How businesses can control health care costs in 2025

According to a recent report from health care consulting firm Mercer, the costs of providing health care coverage are expected rise about 6% in 2025, a rate that’s more than twice the current rate of inflation.

Health care coverage remains among the very top of the most requested employee benefits, and providing good options is essential for employers in order to attract and retain talent.

But how do you offer competitive health care benefits for your employees without breaking the bank? Here are some options to consider for 2025.

Have multiple group health insurance options

Group insurance plans remain popular with small- and mid-sized businesses because they often are the easiest choice and provide expansive coverage. But group insurance can be expensive. To address this, many businesses not only have been decreasing their employer's share of health care premiums, but also offering more plan choices of in- and out-of-network doctors, along with various levels of coverage. This way employees can choose lower cost plans if they prefer, which also impacts the employer's contributions.

The process can be complicated, which is why Tim Elenz, a benefits consultant based in Hoffman Estates, says it’s important to use a good broker.

“Depending on the insurance company you may get dozens, even a hundred different options,” he said. “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.”

Offer Health Savings Accounts

Thomas Conner, a Schaumburg-based benefits consultant at USHealth Group, is a big supporter of Health Savings Accounts, or HSAs.

“It’s like a 401(K) plan for health care,” he said.

If your company has an HSA, plan then in 2025 employees can choose to save up to $4,300 ($8,550 for family) in pretax dollars and then use those funds for unreimbursed health care expenses (not premiums) such as certain medications, vision care, dental services and therapy. Saved amounts can be invested and any unused amounts can roll over to the future, without any minimum required distributions. Also, if an employee leaves a company they can take those funds with them.

“I love the concept of HSAs,” he said. “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.”

Create Health Reimbursement Accounts

Thomas also is a fan of Health Reimbursement Account (HRA) for small businesses.

Certain HRAs allow an employer to contribute pretax dollars to an employee's account, which then can be used to purchase health care plans individually or on a health care exchange. This way, employers don't have to negotiate rates with an insurance provider every year and are less exposed to an employee’s confidential health care information. Also, employers have more control over how much they contribute.

“HRAs are highly underutilized and ideally suited for mom-and-pop operations,” Connor said. “If set up the right way, they can save the business owner time and money.”

Self-insure

Once only a choice for larger companies, self-insuring has become a more viable choice for many small businesses to help reduce overall health care costs. For example, a “level benefit plan” can allow companies to self-insure costs at a low level by reimbursing employees for their claims with a group or stopgap policy kicking in for larger or more catastrophic events.

“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,” Elenz said.

Other employers have been contracting with outside health care providers, such as urgent care facilities. Some are joining captive insurance programs, which pools their members contributions and shares risks.

“The more an employer can take on risk, the lower the cost charged by the insurance carrier,” Elenz said.

Educate

Oftentimes, employees (and their employers) spend too much on health care and this happens when people aren’t completely educated about their choices. Both Elenz and Connor agree that the smarter people are about their insurance options, the smarter decisions they’ll make.

“The most important thing is communication,” said Elenz. “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.”

Saving taxes

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. That’s because health care contributions aren't taxable, but (of course) compensation is. By paying more for your employees’ health care you may be able to avoid employer taxes.

• Gene Marks is a CPA who owns and operates The Marks Group PC, experts in customer relationship management technologies.