How to Design Cost-Effective Health Insurance Plans for Growing Businesses

Health insurance is one of the most requested benefits by employees. For small and growing businesses, offering health insurance can make the difference between attracting skilled workers and losing them to larger employers.

Health benefits also support your team’s well-being and reduce absences due to untreated medical problems. At the same time, providing health insurance is often one of the largest expenses for a business. This means every choice—plan type, coverage level, cost-sharing—must be carefully thought through.

In this article, you’ll learn exactly how to design a health insurance package that fits your business stage, supports your team, and keeps costs manageable.

The Value of Offering Health Insurance

Providing health insurance brings several important advantages to small businesses:

• Helps you hire and keep skilled employees
• Encourages workers to stay healthy and seek care early
• Reduces turnover, which lowers hiring and training costs
• Can qualify you for tax savings if your business meets certain rules
• May help you avoid penalties if you have 50 or more full-time employees

Even if you’re a team of 10 or 20 people, the right health benefits can help build a stable, productive team.

Common Types of Health Insurance Plans for Small Businesses

Understanding how different health insurance plans work will help you choose the best fit for your team and your budget.

Health Maintenance Organization (HMO)

HMOs require employees to choose a primary care doctor who manages their care. They usually need a referral to see a specialist.

• Only in-network providers are covered, except during emergencies
• Lower monthly costs and copays
• Less flexibility in choosing doctors
• Good choice for businesses looking to control costs

Preferred Provider Organization (PPO)

PPOs allow employees to see any doctor without a referral. These plans include both in-network and out-of-network options.

• More flexibility in choosing providers
• Higher monthly premiums and out-of-pocket costs
• Employees can see specialists without getting approval
• Useful for teams that want broader provider access

Exclusive Provider Organization (EPO)

EPOs are a middle-ground option. Employees do not need referrals to see specialists, but they must stay within the network.

• No coverage for out-of-network care unless it’s an emergency
• Lower cost than PPOs but with fewer choices
• No primary care doctor needed
• Suitable for companies seeking cost savings without needing referrals

Point of Service (POS)

POS plans combine features of HMOs and PPOs. Employees choose a primary care doctor and need referrals but can go out of network for care at a higher cost.

• Offers some provider flexibility
• Premiums and copays are in the mid-range
• Balances cost control with expanded access

High-Deductible Health Plan (HDHP) with HSA

These plans come with a higher deductible and lower monthly premium. They are often paired with a Health Savings Account (HSA).

• Employees pay more out of pocket before coverage starts
• HSAs allow pre-tax savings for medical expenses
• Lower premiums are good for healthy, low-use employees
• Can be cost-effective for employers

What Makes Up a Health Insurance Plan

Every plan includes several key parts that affect both employee satisfaction and business costs.

Networks

Insurance companies work with specific doctors and hospitals. In-network care is usually cheaper for both the company and the employee.

• In-network: lower cost and more predictable billing
• Out-of-network: more expensive and often not covered at all
• Important to check whether providers your employees use are included

Premiums

This is the amount paid each month to keep the insurance active.

• Employers typically pay between 50 to 80 percent of the premium
• Employees pay the rest through payroll deductions
• Premium cost varies by plan type, employee age, and location

Deductibles

The deductible is how much an employee must pay before the insurance starts covering care.

• Plans with lower deductibles usually have higher monthly premiums
• High-deductible plans shift more cost to the employee but save on monthly fees

Copays and Coinsurance

• Copays are flat fees for services like office visits or prescriptions
• Coinsurance is a percentage of the cost paid by the employee after the deductible

Out-of-Pocket Maximum

This is the most an employee will have to spend in a year for covered services. After that, insurance pays 100 percent of approved costs.

How Employers Can Manage Health Insurance Costs

Even small changes in plan design can affect overall costs. Employers have several options to manage health insurance spending while offering strong benefits.

Choose the Right Mix of Plans

Offering just one plan may not meet everyone’s needs. Many businesses provide two or three options, such as:

• A low-premium HDHP with an HSA
• A mid-level HMO
• A higher-premium PPO with broad access

This allows employees to pick based on what matters most to them.

Decide on Your Premium Contribution

Most employers pay a set percentage of the monthly premium, with employees covering the rest.

• Common splits are 70/30 or 80/20 for individual coverage
• You can adjust your contribution for family coverage
• Some businesses cover more to stand out to job seekers

Use HSAs and FSAs

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) allow employees to save money before taxes for medical expenses.

• HSAs are only for employees enrolled in HDHPs and can carry over year to year
• FSAs are available with most plans but often expire annually
• Employers can also add funds to these accounts to support employee health costs

Offering Dental, Vision, and Other Benefits

Adding dental, vision, and other coverage types can make your benefits package much more attractive without large added costs.

Dental Insurance

• Covers cleanings, x-rays, fillings, and other dental care
• Often includes preventive care at 100 percent
• Plans may include orthodontics at an extra cost
• Costs are usually low for both the employer and the employee

Vision Insurance

• Covers annual eye exams, glasses, and contact lenses
• Helps employees with vision needs and long-term eye health
• Typically inexpensive to offer

Life and Disability Insurance

• Life insurance provides financial help to employees’ families in case of death
• Disability insurance replaces a portion of income during illness or injury
• Short-term and long-term options are available
• These benefits help provide security and peace of mind

The Role of a Health Insurance Broker

A health insurance broker helps you shop for and manage your health benefits. They can save you time and prevent costly mistakes.

What a Broker Can Do

• Compare options from multiple insurance companies
• Help you choose plans that fit your team’s needs and your budget
• Explain coverage details in plain language
• Support compliance with laws like the Affordable Care Act
• Guide you during renewals and open enrollment

How to Choose the Right Broker

• Look for someone who specializes in small business health plans
• Ask for references from other business owners
• Choose a broker who offers hands-on support, not just quotes

Legal Considerations and Compliance

If you have 50 or more full-time employees, you are required by law to offer health insurance that meets specific coverage and affordability standards under the Affordable Care Act (ACA).

Even smaller businesses have legal rules to follow. These include:

• Offering COBRA continuation coverage if required
• Following state laws on insurance access and transparency
• Providing proper notices and plan documents to employees

It’s smart to review your plan with an HR consultant or legal advisor to make sure you’re in full compliance.

Step-by-Step: How to Build a Health Insurance Package

1. Survey your employees to understand their needs
2. Set a budget based on your financial goals
3. Choose plan types that match employee needs and cost levels
4. Decide how much of the premium you’ll pay
5. Offer HSAs or FSAs if available
6. Consider adding dental, vision, or life insurance
7. Work with a broker to compare plans and handle paperwork
8. Communicate clearly during enrollment
9. Review your package each year and adjust if needed

Conclusion: A Smarter Way to Offer Health Benefits

Building a health insurance package for your small or growing business doesn’t need to be overwhelming. With the right plan mix, cost-sharing approach, and support from a broker, you can offer strong benefits that attract and retain employees while staying within your budget.

Think of health insurance as an investment in your team. When you offer plans that meet their needs, you build a workplace that people want to stay in—and that helps your business grow.