Research memorandum, November 7, 2026
Employer health costs and the Central States benchmark
What a large union-run health fund, the one that covers UPS Teamsters, reveals about administrative cost, employer funding and the HEALTH5 $832 ceiling.
Every citation links to the cited page of the source document. Links to the 77 MB Form 5500 may take a moment to open.
The conclusion: one system costs less than many
HEALTH5 concludes that the United States can save money by replacing duplicated insurer and government systems with one national standard. Here is the math first, using 2024 numbers.
The math, 2024
| Step | Calculation | Per person, per month | National total |
|---|---|---|---|
| 1. What the U.S. spent | $5.263 trillion ÷ 340 million people (CMS) | $1,290 | $5.263 trillion |
| 2. The HEALTH5 ceiling | $832 × 12 months × 340 million people. $832 matches Central States’ cost at 2.0 people per worker ($19,977 ÷ 2 ÷ 12). | $832 | $3.395 trillion |
| 3. What one large pool spends | Central States: $19,977 per worker ÷ 2.5 people per family (CS 5500, PDF p. 338) | $666 | $2.717 trillion if applied to 340 million |
| 4. HEALTH5 surplus | HEALTH5 ceiling − Central States cost ($3.395 trillion − $2.717 trillion). Reinvested in U.S. Treasury bills. | $166 | about $678 billion |
| 5. Savings compared with 2024 | 2024 spending − HEALTH5 ceiling ($5.263 trillion − $3.395 trillion) | $458 | $1.869 trillion (35.5% of 2024 spending) |
| 6. Duplicated administration in 2024 | Insurers’ nonmedical costs $306.0 billion + government administration $66.1 billion (CMS) | $372.1 billion | |
| 7. Administration at the benchmark rate | $3.395 trillion × 5.1% (Central States’ admin share: $203.9 million ÷ $3.966 billion, CS 5500, PDF p. 338) | $174.5 billion | |
| 8. Administrative savings | $372.1 billion − $174.5 billion | about $198 billion (10.6% of step 5) |
We are continuing to confirm these numbers. The 2.5 average family size is our working assumption: the Form 5500 counts workers, not their family members. Steps 3, 4, 7 and 8 rest on it or on the Central States benchmark. The surplus in step 4 is a projection: if national costs run higher than the working-age benchmark, the surplus shrinks. We will update these figures as we confirm covered-lives counts and age-adjust for the national population.
How the surplus depends on family size
| People covered per worker | Central States cost, per person per month | HEALTH5 surplus (deficit), per person per month | National surplus (deficit), invested in Treasury bills |
|---|---|---|---|
| 2.0 | $832 | $0, break-even | ($2 billion), break-even |
| 2.25 | $740 | $92 | $376 billion |
| 2.5 (working assumption) | $666 | $166 | $678 billion |
Download the 2024 math spreadsheet to change the family size or the ceiling and see every step recalculate.
The analysis
Where the duplication is
Medicare, Medicaid, the ACA marketplaces and thousands of employer plans each run their own enrollment, eligibility checks, claims systems, provider networks, prior authorization and appeals. People move between them when they change jobs, turn 65 or lose income, and plans then spend money sorting out which one pays. CMS itself says standardized transactions let billing and payment be automated (CMS). HEALTH5 would replace those parallel systems with one benefit, one payment method and one claim path.
What the benchmark shows
Central States runs one pool under one rulebook for about 227,000 workers and their families. Its administration was 5.1% of spending in 2024 (CS 5500, PDF p. 338), against up to 15% that fully insured large-group plans may spend outside of care (CMS). At 2.5 people per family, it funds medical, prescription, dental and vision coverage for about $666 per person per month, roughly half of the $1,290 national average.
Administration is only part of the answer
Cutting duplicated administration saves about $198 billion, roughly one-tenth of the $1.9 trillion difference between 2024 spending and the HEALTH5 ceiling. The rest has to come from how care is priced and billed: hospitals ($1.6 trillion), physicians ($1.1 trillion) and prescription drugs ($467 billion) (CMS). That is why HEALTH5 pairs one administrative system with one standardized payment method, no networks and an end to billing designed to multiply charges. Try the category-by-category math.
Why the benchmark is a floor
Central States covers working families. The nation is older: in 2023 people 55 and over were 30% of the population but 57% of spending (Peterson-KFF). National spending also includes long-term care, public health and research that a health plan doesn’t pay for. So the $666 benchmark understates a national cost. The $832 ceiling leaves room for that difference, and whatever is not needed becomes the step 4 surplus, reinvested in U.S. Treasury bills. Confirming how much room there is is the next step in our research.
