How I Helped a Business Owner Save Over $60,000 on Health Insurance Costs Without Cutting Employee Benefits
“Health insurance is killing us” - Business owner client
From looking at their renewal terms, their health insurance premiums were increasing by nearly 10% from the prior year.
Naturally, they wanted to know why this was happening - but more importantly, what can they do about it?
Provided this business owner has less than 50 employees - they’re not federally required to offer health insurance.
This is important because it opens the door for you to be able to compare individual healthcare exchange rates vs what you’re getting in your group health insurance.
Provided they had over 50 employees - we’d be more limited in our options.
When it comes to why the premiums increased in the first place, there’s not one single item, but rather a combination of a few things that cause premiums to increase, to name a few larger culprits:
General rising healthcare costs
Employee health (more claims = more expensive & vice versa)
Aging workforce (older = more expensive & vice versa)
Insurance pool size (smaller pool = higher volatility in premiums - ex: one person’s cancer/surgery bill can raise the cost of the pool for everyone)
We don’t control if someone has large medical bills, grows older, or general healthcare costs increase.
But we can control, introducing an employer incentive to encourage healthy habits amongst employees to reduce claims, create a plan design that reduces cost (ex: higher deductible, different health insurer, etc.), and shopping around our policy to ensure we’re getting a fair shake.
Additionally, you can also revisit your employer subsidy.
While there are mandates on the affordability of coverage to your employees which typically result in some form of employer subsidy, this also doesn’t mean that you need to cover 100% of the total premium cost.
A balanced approach of choosing how much premiums to subsidize can help manage total health insurance costs from the employer perspective.
That said, the other consideration is to educate employees on the premium tax credit.
This credit was introduced from the 2014 Affordable Care Act (also known as Obamacare) which was intended to make health insurance more affordable by providing a tax credit to subsidize the cost of insurance for those with lower incomes.
Lower income is defined as those who have adjusted gross income less than 400% of the federal poverty guidelines based on family size.
In 2025, 400% of the federal poverty line is noted below in yellow:
The healthcare exchange will ask you to estimate your income for the upcoming tax year then the credit is paid directly to the health insurance exchange insurer and you’re billed the difference in unsubsidized premium.
Then when you file your taxes you’ll fill out tax form 8962 which will rectify an over or underpayment from your initial estimated income when you filed for health insurance.
Lower actual income will result in a credit against your tax bill in that year.
Higher actual income will result in a repayment of the subsidized premium dollars.
This presents an opportunity to evaluate if employees can qualify for this government subsidy based on their income.
If so - this means the government can fund your employee’s subsidy instead of you as the employer.
Your employee can choose whether they want to apply for individual coverage or stay on the group health plan based on maximizing how much subsidy dollars they’re going to be getting.
Now let’s revisit the business owner’s scenario above:
Their monthly group health insurance premiums were around $8,400/mo.
Because we also are the advisor on their 401k plan, we have their employee census data giving us insight into incomes for the individuals in the 401k plan (this is needed for ERISA compliance testing).
Using this employee income data I worked with the business owner to get the family size information for each employee.
From here, I went on Delaware’s healthcare marketplace and started to evaluate what, if any, premium tax credit dollars would be eligible for these employees.
The results were surprising.
In this scenario, 100% of employees were eligible for some of their premium costs to be subsidized through the premium tax credit ranging from 60% - 100% of the total premium cost.
This meant that instead of the employer paying 100% of the $8,400/mo bill, they could recommend to their employees or reduce their employer subsidized premium amount to incentivize them to enroll in health insurance on the healthcare exchange.
In this example specifically, the premiums being subsidized would save this business owner $61,736 in premium costs annually.
Financially, this is a no-brainer.
Optically, you may run into issues with:
Employee resistance to change/optics of belief this means the employer is trying to shift financial burden onto them or reduce benefits
Potential loss of group discounts
Ongoing qualification for tax credit eligibility
But there are a couple things you can do if you find yourself in this scenario to both limit the negative optics and create an aligned incentive structure:
Cancel your group plan & instead offer a health reimbursement agreement or individual coverage health reimbursement arrangement
Provide a cash stipend for health insurance (if you really want to add value on this - give this benefit at the silver/gold level, so if an employee choose a bronze plan they actually make the difference and collect more income as a result of this change - win-win).
Communicate and educate employees on marketplace benefits (there’s greater plan selection and the potential for coverage at better rates).
You don’t have to feel stuck into doing something because that’s the way it’s always been done.
There can be, and usually is, a better way.
In some cases, it may just be your ticket to $60,000+ in annual savings.