Key Takeaways
- Over 50% of U.S. adults with employer-sponsored health benefits consider it a key factor in staying at their job.
- Health insurance is the second most important employee benefit, behind only wages.
- Offering comprehensive health benefits can lower employee turnover by 26%.
- 90% of employers rank health benefits as the most valued perk by their workforce.
Overview
Employees demand quality health benefits, and employers must provide them if they want to attract and retain the talent they need to compete.
But traditional health insurance is prohibitively expensive for many small businesses. If you want to keep your best employees aboard–and recruit more like them–you may need to think “outside the box” and get creative with your employee benefits program.
When it comes to what employees actually value, health benefits rank second only to pay. Employees value a quality health plan more than retirement plans, PTO programs, or just about anything else.
According to research from the Society of Human Resource Management, 56 percent of U.S. adults with employer-sponsored health benefits see the quality of their coverage as a major factor in staying at their job. Additionally, 46 percent say health insurance was a significant reason they chose their current employer.
Good health benefits do more than help with hiring – they also reduce how often people leave their jobs. Employee turnover costs companies billions every year in direct and indirect costs.
In some industries, turnover rates have skyrocketed: turnover rates in professional services soared to a mind-boggling 63% last year.
But the data is clear: businesses with generous health coverage as part of their employee benefits package have turnover rates some 27% lower than companies with no health plan, or only a bare minimum offering, according to a study from The Predictive Index.
But offering a full-fledged health insurance plan for all employees isn’t always realistic for small employers.
Fortunately, companies with fewer than 50 full-time equivalents are exempt from the Affordable Care Act. If you’re in this category, you can explore other lower-cost strategies for offering employee health plans.
Protection is Key
Without careful plan design, traditional insurance solutions still leave employees exposed to massive out of pocket costs.
Even with insurance, a child who breaks a leg roller-skating can generate thousands of dollars in medical bills, accounting for deductibles, copays, and coinsurance.
This is because the combination of a deductible and a standard coinsurance of 20% plan still leaves workers on the hook for a lot of money.
Consider: studies show that about half of U.S. households don’t have $1,000 ready to handle an emergency without going into debt. But the average group family health insurance plan deductible is nearly four times that amount, or $3,722!
Factors to Consider
When you are designing your employee health benefits package, you should consider multiple different factors, including:
- Your monthly budget
- Employee ages
- Family status (married? children?)
- Their monthly budget: How much can they afford to contribute?
- Pre-existing conditions. Health sharing isn’t suitable for everybody. Make sure you consider workers and family members with pre-existing conditions.
- The market environment: What are competing employers offering?
Learn More: HSA For America Helps Employers Save Thousands on Health Benefits
Health Benefit Strategies and Alternatives
Here are some of the most cost-effective alternatives for small businesses you may consider:
Drop Group Health Entirely and Start a QSEHRA.
QSEHRA stands for qualified small employer health reimbursement arrangement.
It’s a way for small employers to allow their employees to buy their own health insurance on the individual market with tax-free dollars. It’s only available to employers with fewer than 50 FTEs who do not offer a group health insurance plan.
You as the employer fund the program pre-tax, and reimburse your workers when they purchase their own qualifying health insurance plan. These contributions and payments are exempt from income tax and payroll taxes, saving money for both you and your workers.
You can choose to reimburse for the entire cost of health insurance, or you can cap the benefit at a fixed dollar amount. As of 2024, the maximum reimbursement under a QSEHRA plan is $6,150 for a single employee’s coverage ($512.50 per month), and $12,450 for family coverage ($1,037.50 per month).
These amounts are adjusted each year for inflation.
Offer a Health Sharing Benefit
Health sharing plans are a lower-cost, affordable, non-insurance alternative to traditional health insurance products.
They provide powerful protection against the high cost of unexpected medical bills––at roughly half the cost of a comparable employee group health plan.
These plans can be great for relatively young and healthy work forces. However, health sharing plans can and do impose waiting periods before they will share costs for treating pre-existing conditions. So it’s important to ensure any workers under your health sharing plan understand this.
Make it Easy to Access Primary Care
Chronic and preventable health conditions are a major source of healthcare expenses for both large and small businesses.
Access to primary care is proven to reduce these expenses, on average, resulting in reduced business costs and increased productivity.