Executive summary
This memorandum examines what U.S. employer health coverage costs, where premium dollars go, and how one of the largest self-insured multiemployer plans in the country compares: the Central States, Southeast and Southwest Areas Health and Welfare Plan, which covers UPS Teamsters and other union workers through its TeamCare program. Plan figures come from its 2024 Form 5500 annual report and audited financial statements, and from the UPS–Teamsters 2023–2028 contracts.
- Administrative cost of about 5%. In 2024 the plan spent $203.9 million on administration and TeamCare fees, 5.1% of its $3.97 billion in total benefits and expenses (CS 5500, PDF p. 338). Fully insured large-group insurers may spend up to 15% outside of care (CMS).
- Employers pay nearly the entire cost. Employer contributions were $4.54 billion, about $19,977 per active participant; participants paid about $23 each for the year (CS 5500, PDF p. 2; CS 5500, PDF p. 338).
- Per-worker cost close to the national employer share. The $19,977 is close to the $20,143 employers paid toward an average 2025 family premium of $26,993, but Central States workers paid almost nothing against $6,850 for the average family-coverage worker (KFF).
- The $185 figure is a pension benefit, not a premium. It is the monthly pension earned per year of service under the employer-funded UPS/IBT pension plan (NMA, PDF p. 115, printed p. 108; CEN, PDF p. 43, printed p. 250).
- Union dues are not a health premium. At the Teamsters’ minimum, a top-rate driver pays about $1,470 a year in dues, which fund the union, not health care (NMA, PDF p. 14, printed p. 7).
- Implication for HEALTH5. At an assumed 2.0 to 2.5 covered people per participant, employer funding equals about $666 to $832 per person per month, a range at or below the HEALTH5 $832 ceiling.
Documents relied upon
“PDF p.” is the page of the PDF file; “printed p.” is the page number printed in the document. The Form 5500 cover-page fields are images, so those figures were read from the rendered page.
| Short name | Document | Pages relied upon |
|---|---|---|
| CS 5500 | Central States, Southeast and Southwest Areas Health and Welfare Plan, Form 5500 for plan year 2024, with audited financial statements of the Active Plan (EIN 36-2154936, PN 501). 448 pages, 77 MB. | PDF pp. 2, 333, 337, 338, 340, 350 |
| NMA | National Master United Parcel Service Agreement, Aug. 1, 2023 – July 31, 2028. 214 pages. | Articles 3, 22 and 34: PDF pp. 13–14, 87, 107–108, 113, 115 (printed pp. 6–7, 80, 100–101, 106, 108) |
| CEN | Teamsters Central Region Supplemental Agreement to the National Master UPS Agreement, 2023–2028. 65 pages. | Article 14: PDF pp. 41, 43–44, 48–49 (printed pp. 248, 250–251, 255–256) |
| Web sources | KFF 2025 Employer Health Benefits Survey; CMS medical loss ratio rule; Health Care Cost Institute 2023 report; Peterson-KFF Health System Tracker. | Listed at the end of this page |
1. Where an employer premium goes
In 2025 the average employer family premium was $26,993: workers paid $6,850 and employers about $20,143. Single coverage averaged $9,325, with workers paying $1,440 (KFF). These are premiums, not employer cost per employee.
Layer 1: insurer versus medical claims
The ACA’s medical loss ratio rule requires large-group insurers to spend at least 85% of premiums on care and quality improvement (80% for small-group and individual). Administration, taxes and profit come out of the rest (CMS).
| Fully insured large-group family premium, 2025 | Share | Amount |
|---|---|---|
| Medical claims and quality improvement (floor) | at least 85% | at least $22,944 |
| Administration, taxes and profit (ceiling) | at most 15% | at most $4,049 |
| Total premium | 100% | $26,993 |
That ceiling applies only to fully insured plans. Most covered workers (67%, and about 80% at larger firms) are in self-funded plans, which the rule doesn’t cover and for which no public average is reported (KFF).
Layer 2: claims to providers
People with employer coverage averaged $6,743 in total spending in 2023, and hospital facility charges were more than 46% of it (HCCI). Across all payers in 2024, hospitals took 31.0%, physicians and clinics 21.0%, prescription drugs 8.8% and plan administration 7.0% (Peterson-KFF). An illustrative split of the family premium, using the HCCI hospital share:
| Illustrative split of a $26,993 family premium (estimate) | Amount |
|---|---|
| Insurer administration, taxes and profit (ceiling) | about $4,000 |
| Hospital facility charges (46% of claims) | about $10,500 |
| Physicians, prescription drugs, labs and all other services | about $12,400 |
An approximation, not a published figure: the HCCI share includes patient out-of-pocket spending.
