804 for single coverage and $28,303 for family coverage.
Workers contributed an average of $1,672 and $7,471, respectively.
Among covered workers with single coverage in plans with a general annual deductible, the average deductible was $1,955, rising to $2,624 at smaller firms (Source: KFF)
For employers, the useful comparison is what the employee can actually use: added take-home pay, required premium contributions, and the out-of-pocket costs the employee may still face when care is used.
What Workers Say About Pay and Health Coverage
EBRI’s 2025 Workplace Wellness Survey shows why the answer is hard to reduce to one benefit.
Among workers who said employers have a responsibility to support employees’ financial security:
56% selected higher wages as one of the top two ways employers could help.
Among workers whose employer offered health insurance, 62% said it contributed a lot to their financial security.
Health insurance was named by 72% as a top benefit in stay-or-leave decisions.
Salary or wages ranked highest at 62% when compensation was included as an option. (Source: EBRI)
Gallup and West Health reported in July 2026 that 24% of workers in its employer-sponsored insurance analysis, about 23 million adults nationally, said they were staying in a job they wanted to leave because they feared losing coverage. (Source: Gallup)
For someone considering another job, coverage can become part of the decision to leave. A prescription may need to stay covered, a trusted specialist may need to remain in network, and a new deductible can add fresh out-of-pocket costs.
Find Out Where Employees Are Feeling the Pressure
Anonymous employee feedback can show how strongly employees are feeling pressure from take-home pay, healthcare costs, and gaps in the current package.
Two useful questions are:
Which expense or financial concern is putting the most pressure on your household right now?
Which part of your pay or benefits package would you most like the company to improve, and what difference would that change make for you?
Patterns in those responses can be compared with enrollment, employee contributions, existing coverage, and 125 Managed Health’s employer checklist for identifying possible gaps or overlap.
Federal tax treatment can also affect the comparison. The IRS states that employer-paid accident or health insurance plan costs generally are not treated as wages for federal income tax withholding, Social Security, Medicare, or FUTA purposes, subject to exceptions.
(Source: IRS)
The answer will differ by workforce. Employers need to compare the pressure employees feel in their paychecks with what their current coverage costs and how useful it is when care is needed.
Review the Benefits Picture Alongside What Employees Are Telling You
If employee feedback points to gaps in healthcare access, 125 Managed Health’s Managed Health Plan can be reviewed alongside existing coverage.
It is designed to complement existing coverage, with results depending on eligibility, employee elections, plan design, payroll structure, and applicable requirements.
Employers can request an initial analysis from 125 Managed Health based on workforce and payroll information.
Explore stronger workforce benefits with 125 Managed Health.
Educational information only. Benefit availability and tax treatment depend on eligibility, plan design, payroll structure, state requirements, and applicable law. Employers should consult appropriate benefits, tax, payroll, or legal professionals as needed.
