Running and building a business is a costly endeavor. While some businesses have greater overhead than others, no one gets away without incurring some level of start-up and then ongoing expenses. And, often times, health insurance costs can be a major expense, especially for small businesses.
For example, according to Zippia.com, employers pay 78 percent of single coverage employee health insurance plans and 66 percent of family coverage plans on average. When you consider that the average annual cost for premiums is close to $6,500 for single coverage in California, that’s close to $5,000 per year per employee that an employer is contributing.
And family coverage is significantly higher.
As the Kaiser Family Foundation (KFF) has reported, annual family premiums for employer-sponsored health insurance averaged more than $22,400 in 2022. KFF went on to note that, on average, workers were contributing $6,106 toward the cost of family premium last year, with employers paying the rest.
Some states are far more expensive for businesses, as well. While California, for example, ranks about halfway among all 50 states in terms of how expensive it is to start and run a business, states like Nevada,Colorado, and Arkansas are the least expensive. Others such as Minnesota and New York are the most expensive for business owners.
Some Steps For Lowering Health Insurance Costs
The United States has the most expensive health care in the world. Experts debate the actual reasons and underlying causes, but it is highly unlikely that there will be any substantial changes in the foreseeable future.
In the meantime, small businesses must take steps to effectively manage and even lower their own health insurance costs.
Here are some tips from LandrumHR.com for managing small business health insurance costs:
Survey potential and current employees to determine what benefits they value most
Provide benefit selection education to help employees understand their options
Add telehealth alternatives to your plan
Offer a variety of plan choices
Consider an HSA plan option
Utilizing the expertise and experience of a reputable insurance firm such as J.C. Lewis Insurance Services, for example, is also a great way to effectively manage your health insurance costs.
Five Tactics For Small Business Health Insurance Costs Management
There are several tactics that a small business can implement for effectively managing its costs around health insurance.
Here are five proven and actionable tips for managing your small business health insurance costs:
Shop Around for Competitive Rates
Obtain quotes from multiple insurance providers to compare prices and coverage options.
A good recommendation is to request quotes from at least three different insurance companies and carefully review the details to find the most cost-effective plan for your small business.
Implement Cost-Sharing Strategies
One popular approach is to provide your employees with an HDHP option and contribute to their HSAs to help cover medical expenses. This can result in reduced premiums for both the employer and employees.
In addition, encourage employees to take more responsibility for their healthcare expenses, leading to lower overall costs.
Embrace Wellness Programs
The goal here is to promote employee wellness initiatives such as preventative care, exercise programs, and healthy lifestyle choices.
By lowering health risks and promoting healthy habits, these efforts can lead to reduced healthcare costs over time.
Offer discounted gym memberships, organize health challenges, or provide incentives for employees who participate in wellness activities.
Evaluate Alternative Insurance Models
For example, consider partnering with other small businesses to form a self-insured group, which will allow you to share the financial risk and potentially access lower-cost healthcare plans.
Explore additional insurance models such as joining a captive insurance group.
These models may provide more control over healthcare costs and reduce premiums.
Educate Employees on Healthcare Benefits
Some good ways to do this are to conduct educational sessions or provide informational resources to ensure employees make informed decisions regarding their healthcare utilization and choose cost-effective options.
This will help employees understand their health insurance plans, coverage details, and cost-saving options.
It can also encourage them to utilize in-network providers, generic medications, and telemedicine services.
Remember, your business is not like any other and each small business has unique needs. Therefore, it’s essential that you assess your specific situation and consult with insurance professionals to tailor these strategies accordingly.
J.C. Lewis Insurance Services Can Help With Your Health Insurance Costs
We have been in the business of offering quality health insurance plans here in Sonoma County since 1979. J.C. Lewis Insurance Services works only with the leading health insurance carriers licensed to do business in the states that we operate in.
As a family-owned and operated health insurance agency for over 40 years, we, too, are a small business. Which means that we understand the particular needs and challenges small business owners face. In addition to being specialists in finding and managing affordable health insurance plans for small businesses, we are also licensed and certified by each insurance carrier we represent.
So, whether you’re considering small group health insurance for you and your employees or you’re simply looking to make changes to your existing plan, we understand that you’ll likely have questions and concerns.
We always welcome your questions about health coverage insurance, and you can be confident that we will help you find the right solution for your needs.
