Why Employer Health Benefits Matter More Than Ever in 2025

As an employer, you play a key role in making healthcare more accessible for your team.

Providing affordable healthcare options can significantly ease the burden employees face, especially when they struggle with the cost of routine and preventive care.

Employer health benefits can protect employees from financial ruin due to unexpected medical emergencies. However, with rising deductibles and additional out-of-pocket costs, many workers still find it challenging to cover even basic healthcare expenses.

By taking proactive steps to address these gaps, you can help foster a healthier, more productive workforce while supporting your employees’ financial well-being.

The Impact of High Healthcare Costs on American Workers

Consider: The average deductible for a workplace insurance plan as of 2024 is $1,787 for single coverage.

But according to a new survey from Bankrate.com, more than half of Americans can’t cover a $1,000 emergency.

Millions of American workers simply can’t afford to regularly see a doctor, or pick up their prescriptions for newer and more expensive drugs.

A recent study found that 43% percent of working-age adults were inadequately insured in 2024.

Of these, about 9% were completely uninsured, 11% had a gap in insurance coverage over the past year. And some 23% actually had health insurance coverage in place – but still couldn’t afford to get the health care they needed.

The reason: high deductibles, co-pays, and other out-of-pocket costs for health care are overwhelming their available savings. A health insurance plan with an $8,000 deductible doesn’t help most people who don’t have $8,000 lying around.

According to a recent survey by the Commonwealth Fund, nearly half of employees surveyed – 46% – reported they had delayed or skipped getting medical treatment due to costs. 42% said they were currently paying off medical debt or had trouble affording health care costs.

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Costs to Employers

The healthcare affordability crisis isn’t just an employee problem.

It has a very real effect on employers as well, particularly small businesses who have less capacity to self-insure, or to absorb the loss of a key employee to a preventable healthcare issue.

If you suspect your employees are avoiding or putting off receiving health care services because of cost, think of it like deferred maintenance. It may save a bit of cash flow for a little while, but eventually, it comes back to bite employers – and sometimes quite severely.

Presenteeism

When employees can’t afford proper healthcare, it often leads to presenteeism—where they show up to work but can’t perform at their best.

Stress from juggling daily expenses and medical costs, like taking a child to a doctor, can severely impact focus and productivity.

Chronic health conditions such as high blood pressure, heart disease, anxiety, or depression, which could be managed with regular care, end up making things even worse.

Employees who skip medical appointments due to cost are also likely to forgo necessary medications, vaccinations, and health screenings. While these early signs of lost productivity might be hard to spot, they add up.

These early stages of lost productivity are extremely difficult to spot, but they are very real. A 2018 study estimated that healthcare-related presenteeism cost employers some $3,055 per year per person.

Absenteeism

Eventually, unaddressed health problems begin to spill over into operations.

Employees call out sick more often, causing management to scramble to fill shifts, train new employees, and pay overtime costs.

All told, the combined costs of absenteeism, presenteeism, and increased healthcare utilization costs U.S. employers an estimated $575 billion every year.

Turnover

When employers provide an inadequate level of healthcare benefits to their employees, they inevitably experience yet another layer of costs.

Constant and increasing turnover – usually of their best, most upwardly mobile and most talented employees.

This is because quality workers won’t stay long in jobs that don’t provide adequate health benefits. In today’s competitive market, your best workers will move on.

According to the Society for Human Resource Management (SHRM), the average cost of turnover per employee is around 100-150% of their annual salary.

This means that if an employee earns $50,000 a year, the cost of replacing them could range from $50,000 to $75,000.

This cost includes direct expenses such as advertising, recruiting, and training. It also cover indirect costs such as lost productivity and decreased morale among remaining employees.

Even at the minimum wage level, the average total hit to employers who have to replace a worker due to turnover is as high as $1,500.

Hiring and training new employees is costly. That makes it more effective to offer good compensation and benefits to retain top workers than to lose them after investing time and resources.

What You Can Do

Health insurance is expensive.

But there are several things employers can do to improve health care access for lower and middle-wage earners.

1. Consider Health Savings Accounts (HSAs)

These special savings accounts allow workers to save money and pay for medical expenses tax-free.

As an employer, you can assist your employees to contribute up to $4,300 to their HSAs on their behalf ($8,550 for families).

Your contributions are tax-deductible as a compensation expense, and not taxable to the employee.

In one to two years, most employees can save enough in HSAs to cover deductibles, copays, and medical expenses tax-free.

The catch: for employees to be eligible for HSA contributions, they must be covered under a high deductible health plan.

These plans have a minimum insurance deductible of $1,550 ($3,300 for families). But higher deductibles also reduce health insurance premiums, making the whole package more affordable for workers and employers alike.