2. What the UPS–Teamsters contracts provide
How contributions are set
Article 34 of the National Master Agreement doesn’t state base rates. It sets yearly increases: health and welfare and/or pension contributions “shall be increased by forty dollars ($40.00) per week on August 1, 2023 and on each subsequent August 1st,” split between health and pension by regional committees (NMA, PDF p. 107, printed p. 100). Where workers are in TeamCare with an employer pension plan, the health share is $0.50 an hour each year from 2023 through 2027 (NMA, PDF p. 107, printed p. 100). In areas whose pension funds have no funding improvement or rehabilitation plan, only $20.00 of the weekly increase is available, applied first to health (NMA, PDF p. 108, printed p. 101).
The Central Region Supplement follows Article 34 for TeamCare increases and moves Local 964 full-time workers into TeamCare Plan U-2 (CEN, PDF p. 41, printed p. 248). For part-timers, “UPS will be responsible for making the weekly payments to TeamCare to provide the medical coverage” (CEN, PDF p. 48, printed p. 255). UPS keeps paying health contributions for a year after an on-the-job injury and four weeks after an off-the-job illness or injury (CEN, PDF p. 49, printed p. 256). Neither contract contains an employee premium or payroll deduction for active health coverage.
The $185 figure
The $185 appears in a table headed “Monthly Benefit” for 2024 through 2028 under the UPS/IBT Full-Time Employee Pension Plan. It is the monthly pension earned for each year of credited service, up to 35 years (NMA, PDF p. 115, printed p. 108; CEN, PDF p. 43, printed p. 250). “The Employer will be responsible for funding the UPS/IBT Plan” (CEN, PDF p. 44, printed p. 251). It is not paid by employees and is not a health premium.
Disability
Full-time seniority employees qualify for long-term disability after six months of employment, for non-work conditions lasting over 26 weeks: 60% of base weekly pay, up to $800 a week, for up to five years, with health coverage continuing up to 12 months (NMA, PDF p. 113, printed p. 106). The pension plan separately pays a monthly or lump-sum disability benefit (CEN, PDF p. 44, printed p. 251).
Union dues
Dues are separate from health coverage. Membership is required after 31 days, except where state law prohibits it (NMA, PDF p. 13, printed p. 6). UPS deducts the dues and fees the local union specifies: “the Local Union will individually specify the weekly amount to be deducted” (NMA, PDF p. 14, printed p. 7). Neither contract states an amount. The Teamsters International Constitution sets a floor of monthly dues equal to 2.5 times the hourly rate; locals may charge more (Teamsters; Local 399).
| UPS worker | Hourly rate | Monthly dues (minimum) | Yearly |
|---|---|---|---|
| Part-time, contract minimum | $21.00 (NMA, PDF p. 87, printed p. 80) | about $52.50 | about $630 |
| Full-time driver, end of contract | about $49 (CBS News) | about $122.50 | about $1,470 |
Dues fund the union: representation, grievances and strike funds. They don’t buy health coverage. A top-rate driver’s roughly $1,470 a year in dues compares with about $19,977 a year that employers pay per worker into the health fund. Coverage is paid almost entirely by the employers.
3. Central States Active Plan: 2024 financial benchmark
The Active Plan is self-insured. Nearly all participants are in TeamCare, which steers care to contracted providers, primarily Blue Cross Blue Shield of Illinois, and the fund contracts with pharmacy, dental and vision managers. Benefits also include life, accidental death and disability coverage (CS 5500, PDF p. 340, Note 1).
