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Key Takeaways Small business owners are facing rapidly rising healthcare costs and need creative strategies to stay competitive without breaking the bank.
Navigating healthcare options is more complex than ever, and understanding the system can make a major difference for both employers and employees.
According to a recent study from Aon, the average employer health insurance cost is expected to surpass $17,000 per employee in 2026, a 9.5% jump from 2025.
There’s no debate that healthcare costs are dramatically increasing. And yet, as small business owners, you and I need to provide some sort of healthcare benefit in order to remain competitive with our larger competitors so that we can attract and retain the best talent possible. How to do this? Here are five strategies.
Related: Employee Benefit Costs Are Increasing. It’s Time for Employers to Fight Back.
1. Level-funded plans
Self-insuring was once only a choice for the largest of companies. But newer arrangements are beginning to filter down to small and mid-sized businesses. One of these options is a level-funded (or benefit) plan. Simply stated, this type of plan means your business funds the cost of health insurance at the lowest level — out-of-pocket costs, doctor’s visits, routine treatments — up to a certain amount, and then a stop-loss plan kicks in to cover any catastrophic costs like surgery or expensive treatments.
These plans are on the rise. Another report from Kaiser Family Foundation indicated that among small employers, the share of offering level-funded plans jumped from about 13% in 2020 to roughly 40% in 2023. The reason why is that many business owners have realized that not all of their employees — particularly younger or healthier workers — are fully using the group insurance plans they’re helping to pay. With a plan like this, you’re only paying for when healthcare is needed. These plans do come with risks, such as the potential for unpredictable claims, continued renewals from insurance companies and administrative complexity. But administered properly, they can go a long way towards better controlling healthcare costs.
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