Lower-wage workers may need employer contributions, as their disposable incomes often can’t support fully maximizing HSA contributions alone.

But as the employer, you can choose your contribution level, or make it a match. And adding an HDHP to your company’s health plan costs little or nothing.

2. Consider Direct Primary Care

Direct Primary Care (DPC) is a healthcare model that’s quickly becoming popular for its simplicity and affordability.

With DPC, patients (or their employers) pay a flat, predictable monthly subscription fee for unlimited virtual or in-person visits with a primary care doctor.

DPC memberships typically include traditional doctors’ office services such as:

Once the monthly subscription is paid, there are no deductibles or copays to worry about. Your employee will have no additional out-of-pocket costs to see his or her doctor.

With unlimited telemedicine appointments, workers won’t even have to take a half day off work to “see” their doctor. They can do a telemedicine appointment on their lunch break, and not even have to leave the job site.

DPC removes many financial barriers, allowing your workers to get the care they need without worrying about the cost.

To learn more about DPC, see our small employers’ guide to Direct Primary Care.

Tip: To maximize cost-effectiveness, consider combining direct primary care with a healthsharing plan specifically designed for this purpose, like DPC DIRECT. See the section on health sharing below.

3. Offer a Health Reimbursement Arrangement (HRA)

A Health Reimbursement Arrangement (HRA) is an employer-funded health benefit plan that reimburses employees for qualified medical expenses.

The employer sets aside funds for the HRA and employees can use the funds to pay for eligible medical expenses, such as deductibles, copays, and coinsurance.

In general, HRAs are tax-free for employees and tax-deductible for employers. They can be offered in conjunction with other health insurance plans, like high-deductible health plans (HDHPs), or as a standalone benefit.

HRAs can be a valuable tool for employers to offer cost-effective health benefits. They give employees greater flexibility and control over their health care expenses.

Planning Technique: Cancel Group Health Insurance!

For small businesses (with fewer than 50 employees), HRAs present a terrific alternative to group health insurance.

They are especially beneficial if you have a lot of lower-wage workers and families.

Set up an HRA instead of group health insurance. This can help employees purchase their own health insurance through your state’s Affordable Care Act exchange.

When employees buy their own insurance on the open market, most will qualify for a premium tax credit under the ACA. Keeping them on your group plan means no subsidy is available. Both you and the employee would pay the full price of coverage.

Offering an HRA to help employees get their own health insurance preserves much of the subsidy. The subsidy amount may be reduced by the amount of HRA assistance you provide. However, the overall cost savings potential is substantial.

Employees can tap HRA money not needed for premiums to pay other out-of-pocket healthcare costs.

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4. Consider Health Sharing

Health sharing plans are lower-cost alternatives to traditional health insurance plans.

With healthsharing, a group of like minded individuals comes together to form an association, and agree to share one another’s unexpected medical bills.

These associations are run by healthcare sharing ministries or other non-profit organizations. Many organizations are faith-based, but secular, non-religious plans are also available if that approach suits you or your workers better.

The chief advantage of health sharing plans vs. traditional health insurance is cost. Healthsharing plans are typically 40 to 50% cheaper on a monthly basis compared to health insurance.

For example, as of 2024, the annual family premiums for employer coverage rose 7% to $25,572, according to data from KFF.

However, there are several quality healthsharing plans that can cover catastrophic medical bills with total costs for a family of four under $12,000.

The downside: Healthsharing plans typically impose a waiting period on pre-existing conditions. Traditional health insurance plans will cover pre-existing conditions from day one.

Some employers offer a cost-saving health-sharing plan for healthier employees. They also help employees with pre-existing conditions purchase traditional health insurance.

For a free, no-obligation consultation on how to design a quality set of health benefits, including HRAs, healthsharing, health insurance, direct primary care, and plan design, contact one of our highly-experienced Personal Benefits Managers.

5. Offer Paid Sick Leave

Many employers make the mistake of thinking they save money in the long run by not offering paid sick leave to employees.

When employees are cash-strapped, they can’t afford to take a day off work if they’re sick.

Not only are sick employees less productive, they also compound the presenteeism loss because they can get other workers sick.

As a benchmark, workers nationwide receive an average of seven paid sick days each year.

6. Offer Voluntary Benefits

Voluntary benefits are ancillary benefits that employers are not required to provide under the Affordable Care Act.

However, they can help create a valuable safety net for employees experiencing a healthcare event in their households.

With voluntary benefits, employers can pay the entire cost, part of the cost, or have employees pay all of the cost. These are commonly offered as part of a Section 125 “cafeteria plan.” Employees must usually “opt in” to the benefit.

Examples of common voluntary benefits include: