Cut Health Plan Costs Without Sacrificing Employee Benefits

MAY 6, 2025

Offering benefits is a key strategy to attract and retain employees, but as the cost of health insurance continues to rise, many businesses will struggle to provide affordable, competitive benefits.

While most brokers will recommend raising co-pays and deductibles, this only addresses rising premiums and doesn’t consider how it would impact employees. Smaller businesses already struggling to find workers need to find a sustainable way to control health plan costs.

One strategy USI Insurance Services often recommends to reduce costs without impacting benefits is level funding — a self-funded strategy that allows employers to pay a fixed monthly premium to the insurance company for claims administration and payment. Plans that run better than expected may see a return on premium.

Employers often see savings up front by switching from a fully insured health plan to a level-funded one. If you’ve already explored level funding but determined your health plan is not a good fit, you may still be able to reduce health plan costs by adjusting your plan design.

Switching to a High-Deductible Health Plan Can Reduce Costs

Many fully insured employers switch from a traditional preferred provider organization (PPO) plan to a high-deductible health plan (HDHP) to reduce benefits spending. This transfers the cost of risk to the employees, who pay for more healthcare expenses out-of-pocket (OOP) before insurance pays its share.

While this can reduce health plan costs for employers, employees who are used to a gold-level plan — featuring a higher premium in exchange for a lower cost of service — may not be thrilled to be responsible for OOP expenses, and may decide to seek employment elsewhere. Employers that want to switch to an HDHP should look at including a health reimbursement arrangement (HRA) to maintain employees’ benefits experience while still reducing health plan spending.

Help Employees Maintain Their Benefits Experience

An HRA is an employer-funded account that helps employees cover their OOP expenses under an HDHP. Unlike a health savings account (HSA), with an HRA, any unused funds are returned to the employer at the end of the plan year. Employers may then choose whether to roll over HRA funds and, if so, how much.

Employers may be skeptical about funding HRA accounts up front. However, USI has found that 75% of plan members incur $4,000 or less in claims expenses. Many employers that choose to switch to an HDHP apply the premium savings to the HRA. With unused funds, employers can see a 5% to 10% total reduction in health plan costs.

How does adding an HRA to a high-deductible health plan save employers at renewal?