However studies show that even with health insurance coverage, too many people skip going to their doctor to manage chronic conditions because of high deductibles and copays.
But you have several options to help your employees access the primary care they need. Let’s take a closer look at some of the most effective for small businesses.
Contribute to Health Savings Accounts
You can contribute to employee HSAs, or health savings accounts.
HSAs are a powerful and popular benefit. If an employee is enrolled in a qualified high-deductible health program, or in our proprietary and ultra-affordable HSA MEC plan (which can be combined with health sharing plans as well for a much lower cost), you can make pre-tax employer contributions to his or her health savings account.
Your worker or covered family members can use this account to pay for qualified medical expenses, tax-free. They don’t even have to pay Social Security or Medicare taxes on this money.
Any money they don’t need for medical expenses this year compounds tax-deferred as long as it remains in the account.
Once they turn 65, the usual 20% penalty for non-qualified withdrawals goes away. They can still pay qualified health expenses tax-free. But they can also access that money for any purpose they like, penalty-free. They just have to pay the taxes they deferred when you or they first contributed.
You can make employer contributions to their HSA whether they bought their HDHP in the individual insurance market, or if they are part of the company’s group plan. You can even contribute if they bought a qualified HDHP via your QSEHRA!
Note: Any subsidies they qualify for under the Affordable Care Act are significantly reduced or eliminated when they receive benefits under a QSEHRA.
Compare Pricing on the Best HealthShare Plans Available
Offer Direct Primary Care Membership
Alternatively, you can roll out a Direct Primary Care (DPC) benefit.
Direct primary care is an increasingly popular arrangement that makes seeing a doctor for primary care extremely easy and affordable: you or your employee (or both!) simply pay a flat monthly subscription directly to their primary care physician’s office.
There’s no insurance, no deductibles, no coinsurance percentage, and no copays: all basic services are normally handled by a primary care doctor in his or her office. Patients can see their doctor as often as necessary to address their medical concerns at no additional charge.
Most employees who need to see a doctor love DPCs because DPC doctors can spend much more time speaking with their patients face to face. For those who need to see a doctor regularly, DPCs can be a big moneysaver compared to traditional insurance-based practices, which cause people to rack up copays and deductibles, which can be a real financial hardship for cash-strapped employees.
Because DPC practices don’t take insurance, physicians can spend much more quality time with patients, getting to the root of their medical issues or focusing more on preventive care.
In the long run, this, too, helps control your costs as an employer, because prevention helps reduce hospitalizations and ER visits in future years.
Note: Individuals enrolled in DPC plans are not eligible to make or receive HSA contributions under current law.
Case Study: How Group Health Sharing Saved a Small Business More Than $5,000 Per Month
A small business in Florida we worked with had 24 employees on board. 17 of them signed up for a group health sharing plan. 7 employees chose to enroll in an individual health insurance plan.
Working with one of our expert Personal Benefits Managers, the business owner set up a health reimbursement arrangement (HRA), which would help reimburse employees who chose health insurance for most of their insurance premiums, tax-free.
The business owner also set up an accident insurance voluntary benefit plan that effectively reduced every employee’s deductible for accidents to $100. This was important, because most of the employees couldn’t afford thousands of dollars in ER deductibles and coinsurance costs if, for example, a child broke her leg at soccer practice.
All together, offering employees a lower-cost health sharing alternative still saved the business more than $5,000 per month, compared to the cheapest traditional group health insurance plan they had been considering. The savings were more than enough to provide the improved accident insurance protection.
As a result, the business is more profitable, has more free cash flow, and employees have more financial security, thanks to these innovative approaches to small business health benefits.
Get a Custom Benefits Plan Design
Clearly, offering a robust employee health plan is necessary to remain competitive in today’s tight talent market.
A traditional group health plan is an expensive but powerful solution for many small businesses. For many other small businesses, it might be necessary to get creative and consider using a combination of programs to protect employees and help cement the employer-employee relationship.
Getting started is easy: just prepare an employee census, and contact one of our experienced Personal Benefits Managers. We’ll collect some basic facts, get to know you and your business, and help you design an employee benefits strategy that meets your individual needs – by meeting the needs of your employees and their families.
For Further Reading: Affordable Group Health Insurance –– A Guide for Small Businesses | Everything You Need to Know About Health Sharing For Small Businesses –– 2025 Update
