Navigating the Rising Tide: Health Insurance Costs in 2025
by Gene Marks
The cost of providing employee health insurance is set to surge. A recent report from Mercer, a leading healthcare consulting firm, projects a nearly 6% increase in 2025 – more than double the current inflation rate. This meaningful jump presents a major challenge for businesses across the U.S., forcing them to find innovative ways to manage expenses while maintaining competitive benefits packages.
Attracting and retaining top talent in today’s competitive job market hinges on offering robust employee benefits, with health insurance consistently ranking among the most sought-after perks.The question for employers is: how can they provide complete coverage without crippling their bottom line?
Strategies for Managing Healthcare Costs in 2025
Diversify Group Health Insurance Options
Customary group health insurance plans remain a popular choice for small and medium-sized businesses due to their ease of implementation and extensive coverage. However, the rising cost of these plans necessitates a strategic approach. Many companies are responding by reducing their contribution to premiums while concurrently offering a wider array of plan options.This includes plans with varying levels of coverage, in-network and out-of-network doctor choices, allowing employees to select a plan that best suits their needs and budget, ultimately impacting the employer’s overall contribution.
The complexity of navigating numerous insurance options underscores the importance of expert guidance. Tim Elenz, a benefits consultant based in Hoffman Estates, emphasizes the value of a skilled broker: “Depending on the insurance company you may get dozens, even a hundred different options,” he saeid. “A good broker can help survey employees to find out what doctors and hospitals they use and match the right plan to the company based on the size of the employee group.”
Embrace Health Savings accounts (HSAs)
Thomas Conner,a Schaumburg-based benefits consultant at USHealth Group,strongly advocates for Health Savings Accounts (HSAs) as a powerful tool for cost management. “It’s like a 401(K) plan for health care,” he explained.By offering HSAs, companies empower employees to save pre-tax dollars—up to $4,300 for individuals and $8,550 for families in 2025—to cover unreimbursed healthcare expenses such as medications, vision care, dental services, and therapy. The ability to invest these savings and carry over unused funds adds further value.
The rising cost of healthcare is a significant concern for businesses and employees alike. By implementing these strategies, companies can effectively manage expenses while continuing to provide valuable and competitive health benefits packages in 2025 and beyond.
Smart Strategies for Small Businesses to Slash Healthcare Costs
Healthcare costs are a significant burden for many small businesses. Though,savvy strategies can considerably reduce these expenses,boosting profitability and employee satisfaction. Experts highlight several key approaches that offer substantial savings and improved benefits for both employers and employees.
Harnessing the power of Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs) offer a powerful tool for tax-advantaged savings. These accounts allow pre-tax contributions to be used for qualified medical expenses, reducing taxable income. The funds roll over year to year, and employees can take the money with them if they leave the company.
“I love the concept of HSAs,” one expert noted. “I understand that for some people throwing a thousand dollars into an account designed to pay your out-of-pocket for your health care expenses may not be very palatable. But it’s a great way to save on your out-of-pocket expenses.”
Leveraging Health Reimbursement Accounts (HRAs)
Health Reimbursement Accounts (HRAs) provide another avenue for cost savings, notably for small businesses.With certain HRAs, employers contribute pre-tax dollars to employee accounts, which can then be used for individual health plans or plans purchased through a health care exchange. This approach offers several advantages: employers avoid annual rate negotiations with insurance providers, protect employee health information confidentiality, and maintain greater control over contribution amounts.
“HRAs are highly underutilized and ideally suited for mom-and-pop operations,” an expert commented. “If set up the right way, they can save the business owner time and money.”
Exploring Self-Insurance Options
Self-insurance, once primarily a large-company strategy, is becoming increasingly viable for smaller businesses. A “level benefit plan,” such as, allows companies to self-insure lower-level costs by reimbursing employee claims, with a group or supplemental policy covering larger or catastrophic events. This approach can lead to significant savings,especially for businesses with a younger or healthier workforce.
“If you have a workforce that’s younger or healthier, both the employee and the employer may save on health insurance because they’re not even using their health benefits,” one expert explained.
Othre cost-saving strategies include contracting with outside healthcare providers like urgent care facilities and joining captive insurance programs that pool contributions and share risks. “The more an employer can take on risk, the lower the cost charged by the insurance carrier,” an expert noted.
The Power of Employee Education
Overspending on healthcare frequently enough stems from a lack of understanding about available options. Experts emphasize the importance of educating employees about their insurance choices to promote informed decision-making and cost savings.
“The most important thing is interaction,” an expert stressed. ”An employer should take the time — even bring in outside consultants — to help their employees understand the mechanics of how their health plans work and the choices they have.”
Tax Savings: A Key Benefit
Many of these strategies offer significant tax advantages, further enhancing their appeal to small businesses seeking to control healthcare costs and maximize profitability. Careful planning and implementation can lead to substantial tax savings for both employers and employees.
Smart Tax Strategies for U.S. Businesses: Boosting Employee Benefits
In today’s competitive job market,attracting and retaining top talent is crucial for U.S. businesses. While salary increases are a common approach,savvy business owners are exploring choice strategies to optimize compensation packages and minimize tax burdens. One such approach involves maximizing employee health care benefits.
The Tax Advantages of Enhanced Health Care Benefits
According to Gene Marks, a CPA and owner of The Marks Group PC, a firm specializing in customer relationship management technologies, “As a certified public accountant I also find myself advising clients to consider increasing their health care premium match in lieu of paying higher salaries to their employees.” This strategy leverages a key tax advantage: health care contributions are not subject to the same taxes as compensation.
This means that by increasing the employer’s contribution to employee health insurance premiums,businesses can potentially reduce their overall tax liability. This is particularly relevant given the complexities of current U.S. tax laws and the ongoing debate surrounding employer tax burdens.
Beyond Tax Savings: A Competitive Edge
The benefits extend beyond simple tax savings. Offering a comprehensive health care package is a highly attractive employee benefit in a competitive market. It demonstrates a commitment to employee well-being and can significantly improve employee morale and retention. In a tight labor market, this can be a game-changer for attracting and keeping skilled workers.
Such as, a small business owner might find that offering a more generous health insurance plan attracts higher-quality applicants, reducing the time and cost associated with recruitment and training. This can lead to increased productivity and profitability in the long run.
Understanding the Implications
It’s critically important to note that the specifics of tax implications can vary depending on the size and structure of the business, as well as the specific health insurance plan offered.Consulting with a qualified tax professional is crucial to ensure compliance and maximize the benefits of this strategy. They can definitely help businesses navigate the complexities of tax laws and optimize their employee benefits packages for maximum impact.
Marks emphasizes that “By paying more for your employees’ health care you may be able to avoid employer taxes.” This highlights the potential for significant cost savings and improved competitiveness for U.S. businesses.
About the Expert
Gene Marks is a CPA and the owner and operator of The Marks Group PC, a firm specializing in customer relationship management technologies. Learn more about Gene Marks and The Marks Group PC.