If you’re a small business owner, you already know that offering health insurance isn’t just about checking a box—it’s about attracting talent, retaining employees, and staying competitive. But with health insurance costs projected to rise yet again in 2025, many employers are asking the same question: How can we afford to keep offering coverage?
According to Mercer’s latest employer survey, companies are bracing for a 5.8% increase in health insurance costs per employee, marking the third straight year of steep hikes. The pressure is even greater for small businesses working with tighter margins and fewer options.
But there’s good news: small businesses have more flexibility and more tools at their disposal than ever before. In this guide, we’ll walk you through practical, cost-effective ways to offer quality benefits—even in a tough economic climate.
Why Health Insurance Costs Are Climbing Again
Medical inflation, increased care utilization, and specialty drug prices are all fueling the 2025 trend. PwC’s annual cost forecast predicts an 8% rise in overall medical costs—and employers are absorbing a large portion of that impact.
The result? Premiums continue to rise, and small businesses must work harder to strike the balance between affordability and attractiveness.
If you’re unsure how costs are calculated or why they vary from business to business, here’s a helpful breakdown: Understanding Group Health Insurance Costs.
What Rising Costs Mean for Small Employers
While large corporations may weather rate hikes by pooling risk across massive employee bases, small businesses don’t have that luxury. In fact, studies like this one from the Commonwealth Fund confirm that small employers and their teams are shouldering higher-than-average premiums and deductibles.
If this sounds familiar, you’re not alone—and you’re not without options.
Smart, Affordable Alternatives to Traditional Plans
You don’t have to choose between bloated costs and dropping coverage altogether. These options are becoming increasingly popular among small business owners:
1. Level-Funded Health Plans
Level-funded plans give you predictable monthly costs while letting you share in savings if your employees use less care than expected. These plans combine the stability of fully insured coverage with the flexibility of self-funded solutions.
They’re especially valuable for businesses with younger or healthier teams. Learn how they compare in our guide: Self-Insured vs. Fully-Insured.
2. ICHRA (Individual Coverage HRA)
An ICHRA allows employers to reimburse workers tax-free for their individual health insurance premiums—turning health benefits into a customizable and cost-controlled strategy. It’s perfect for distributed or remote teams, and recent legislation may make ICHRAs even more accessible in the near future.
3. QSEHRA (Qualified Small Employer HRA)
Unlike ICHRA, which works for businesses of all sizes, QSEHRA is built specifically for small employers with fewer than 50 full-time employees. It enables you to reimburse employees for health premiums and qualified medical expenses without offering a group plan at all—making it an excellent fit for startups and lean teams.
If you’re comparing options, don’t miss our breakdown of ICHRA vs. QSEHRA: Which Is Best for Your Business in 2025?
4. Optimizing Existing Group Plans
Even if you decide to stick with a traditional group plan, there are smart ways to make it more affordable:
- Adjust employer/employee premium splits
- Offer a high-deductible plan with an HSA
- Re-evaluate plan design and coverage tiers
Next Steps
Every business is different. Your health insurance solution should be, too. Whether you’re exploring ICHRAs, QSEHRAs, level-funded plans, or simply looking to optimize your current group coverage, it starts with knowing your options.
Let’s Make Group Health Insurance Simple
At Group-Health-Quotes.com, we specialize in helping small businesses like yours find affordable, effective group health plans—without the guesswork. Whether you’re planning for the first time or shopping for better options, we’re here to help you make a confident, informed decision.
