Small Business Health Plans: Traditional Insurance vs. Modern Alternatives

Finding affordable small business health plans is getting harder. 

Health insurance costs keep climbing, and it’s putting real pressure on employers who just want to offer solid benefits without wrecking the budget.

According to KFF, annual premiums for employer-sponsored family coverage hit $26,993 in 2025 (a 6% increase from 2024). 

Many small business owners are staring down renewal quotes they didn’t expect, deductibles their teams can’t afford, and limited options that all seem too expensive. Employees still need dependable care, but the traditional plans that once felt safe now feel impossible to sustain.

The good news is that employers aren’t stuck. Modern small business health insurance alternatives like health sharing, Direct Primary Care, and ICHRAs are giving teams more flexibility, more control, and often a much lower price tag. 

Current Costs of Small Business Health Plans

Health coverage has never been more expensive for small employers.

Premiums rise a little every year, but lately the jumps have been hard to ignore.

Increases have been stacking up for several years. For a small company, that kind of trend is tough to absorb, especially when revenue doesn’t rise at the same pace.

Even when a plan looks “affordable” on the surface, the deductible often tells a different story. The National Conference of State Legislatures notes that many employer plans in 2025 now carry single deductibles above $2,500, and it’s common to see small-group plans land closer to $3,000–$5,000. 

When employees have to meet a high deductible before the plan covers much, it adds pressure on the employer to offer richer benefits, or find something more sustainable.

The pressure is gradually adding up to fewer companies offering coverage overall. JP Morgan Chase found about one third of small businesses dropped health insurance coverage in 2025. 

Many owners would love to offer a traditional plan, but the numbers often don’t work unless they raise prices, cut budgets elsewhere, or reduce coverage options.

Even administration is a pain point. Most small teams don’t have dedicated benefits departments. Managing renewals, compliance rules, enrollment deadlines, and ongoing questions takes time away from everything else. 

In one recent survey, 93% of small employers said they’re worried about the long-term sustainability of their benefits.

It isn’t just the price. It’s the workload that comes with maintaining a traditional plan.

These pressures are why so many employers are exploring affordable small business health coverage options that offer more flexibility and predictability without leaving employees unprotected.

Traditional Group Health Insurance: Full Cost Analysis

Traditional group plans still feel like the “default” option for many employers, but the full cost picture tells a different story.

Once you look past the monthly premium, the true expense becomes much clearer.

Premiums Add Up Fast

Premiums are the biggest line item for most companies. 

Even a small team can end up spending more than expected over a single plan year.

Most carriers also require employers to cover a set percentage of the premium, commonly 50–75%, depending on the state and the insurer. That means every renewal increase hits the employer directly, even if employees shoulder part of the cost.

Deductibles, Copays, and OOP Costs Bring Extra Pressure

Premiums are only part of the story.

Employee out-of-pocket spending continues to grow because deductibles keep rising. The KFF Group reports that many 2025 small-group plans now list single and family deductibles between $2,500 and $5,000. 

That matters because employees often come back to the employer asking for stronger benefits when their coverage feels too thin. It’s one more reason small-business budgets get stretched year after year.

Hidden Costs of Small Business Health Plans That Don’t Show Up on the Quote

Beyond the premium and the deductible, group plans bring a set of administrative and compliance costs:

Modern Alternative #1: Health Sharing Plans

Health sharing has become one of the most talked-about small business health insurance alternatives, especially for employers trying to control rising costs without cutting benefits.

It works very differently from traditional insurance, but the potential savings get the attention of a lot of budget-conscious teams.

Health sharing isn’t insurance. It’s a community-based model where members contribute to a shared pool and help pay each other’s medical bills. 

Most programs are values-based or faith-aligned, though many newer options are open to anyone who agrees to community guidelines.

For small businesses, employees can join individually or as a group, and contributions often look more like a membership fee than a premium.

The Cost Difference Is Hard to Ignore

Most health sharing memberships fall in the $300–$500 per month range for an adult, depending on the program and age bracket.

Traditional plans often land between $700–$1,200+ per month, especially for small-group markets with higher premiums.

This is why many employers report 30–50% lower costs when switching from a group plan to a health sharing model.

What’s Covered and What Isn’t

Most health sharing plans help with:

However, because these programs aren’t legally classified as insurance, they don’t follow ACA rules. That means:

This is why clear communication is essential. Employees appreciate transparency, especially if they’re used to more traditional coverage.

Why Some Employers Prefer This Route

For many small companies, the appeal is simple: flexibility and affordability.
Health sharing typically has:

It’s also a popular option for startups that need affordable small business health coverage but don’t have the margin for a full group plan.

