Updated on June 4, 2026

It will come as no surprise to anyone who deals with healthcare insurance expenses that those costs are going up. Even in the latest inflationary environment, the rise in the cost of healthcare coverage outpaced virtually every metric, including core inflation and wage growth. Prescription drug costs alone are responsible for a massive increase being felt by employers.

For those companies who are required to provide healthcare coverage for their employees, these increases are a particularly severe blow. Not only do they hit the bottom line, but remedies that reduce benefits or increase employee contributions run the risk of straining employee relations.

For small and medium-sized businesses (SMBs) competing for top talent, reducing healthcare costs becomes priority number 1.

But there are reasons to be hopeful! Market forces are driving innovative approaches designed specifically to address the needs of SMBs.  

What are the Challenges Employers Face When Offering Employee Health Benefits?

As a leading national PEO, the struggle of finding the right benefits for employees that are also affordable is one we’re very familiar with.

Rising costs in both health insurance and healthcare at large

First, it’s important to understand the differences between costs. Both healthcare costs and healthcare insurance costs are rising. In the US, it’s easy to conflate the two. However, healthcare insurance costs outpace the rising healthcare costs — for reasons too numerous and too complex for us to unpack in this blog.

But with a growing number of employees (and business owners alike) sometimes struggling to pay copays even with insurance, everyone is feeling the squeeze and paying the price.

But let’s take a historical look: healthcare costs are consistently one of the single greatest expenses in any family’s budget. That’s why employer-sponsored healthcare coverage is so critical to those families. This, in turn, puts additional pressure on employers to provide competitive benefits to retain the talent they need.

Employers facing external circumstances they cannot change

Employers have very few levers to pull to stabilize – much less bring down – healthcare and prescription drug costs on their own. They can shift deductibles or coverage exclusions and limitations. But these moves often just complicate the plan selection process and don’t appreciably control the total cost but only place more of the burden on the employees.

Shrinking options for employers (and thus employees)

In many ways, even these options are shrinking as the marketplace of carriers consolidates. And, while the range of specialty medicines expands, the associated costs of prescriptions drive up the overall costs of coverage. As a result, healthcare benefit costs tend to be the largest expense for employers, sometimes even more than the cost of goods sold.

Employee benefits remain one of the top expenses for businesses today. Because so many of these challenges are constants in the market, the solutions to address them often remain the same. 

How can Employers Reduce Healthcare Insurance Costs?

For many business owners, reducing healthcare costs has become a constant challenge. Premiums continue to rise, plan options get more complex, and balancing affordability with quality benefits can feel overwhelming.

The good news? There are proven, practical ways to take control of your healthcare spend without sacrificing the coverage your employees depend on.

Instead of relying on the same plans year after year, successful businesses:

• Regularly evaluate new options
• Explore alternative care models
• Focus on long-term cost drivers, not just premiums

Compare Multiple Plans and Explore Alternative Coverage Models

One of the simplest ways to start reducing healthcare costs is to broaden your options.

Many business owners stick with the same insurance carrier out of convenience. But pricing and plan structures vary widely, and shopping multiple carriers can often uncover more cost-effective solutions.

In addition to traditional plans, consider:

• Direct-to-provider or direct-to-employer models
• Level-funded or self-funded plans (when appropriate)
• Hybrid options that combine traditional insurance with alternative care models

These approaches can:

• Reduce markup from intermediaries.
• Improve pricing transparency.
• Offer more predictable cost structures over time.

While some of these models require more involvement, they can deliver meaningful savings. This is especially powerful for growing businesses looking to better control costs.

Invest in Preventative Care to Lower Long-Term Costs

If your goal is truly reducing healthcare costs, it’s critical to look beyond premiums and focus on total healthcare spend.

Preventative care and wellness programs are one of the most effective ways to do this.

Encouraging employees to engage in:

• Annual check-ups and screenings
• Chronic condition management programs
• Wellness initiatives like nutrition or stress management

Can lead to:

• Fewer high-cost claims
• Earlier detection of health issues
• Lower long-term insurance costs

For SMBs (and even larger businesses/enterprise settings), even modest improvements in employee health can have a significant impact on overall healthcare expenses.

Help Employees Make Smarter Healthcare Decisions

A major—but often overlooked—factor in reducing healthcare costs is employee behavior.

Without guidance, employees may:

• Choose higher-cost providers unnecessarily
• Use urgent care or ER services when lower-cost options are available
• Miss opportunities for preventative care

Business owners can reduce these inefficiencies by helping employees access tools like Telehealth services for routine needs. Certain tools like Vensure’s Pathway to Care and Wellness service help employees quickly identify in-network providers, even sorting them by cost. When employees make better decisions, costs decrease across the board.

Improve Visibility and Control Over Healthcare Spending

You can’t reduce what you can’t see.

