Right-Sizing the Health Benefits Piece

PUBLISHED MAY 2025

Few legislative actions have transformed the American health insurance market as dramatically as the Affordable Care Act. Since its passage in 2010, the industry has experienced unprecedented disruption. Premiums, deductibles, and out-of-pocket costs have steadily climbed, creating a difficult environment for both consumers and employers. 

For industry leaders and business owners alike, one question has persisted: How do you provide quality health coverage in a system where costs are rising and change seemingly never favors the consumer?

I sure am glad you asked. At the heart of the ACA is a mandate to cover all pre-existing conditions—no exceptions. From a consumer’s perspective, this is music to our ears. Yet for small business owners trying to offer coverage to their employees, it has introduced new financial pressures. Insurers must now account for higher expected usage and risk, resulting in increased premiums (and deductibles, copays, etc.) across the board. This cost is often passed down to businesses, particularly small employers who lack the negotiating power of larger corporations.

Small businesses form the backbone of the American economy. Yet, when it comes to health-care policy passed in Washington, they are steadily overlooked. Over the past 15 years, small business owners have faced compounding challenges—not only in health insurance but in every corner of their operations. Rising prices on everything from fuel to food have forced many to make hard choices. When it comes to employee benefits, some businesses have had to say, “Not this year,” or worse, “Not anymore.” Not exactly the end-of-year Christmas party announcement you want to make.

So what options are available in today’s market? Two emerging solutions have gained traction for their flexibility and cost-control potential: partially self-funded health plans and ICHRA plans, shorthand for Individual Coverage Health Reimbursement Arrangement.

Partially self-funded health plans are employer-sponsored and medically underwritten. Employees complete health questionnaires, allowing the insurer to assess the group’s overall risk profile. If the work force is relatively healthy, premiums can be significantly lower than traditional group plans. 

These plans also include a claims fund, and if the group has a low-claims year, the employer may receive a surplus refund. These refunds can be reinvested to further reduce costs in future years or used for business needs as they arise. Does this approach introduce some risk? Yes—if claims are high, the employer bears a portion of that cost. But it also aligns incentives: Healthy behavior is rewarded, and employers gain more control over long-term health-care spending.

On the other hand, ICHRA is a newer, more customizable solution that allows employers to reimburse employees for individually purchased health insurance. ICHRA is all the talk at the friendly insurance water cooler. Instead of offering a traditional group plan, the business sets a defined monthly allowance that will be reimbursed to the employee pre-tax. Employees then use those funds to purchase any individual ACA-compliant plan that best meets their needs. 

The “individual” piece here is a key factor—not having to group all risk together is a surefire way to keep cost down. ICHRA offers flexibility for both employers and employees. Businesses can control their budget while avoiding the administrative burdens of managing a group plan. Employees gain access to a broader range of plan options, often with better coverage than their small-group alternatives.

Both of these models represent a shift in how small businesses can approach health benefits. Rather than being trapped in a one-size-fits-all solution, owners now have tools to build plans that align with their team’s needs and their company’s financial reality. Is either idea perfect? Of course not. But no perfect plan exists in today’s world of American health care. The goal for a small business owner shouldn’t be perfection—but instead, containment.

The best way to contain the chaos? Stay informed. Whether you’re a business with two employees or 200, there are more options today than ever before—but only for those willing to explore them. Work with a broker who understands both the traditional models and the new frontiers like ICHRA and level-funding. 

Your people are your business. Protecting them while protecting your bottom line is possible—it just requires a different playbook than the one we’ve used for the past 15 years.