Table 1. Reported figures (dollars in thousands unless noted)
| Line item | 2024 | 2023 | Source |
|---|---|---|---|
| Active participants, beginning of year | 228,415 | CS 5500, PDF p. 2, line 6a(1) | |
| Active participants, end of year | 226,080 | CS 5500, PDF p. 2, line 6a(2) | |
| Contributing employers | 811 | CS 5500, PDF p. 2, line 7 | |
| Employer contributions | $4,539,774 | $4,498,633 | CS 5500, PDF p. 338 |
| Participant contributions | $5,272 | $7,010 | CS 5500, PDF p. 338 |
| Total revenue | $4,545,958 | $4,506,555 | CS 5500, PDF p. 338 |
| Net investment income | $575,534 | $644,402 | CS 5500, PDF p. 338 |
| Benefits paid, incl. change in current obligations | $3,762,521 | $3,579,998 | CS 5500, PDF p. 338 |
| Retiree Plan funding | – | $90,000 | CS 5500, PDF p. 338 |
| General and administrative expenses | $109,441 | $105,298 | CS 5500, PDF p. 338 |
| TeamCare administrative fees | $94,463 | $92,407 | CS 5500, PDF p. 338 |
| Total benefits and expenses | $3,966,425 | $3,867,703 | CS 5500, PDF p. 338 |
| Increase in net assets over benefit obligations | $1,155,067 | $1,283,254 | CS 5500, PDF p. 338 |
| Net assets over benefit obligations, end of year | $10,030,848 | $8,875,781 | CS 5500, PDF p. 337 |
| Shared costs included in G&A | about $60,500 | about $55,900 | CS 5500, PDF p. 350, Note 5 |
Table 2. Derived measures (our calculations from Table 1)
| Measure | Calculation | 2024 result |
|---|---|---|
| Average active participants | (228,415 + 226,080) / 2 | 227,248 |
| Employer contributions per participant | $4,539,774,000 / 227,248 | $19,977 a year ($1,665 a month) |
| Participant contributions per participant | $5,272,000 / 227,248 | $23 a year |
| Benefits paid per participant | $3,762,521,000 / 227,248 | $16,557 a year |
| Administration per participant | ($109,441 + $94,463) thousand / 227,248 | $897 a year |
| Administrative share of total spending | $203,904 / $3,966,425 | 5.1% |
| Administrative share of employer contributions | $203,904 / $4,539,774 | 4.5% |
| Operating surplus before investment income | $4,545,958 − $3,966,425 | $579.5 million (12.7% of revenue) |
| Reserves measured in years of benefits | $10,030,848 / $3,762,521 | about 2.7 years |
4. Comparison with employer coverage and HEALTH5
Central States figures are per participant and include whatever mix of single and family coverage its workers hold, so they fall between the single and family benchmarks.
Table 3. Side by side
| Annual figure | Central States, per participant (2024) | KFF family premium (2025) | KFF single premium (2025) | HEALTH5 ceiling, per person |
|---|---|---|---|---|
| Total funding | $19,977 employer + $23 worker | $26,993 | $9,325 | $9,984 ($832/mo) |
| Paid by the worker | $23 | $6,850 | $1,440 | $1,500 ($125/mo) |
| Paid by the employer or others | $19,977 | about $20,143 | about $7,885 | $8,484 ($707/mo) |
| Administration | 5.1% of spending (reported) | up to 15% if fully insured | up to 15% if fully insured | to be modeled |
| Benefits covered | Medical, Rx, dental, vision, life, AD&D, disability | Typically medical and Rx | Typically medical and Rx | Medical, dental, vision, hearing, Rx |
Table 4. Per-person sensitivity
The Form 5500 counts workers, not dependents. Dividing employer funding per participant by an assumed household size gives a per-person figure. The household sizes are our assumption, not the plan’s.
| Assumed covered people per participant | Per person, per year | Per person, per month | HEALTH5 surplus (deficit) per person, per month |
|---|---|---|---|
| 2.0 | $9,989 | $832 | $0, break-even |
| 2.25 | $8,879 | $740 | $92 |
| 2.5 | $7,991 | $666 | $166 |
Table 5. Extrapolating the per-person cost nationally
Multiplying each per-person figure by the 340 million people in the HEALTH5 population example gives a national cost at Central States’ 2024 funding level:
| Assumed covered people per participant | Per person, per year | Times 340 million people | HEALTH5 surplus (deficit) vs. $3.395T ceiling | Compared with 2024 U.S. spending of $5.263T |
|---|---|---|---|---|
| 2.0 | $9,989 | $3.396 trillion | ($2 billion), break-even | $1.867 trillion below |
| 2.25 | $8,879 | $3.019 trillion | $376 billion | $2.244 trillion below |
| 2.5 | $7,991 | $2.717 trillion | $678 billion | $2.546 trillion below |
A floor, not an estimate. Central States’ Active Plan covers working union families; retirees are in a separate plan (CS 5500, PDF p. 338). The national population is older and sicker: in 2023, people 55 and over were 30% of the population but 57% of health spending (Peterson-KFF). The plan also excludes long-term care, public health and other national spending. A national figure would need age adjustment, which the HEALTH5 proposal assigns to CMS.
