At first glance, one might assume non-profits spend less on health benefits because they run tighter budgets. The data doesn't support that. Average premiums at private non-profits sit above for-profit levels, according to KFF survey data. Both types of employer face the same market pressures: medical inflation, prescription drug costs, competition for talent. What separates their cost structures is workforce demographics, plan design, and organization size.
Key Structural Differences
Tax-exempt status by itself doesn't make self-funding easier. Self-funding is a decision about size and risk tolerance, and it is open to any employer. KFF's 2025 Employer Health Benefits Survey finds 67% of covered workers in self-funded plans, including 80% at firms with 200 or more workers and 27% at firms with 10 to 199 workers. Because most non-profits are small, many buy fully insured coverage, which carries state premium taxes and insurer profit margins. Large non-profits, such as hospital systems and universities, self-fund at rates similar to large for-profits.
1. Plan Funding and Risk Management
Self-funding is the main lever on cost. A self-funded employer pays claims directly and buys stop-loss insurance to cap catastrophic claims. A fully insured employer pays a carrier a premium that includes state premium taxes and insurer profit. Both options are open to non-profits and for-profits alike; employers usually choose based on size and cash reserves. Self-funded plans are exempt from state premium taxes and most state benefit mandates under ERISA preemption, and that exemption applies to any self-funded plan regardless of ownership.
2. Demographics and Workforce Composition
Workforce composition drives claims. The non-profit workforce is older on average and concentrated in health care, education, and social services; the Bureau of Labor Statistics found about two-thirds of non-profit jobs in 2022 were in health care and social assistance. An older workforce in those fields generates more chronic-condition and maternity-related claims. For-profit workforces in technology, finance, and manufacturing skew younger and healthier, which holds down raw spending, though those employers often add richer plan designs to compete for talent.
3. Benefit Generosity and Cost-Shifting
Non-profits traditionally offer more generous benefits, such as lower deductibles and broad wellness programs, to offset salaries that often run below for-profit pay. This raises the employer's cost share per employee. For-profits are more likely to adopt high-deductible health plans (HDHPs) paired with health savings accounts (HSAs), which shift first-dollar costs to employees. That lowers the employer's premium outlay and can hold down total cost growth over time by reducing low-value utilization.
Level-funded plans: a third option for small employers
A level-funded arrangement blends a small self-funded component with stop-loss insurance, so the employer pays a level monthly amount and gets money back if claims come in low. KFF's 2025 survey finds 37% of covered workers at firms with 10 to 199 employees in level-funded plans, similar to 2024. For a small non-profit or for-profit that can't take on full self-funding risk, this structure captures some of the premium-tax and mandate savings while capping downside. It is one reason the simple fully insured versus self-funded split no longer describes the small-employer market.
Regulatory and Tax Considerations
Non-profits pay no federal corporate income tax, so they get no value from the premium deduction for-profits claim; for a for-profit, that deduction lowers the after-tax cost of coverage. Tax-exempt status doesn't by itself get a non-profit better prices from providers. Non-profit hospital systems do hold a structural edge: they employ a large share of the non-profit workforce and can route employees into their own facilities, which reshapes their cost structure in a way a small social-services charity does not experience. Non-profits remain fully subject to ERISA, HIPAA, and the ACA, and their executive compensation and benefits face the excess-benefit rules of IRC Section 4958, which tax payments to insiders that exceed reasonable market value.
For-profits deduct health plan contributions as an ordinary business expense, lowering taxable income. They face no equivalent to Section 4958, so executive-only coverage and richer perks carry less legal exposure. ERISA, HIPAA, and the ACA still apply to both. In competitive industries, for-profits may inflate benefit packages to retain key staff, spending non-profits find harder to justify to donors and boards.
Administrative and Compliance Costs
Non-profits often run lean HR and benefits teams, so they rely on brokers and consultants more than comparable for-profits. Understaffed compliance functions raise the risk of penalties under the ACA employer mandate, which applies to any employer with 50 or more full-time-equivalent workers regardless of ownership. Small non-profits can claim the Small Business Health Care Tax Credit, worth up to 35% of premiums and refundable against payroll taxes, but only if they enroll through the SHOP marketplace, have fewer than 25 full-time-equivalent employees, and claim it within a two-consecutive-year window. For-profit small employers qualify for a larger credit, up to 50%, though it is not refundable.
For-profits more often field dedicated benefits departments with analytics staff, data-driven wellness programs, telemedicine, and pharmacy benefit manager carve-outs. Those investments carry upfront cost but tend to produce more disciplined long-term cost control. Non-profits that can't fund those teams pay for the gap through broker fees and forgone savings.
Measured premiums: non-profit vs. for-profit
Kaiser/HRET survey data compiled by the Bureau of Labor Statistics put the average single-coverage premium at $6,587 for private non-profit enrollees in 2014, compared with $5,646 at for-profit firms. KFF's 2025 survey finds the same pattern today: average premiums for single and family coverage run relatively low at private for-profit firms and relatively high at private non-profits. The gap reflects richer plan designs and an older workforce rather than a tax-status discount.
Conclusion: Which Pays More?
There is no universal answer, because size matters as much as ownership. Non-profits pay higher employer premiums per employee on average, a result of richer plan designs and an older workforce concentrated in health care and education. Whether an employer self-funds, and therefore avoids state premium taxes and benefit mandates, depends on its size and cash reserves more than on its tax status; many non-profits are small and fully insured. Small tax-exempt employers can recover part of their cost through the refundable SHOP credit, while small for-profits claim a larger but non-refundable credit. Employers in both sectors should benchmark their total cost of coverage, employer and employee contributions combined, against industry peers and invest in population health management to keep costs predictable.