Where Health Sharing Works Best

Health sharing tends to fit businesses that:

It can also be paired with Direct Primary Care (DPC) to give employees stronger everyday access to care.

Health sharing isn’t the right choice for every company, but it’s no longer a fringe option. For teams struggling with small business employee benefits costs, it can deliver real value at a predictable price, something that’s getting harder to find in today’s insurance market.

Modern Alternative #2: Direct Primary Care (DPC) Models

Direct Primary Care changes the entire feel of day-to-day healthcare for employees.

Instead of dealing with copays, billing codes, or rushed appointments, patients get straightforward access to a primary care doctor for a simple monthly fee.

DPC works like a monthly membership. Employees pay a set fee, or the employer covers it for them, and that gives them unlimited primary care visits. Many clinics offer quick appointments, longer visit times, and direct access to the doctor by text or phone. The idea is straightforward: simple access and no surprise charges. 

The Cost Advantage

Most DPC memberships fall between $50 and $150 per month, depending on location and services.

For employers trying to offer affordable small business health coverage, this is one of the easiest ways to control spending while improving employee access to care.

Many businesses pair DPC with:

This strategy keeps major medical protection in place while giving employees strong, predictable primary care.

Why Employers Like DPC

DPC tends to reduce stress for everyone.

Employees get time with their doctor, quick visits, and fewer hurdles. Employers see fewer missed workdays due to unmanaged health issues, and many report better employee satisfaction.

Because there’s no insurance billing, the administration is light. No claims to track, network rules, or surprise fees.

If your team values preventive care, this model often feels like a huge upgrade, not a cost cut.

Where DPC Needs Backup

DPC isn’t a full insurance replacement. It doesn’t cover:

This is why pairing is essential. A DPC-plus-catastrophic or DPC-plus-health-sharing setup blends everyday access with serious protection.

Who DPC Works Best For

DPC tends to be a strong fit for:

DPC won’t replace major medical coverage, but it fills one of the biggest gaps in today’s healthcare system: access. For many employers, it’s one of the most reliable ways to improve care while keeping costs under control.

Modern Alternative #3: Individual Coverage HRAs (ICHRA)

ICHRA has become a practical way for small employers to offer health benefits without getting trapped by group insurance prices.

Instead of buying one plan for everyone, the employer sets a monthly allowance and employees shop for the coverage that fits their own needs.

At its core, an ICHRA is simple. The employer picks a set dollar amount. Employees use that money to buy an ACA-compliant individual plan, and qualified expenses can be reimbursed tax-free.

It’s a clean swap: fixed employer cost to flexible employee choice.

This structure appeals to businesses that want predictable spending without giving up the ability to offer real benefits.

Why More Employers Are Using It

The last few years have pushed a lot of small businesses to rethink their benefits strategy.

With premiums rising around 6–7% each year, many owners are tired of watching their renewal quotes jump for reasons they can’t control.

ICHRA solves several headaches at once:

For companies comparing small business health insurance alternatives, this is one of the most flexible tools available.

What Employers Should Keep in Mind

There are a few rules to follow.

Employees must enroll in individual health insurance to participate, and if they use the ICHRA, they usually can’t also take ACA premium subsidies.

ICHRA also lets employers set up “classes” of workers like full-time, part-time, seasonal, hourly, and so on, so each group can receive different allowance amounts.

This structure helps employers stay fair and consistent while adjusting for the realities of their workforce.

Where ICHRA Fits Best

Certain types of employers tend to get the most value from an ICHRA, and they usually fall into a few clear groups:

ICHRA gives employers a way to stay in the benefits game without surrendering their budget to unpredictable renewals. Employees get more say in their coverage, and the company gets a plan that doesn’t swing wildly in price from one year to the next.

Side-by-Side Cost Comparison

Seeing the numbers beside each other helps everything click.

Most small businesses don’t have room for assumptions, and a clear comparison makes it easier to choose a benefits setup that won’t sink the budget.

A Quick Look at Typical Costs

What This Looks Like for a 5-Person Team

Why These Differences Matter

Traditional insurance works, but it’s the only model where the employer has almost no control over next year’s price. 

Renewal letters arrive, the rate jumps again, and the team scrambles to make it fit.

The other options don’t move like that. They give the employer a chance to set real limits, build hybrid setups, or offer more value at a lower price. 

Some combine DPC with health sharing. Others use an ICHRA so each employee can pick their own ACA plan. There’s room to adjust things instead of being locked into a carrier’s menu.

Compare Pricing on the Best HealthShare Plans Available

How to Choose the Right Options for Your Small Business Health Plans

The right health benefit should match your budget, your team, and how your business actually operates.