5. Findings
- Scale and a single rulebook keep administration low. At 5.1% of spending (CS 5500, PDF p. 338), Central States runs at about one-third of the 15% fully insured large-group plans may spend outside of care (CMS). On a $26,993 family premium, 10 percentage points is about $2,700 a year. The rule is a ceiling, not an average, so the real gap for a given insurer may be smaller.
- Low worker cost reflects employer funding, not lower total cost. Workers paid about $23 because employers paid about $19,977 per participant, and the UPS contracts add up to $40 a week each year for health and pension (NMA, PDF p. 107, printed p. 100).
- The per-person cost is in the range of the HEALTH5 ceiling. At 2.0 to 2.5 people per participant, employer funding equals $666 to $832 per person per month, for a package that already includes dental and vision.
- Extrapolated nationally, it falls near or under the HEALTH5 ceiling. At 2.5 people per participant, Central States’ funding level implies $2.717 trillion for 340 million people, a projected HEALTH5 surplus of about $678 billion under the $3.395 trillion ceiling, reinvested in U.S. Treasury bills. At 2.0 people the plan breaks even, because the ceiling was set to match that case. An age-adjusted national figure would be higher, so we are continuing to confirm these numbers.
- Part of each contribution builds reserves. Revenue exceeded benefits and expenses by $579.5 million in 2024, and reserves reached about 2.7 years of benefits. A national HEALTH5 fund would need reserves too.
6. What it means for HEALTH5
The Central States experience supports three parts of HEALTH5: a very large pool under one set of rules can run with administration near 5%; a broad benefit including dental and vision can be funded at roughly $832 per person per month; and a jointly governed nonprofit trust can operate at national scale for decades.
It also confirms the proposal’s own caution: a low cost to the worker depends on someone else paying the balance. HEALTH5 assigns that balance, $707 per person per month, to employers, existing public programs and other authorized sources. How to divide it is the central decision for Congress (see For lawmakers).
Limitations
- Figures are for the whole Central States Active Plan, covering 811 employers. The filing doesn’t isolate UPS, and neither contract states base hourly contribution rates.
- Per-participant figures include dependents in unknown proportions; Table 4 rests on an assumed household size.
- “Benefits paid” includes changes in current benefit obligations, not just cash claims paid (CS 5500, PDF p. 338).
- The plan’s members are working union families, not the general population, and its prices reflect its contracted network.
- KFF and HCCI figures are national averages for different years (2025 and 2023) and populations.
HEALTH5 is a proposed policy, not current law, and its funding figures have not been actuarially validated. Calculations in Tables 2 and 4 are ours and are shown so they can be checked.
Sources for this page
- CMS, National Health Expenditure Fact Sheet (2024 data)Total 2024 spending of $5.3 trillion and $15,474 per person; hospital, physician and drug spending; Medicare, Medicaid and private insurance totals; sponsor shares.
- CMS, National Health Expenditure historical dataDetailed 2024 spending by category used in the reconciliation tool.
- CMS, About Administrative SimplificationCMS: standardized electronic transactions let the industry automate billing and payment, saving time and health care dollars.
- CMS, Medical Loss Ratio fact sheetLarge-group insurers must spend at least 85% of premiums on care and quality improvement; small-group and individual at least 80%.
- Peterson-KFF Health System Tracker, How do health expenditures vary across the population?In 2023, people 55 and over were 30% of the population and 57% of health spending.
- KFF, 2025 Employer Health Benefits SurveyAverage 2025 employer single premium of $9,325 a year, with workers paying $1,440 of it.
- Health Care Cost Institute 2023 report, as summarized: Health Care Spending for People with Employer-Sponsored Insurance Reached $6,743 Per Person in 2023Employer-coverage spending of $6,743 per person in 2023, with hospital facility charges of $3,100.
- Peterson-KFF Health System Tracker, How has U.S. spending on healthcare changed over time?2024 shares of national spending: hospitals 31.0%, physicians and clinics 21.0%, prescription drugs 8.8%, administration 7.0%.
- International Brotherhood of Teamsters, Straight Facts on Teamster DuesTeamster dues formula: monthly dues of 2.5 times the base hourly rate.
- Teamsters Local 399, 2023 Local 399 Dues IncreaseArticle X of the Teamsters International Constitution: monthly minimum of 2.5 times the hourly rate.
- CBS News, UPS drivers to make $170,000 in pay and benefitsFull-time UPS drivers to average $49 an hour by the end of the 2023–2028 contract.
Policy design details come from the UR2Big HEALTH5 Comprehensive Research and Policy Proposal (November 2026). See all sources.
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