J.C. Lewis would love to be your preferred partner, helping you to make the right decisions for your company’s health coverage needs.
FAQs – Real Talk About Small Business Health Insurance
1. How can small businesses actually save money on employee health insurance?
Honestly? Health insurance can eat up your budget if you’re not careful. One trick a lot of small business owners are using is shopping around—don’t just settle for the first quote you get. Compare a few providers (three at the very least). Then there’s the HDHP + HSA combo—that’s a high-deductible plan plus a Health Savings Account. You get lower monthly premiums, and your employees get a tax-advantaged account to help cover out-of-pocket stuff. Bonus tip? Add some wellness perks. Things like step challenges or free meditation apps help employees stay healthy, which can seriously reduce long-term claims. Healthy people = fewer expensive doctor visits.
2. What states are the cheapest for offering small business health insurance?
If you’re trying to stretch every dollar, where your business is located actually matters—a lot. States like Nevada, Arkansas, and Colorado usually have lower average premiums, which means more bang for your buck. On the flip side, states like New York and California can be pretty pricey. For example, single coverage in California runs around $6,500 a year. But if you’re in one of the cheaper states, you could knock a couple grand off that price tag. And if you’re remote or multi-state? You’ve got options—just make sure you’re comparing plans that make sense across your team’s zip codes.
3. How much do small businesses usually pay toward employee health insurance?
There’s no one-size-fits-all answer, but here’s the rough math: most small businesses cover about 78% of the cost for single plans and around 66% for family plans. So if the plan costs $6,500 for single coverage, you’re likely putting in about $5,000. For a family plan (which can easily hit $22,000 or more), you might cover $16,000+ and your employee picks up the rest. You can also just set a flat dollar amount each month and let employees pick plans that fit that budget—it’s all about what works best for your setup.
4. Is adding telehealth to a health plan really worth it?
100%. Telehealth is a total game-changer—especially for small teams. Employees can see a doctor without taking time off or sitting in a waiting room for two hours with bad Wi-Fi and outdated magazines. It’s quicker, cheaper, and way more convenient. Plus, virtual visits often cost way less than in-person ones. Offering telehealth shows your team you’re modern, flexible, and not stuck in 1995.
5. Do wellness programs really help lower insurance costs?
You bet they do. Stuff like gym reimbursements, step-tracking challenges, smoking cessation programs, or even mental health check-ins can lead to healthier employees—and fewer expensive claims. Companies that invest in wellness typically get a return of about $3 for every $1 spent. So yeah, it’s not just fluff—it’s smart business. Plus, it makes your workplace a lot more fun and proactive.
6. What’s a cost-sharing strategy, and how does it help?
Cost-sharing is just a fancy way of saying, “Let’s split the bill.” A common setup is offering a high-deductible plan (lower monthly premiums) and giving your team the option to put money into an HSA. You save on the premium side, they get a tax-free bucket of cash for medical stuff, and everyone feels more in control of their healthcare spend. It’s basically a financial tag team.
7. Can small businesses team up to get better insurance rates?
Heck yes. Small businesses can totally join forces—like a health insurance Avengers. You can form a group health plan, join a captives plan, or tap into a self-insured group. When you pool together, insurers see you as a bigger, less risky group, and that means better rates and coverage options. It’s a clever workaround if you’re not big enough to negotiate solid rates solo.
8. Does educating employees on their benefits actually help cut costs?
Absolutely. When employees get how their insurance works, they make smarter (and cheaper) decisions—like choosing in-network doctors, asking for generic meds, and using telemedicine instead of heading to the ER for a headache. This keeps your claims lower, which keeps your premiums from spiraling out of control. A quick lunch-n-learn or a how-to email can seriously save you money in the long run.
9. Are HSAs worth offering as part of a small business health plan?
Totally worth it. Health Savings Accounts (HSAs) are like a financial Swiss Army knife. Your employees can put in tax-free money for qualified medical expenses, and they keep the cash if they don’t use it—it’s theirs forever. For you? You get to offer a high-deductible plan with lower premiums, which helps your bottom line. Everybody wins.
10. Why should a small business offer more than one health insurance option?
Because not all employees are living the same life. One person might be young and healthy and just want something basic. Another might have a family and need robust coverage. Offering multiple plans lets folks pick what works best for them, and it helps you control costs by not forcing everyone into the same (expensive) plan. Plus, giving people choices? That’s just good leadership.