Most companies don’t need the “perfect” plan. They just need a practical one that doesn’t knock the wind out of their finances, or drive employees away.

Start With What You Can Truly Afford

A lot of decisions fall into place once you’re honest about the numbers.

If traditional premiums keep climbing and you’re crossing your fingers every renewal, that’s usually a sign it’s time to explore something more stable. 

Some teams need the full structure of a group plan. Others do better with options that offer more control over small business employee benefits costs.

Take a moment to look at the health needs of your team. A group of younger or mostly healthy employees may not see much benefit in an expensive group plan. A team with older workers or people who manage ongoing conditions may need something with broader coverage. 

If your staff is spread across different states, an ICHRA often becomes the easiest fit.

Clarify What Matters Most to Your Team

A benefit only works when people understand it and feel comfortable using it. 

Some employees strongly prefer traditional insurance because that’s what they’re used to. Others are perfectly fine with a model like health sharing or Direct Primary Care once they actually see how it works.

This is where clear communication saves headaches. A short overview meeting, a simple comparison chart, or a quick Q&A session often gives employees enough confidence to support a change. 

Make sure you know exactly which benefits and what kind of support means the most to your employees. 

Use a Simple Process to Narrow the Choices

When owners sort out what matters most, they tend to fall into a few groups:

This is less about choosing a “right” or “wrong” plan. It’s about choosing the one that matches the way your business actually runs.

Think Through the Transition Before You Switch

Any change, whether it’s big or small, goes smoother when everyone knows what’s coming.

Most employers tie the switch to their renewal period, then walk employees through what stays the same and what will feel different. A few short conversations usually calm most concerns. But make sure your employees have someone they can turn to if any additional questions crop up over time. 

If you’re switching from a group plan, it helps to line up comparisons a few weeks in advance and give employees time to review their options. Being transparent works better than trying to sell them on something new.

Taking Action: Next Steps for Your Small Business Health Plans

Once you have a sense of your options, the next step is simply getting things in order. 

Most small businesses don’t need a long process. A straightforward plan with a few steps is usually enough to move forward.

Start by Looking at Your Current Costs

Before changing anything, take a fresh look at what you’re actually spending now.

That means the monthly premium, the employer contribution, rising deductibles, and the time your team spends dealing with enrollment, renewals, and claims questions. For many small companies, the “hidden” admin time is far more expensive than they realize.

A quick snapshot of your real costs helps you see whether staying with your current plan even makes sense.

Get Quotes From a Few Different Directions

This part doesn’t have to be complicated.

Gathering side-by-side numbers from traditional carriers, a few health sharing programs, and an ICHRA provider gives you a clearer picture than any generic chart.

Most owners also check how a Direct Primary Care membership would fit into the mix. DPC pairs well with several options and can often replace the need for richer (and pricier) primary care benefits.

Talk Through the Pros and Cons With Your Team

Even small changes can feel big to employees.

A short conversation: “Here’s what we’re paying, here’s how it’s going, and here’s what we’re considering” goes a long way. When people feel informed, they’re less anxious about trying something new.

You don’t have to present everything as final. It’s often better to frame it as, “We’re exploring ways to offer strong benefits without putting the business under unnecessary strain.”

Plan the Timeline Before You Commit

Most employers make changes at renewal time because it keeps the switch clean and easy.

If your renewal is months away, you still have options. You can prepare your comparisons now, decide on your direction, and roll it out when the timing makes the most sense. Getting started early can help you to avoid trying to overhaul everything overnight. 

Be sure to give employees a fair heads-up. A week or two of notice, and the chance to ask questions, keeps things calm.

Choosing the Right Small Business Health Plans for Your Employees

Small businesses are under more pressure than ever when it comes to health benefits, and the steady rise in small business health insurance costs isn’t slowing down.

Traditional group plans still have their place, but they’re not the only way to offer meaningful coverage. Health sharing programs, Direct Primary Care memberships, and ICHRAs give employers more room to maneuver, more control over the budget, and usually better value for their teams.

The best part is that none of these choices require lowering the quality of care. With the right setup, employees get steady support, clear coverage, and easy access to care. Employers get a budget they can plan around instead of dealing with sudden increases. 

Every business is different, and some may end up blending more than one approach. The main goal is choosing a plan that protects your team and keeps the company in a strong position. Today’s small business health insurance alternatives make that possible, even when traditional plans are too expensive.

If you’re ready for a deeper insight into the types of coverage options that might work better for your employees than standard insurance, we’re here to help. 

Compare traditional insurance vs health sharing costs for your team today, and find the best way to cut costs, without driving team members away.