That sounds simple, but many SMB owners lack clear insight into what’s actually driving their healthcare expenses. By improving visibility into claims, utilization, and trends, you can make more informed decisions about your benefits strategy.

Key steps include:

• Reviewing plan performance annually
• Identifying high-cost drivers
• Adjusting offerings based on employee needs and usage

This data-driven approach is essential for sustainable healthcare cost reduction.

Take a Long-Term Approach to Reducing Healthcare Costs

There’s no single solution to rising healthcare expenses. The most effective strategy combines multiple approaches into a cohesive plan.

For business owners, that means:

• Continuously evaluating plan options
• Leveraging alternative coverage models where appropriate
• Promoting employee wellness and engagement
• Supporting smarter healthcare decisions

By taking a proactive, informed approach, you can successfully reduce healthcare costs, protect your bottom line, and continue offering valuable benefits that attract and retain employees.

VensureHR’s Solution: More Than Financial Band-Aids

As one of America’s largest PEOs, VensureHR clients include SMBs in industries of all kinds with a variety of risk profiles.

While the healthcare insurance premium problem feels the same to most such businesses, potential solutions can vary considerably. VensureHR also works with virtually every major carrier. Each offers variations on a few core policy strategies. This highlights the gaps in devising plans for those businesses positioned to address their premium costs more directly.

Category	Master Plan (PEO Risk Pool)	Fully Insured Plan (PEO-Negotiated)	Max Funded Benefits (RBP Model)
How It Works	Employees join VensureHR’s large risk pool (2.26M worksite employees), lowering overall risk and premiums	Traditional insurance plan negotiated by VensureHR using its scale and carrier relationships	Self-insured-style plan using reference-based pricing (cost-plus model vs. carrier pricing)
Best For	SMBs that want predictable costs and simplicity	SMBs with strong risk profiles or favorable claims history	SMBs (typically 25–150+ employees) seeking maximum cost control
Cost Savings Potential	Moderate savings through risk pooling	Potentially high savings depending on risk profile	Highest potential savings
Administrative Burden	Very low (VensureHR manages payroll, benefits, claims)	Low (PEO manages much of the process)	Moderate internally, but largely handled by VensureHR
Key Advantages	– Lower premiums via shared risk – Simplified HR & benefits administration – Reduced internal workload	– Better rates through PEO leverage – Predictable monthly premiums – Familiar structure	– Significantly lower total costs – $0 deductibles and $0 copays possible – Lower Rx and service costs – Greater transparency
Considerations	– Less plan customization – Savings tied to pool performance	– Market-driven premium increases – Less flexibility than self-funded models	– Requires stop-loss protections – May feel unfamiliar to employees – Needs cost oversight (managed by VensureHR)

About the Comparison Chart

One solution is to obtain coverage under a Master Plan. VensureHR administers payroll and benefits for 2.26M worksite employees. When anyone SMB places their employees into such a massive risk pool, their resulting risk profile can go down, and the premiums come down with it. In this scenario, VensureHR also handles the benefits election and claims management processes, further trimming an SMB’s administrative overhead.

However, some SMBs are in a position to cut premium expenses even further. For them, a Fully Insured plan can yield even greater savings, depending on the risk profile of their business, their employee pool, and their claims history. Such a plan is a traditional insurance program. But, because of their scale and expertise, PEOs have additional negotiating leverage when they manage such a program on their client’s behalf. This is especially true for VensureHR, given its size and reach.

Potentially the most cost-effective solution is VensureHR’s Max Funded Benefits program, a variation on a traditional self-insured model. It builds its cost structure on reference-based pricing (RBP). This is more of a cost-plus model than the traditional top-down model carriers use to discount off a maximum allowable fee.

As a result, the total costs tend to be considerably lower than traditional carriers. This model also allows for some highly desirable options like $0 deductibles and $0 copays which can be extremely attractive to employees. These savings may also appear in prescription drug costs and other medical services.

This can be an ideal solution for companies with 25-150+ employees. A health plan must have critical stop gaps and measures to identify and mitigate medical and drug cost exposure. Most small businesses don’t hire a full-time HR professional until around 100 employees and are not looking into the deep layers of medical and prescription drug spend. In the case of Max Funded, VensureHR handles all necessary administration.

Necessity Drives Innovation

The healthcare coverage pressures that employers are feeling will only continue to grow. The good news is that such pressure forces all participants in the healthcare ecosystem to look for better ways to fund and deliver the necessary services.

This is of special value to businesses of all sizes who rely on top talent to keep their companies competitive in their respective industries. By offering attractive benefits packages, they can attract and retain the talent they need. But that only works if they can afford plans that work for them. This is the inspiration behind VensureHR’s innovation in devising the insurance programs SMBs need.

If this looks like a potential solution for your company, let’s talk. Schedule a call with a VensureHR benefits representative.