With the 2025 open enrollment season being upon us, small business owners and HR professionals are taking a close look at their health insurance plans. They’re asking important questions: What’s working? What’s missing? And most importantly, what can we afford to offer our employees next year?
Balancing benefits is tricky. Offer too few, and your employees may feel vulnerable and dissatisfied. Offer too many, and your budget could be strained under the weight. The challenge is to find the sweet spot—providing valuable coverage that fits your size and budget.
The landscape of small business health insurance is also evolving beyond just medical plans. Today’s employers need to consider a broader range of benefits to stay competitive and ensure employee well-being. In this blog, we’ll take a deep dive into what you can expect in the small business health insurance market for 2025.
Will Small Business Health Insurance Premiums Go Up In 2025?
It’s no secret that health insurance premiums tend to rise each year. In fact, according to Mercer’s National Survey of Employer-Sponsored Health Plans, smaller employers (those with 50 – 499 employees) are estimated to see premiums rise by 9% if they don’t take action to lower their premiums.
Small businesses may have to make difficult decisions about their benefits packages due to increasing costs. But why exactly are these premiums rising?
What’s Driving the Increase?
Several factors contribute to the rising cost of health insurance. Medical inflation, the cost of new treatments, and the increasing demand for comprehensive care all play a role.
Today’s employees value a comprehensive benefits package that addresses their overall well-being. This can include mental health benefits, work-life balance perks, comprehensive wellness programs, and financial planning benefits.
Additionally, there are a few trends specifically affecting the small business market:
- GLP-1 Weight Loss Drugs – You’ve likely heard of Ozempic by now, particularly with celebrities endorsing or creating their own versions of these supplements. These weight loss drugs are in high demand, and their inclusion in health plans could be playing a role in driving up costs.
- Individual Coverage Health Reimbursement Arrangements (ICHRAs) – ICHRAs are becoming a popular option for small businesses. These arrangements allow employers to offer pre-tax, fixed amounts that employees can use to purchase their own health insurance. This flexibility can be a win-win for both employers and employees, offering more control over coverage while keeping costs predictable.
- Flexible Savings Accounts (FSAs) and Emergency Savings Accounts (ESAs) – More employers are offering FSAs and ESAs as part of their benefits packages. These pre-tax accounts allow employees to set aside money for medical expenses or emergencies, giving them greater financial security and peace of mind.
Offering these comprehensive benefits can have a significant impact on your business and your workforce:
- Increased Financial Security for Employees – Employees feel more secure when they know they have access to a broad range of benefits, from mental health support to emergency savings.
- Improved Retention Rates – Inclusive benefits packages can boost employee satisfaction, which in turn reduces turnover. High retention rates mean lower recruitment and training costs for your small business.
- Staying Competitive – As more businesses adopt these benefits, it becomes essential to offer similar packages to stay competitive in the market. Employees today expect more than just basic medical coverage and providing comprehensive benefits can help you in the long run.
Potential Downsides
While the benefits of offering comprehensive coverage are clear, there are some potential challenges:
- Higher Costs – Expanded benefits often come with a higher price tag, which can strain small business budgets. It’s important to weigh the costs against the potential advantages, including employee retention and satisfaction.
- Administrative Complexity – Managing a variety of benefits can be time-consuming and complex. But there are tools designed to make managing benefits easier.
Stepping Into Open Enrollment
As we approach 2025, small business owners should take the time to evaluate their health insurance options carefully. The evolving landscape means that offering just medical coverage may no longer be enough. During this season of open enrollment, now is the time to assess your budget, consider employee needs, and explore options like wellness programs, ICHRAs, and FSAs.
Don’t rush your decision—finding the right balance will keep both your business and your employees thriving. If you need help discussing options or comparing plans, our health insurance brokers are available to assist you. Contact Health & Benefits Partners today to get started.
