As the cost of health care continues to increase, we’ve seen a surge of interest in alternatives to traditional small group health insurance plans, like level-funded health insurance or HRAs, which can offer cost savings and flexibility for businesses that qualify.
The problem? We’ve found that many small business owners still don’t know that these options exist, how they work or what cost savings they might bring.
Exploring health plan alternatives: HRA and level-funded plans
In today’s complex and costly health insurance market, traditional group plans don’t always meet the needs of small businesses. Between participation requirements, rising premiums, and administrative overhead, it’s no surprise many employers are looking for new solutions.
Two of the most promising, but still underutilized, alternatives are:
Level-funded health insurance plans:
- What it is: An employer-sponsored health insurance option that blends the predictability of fully insured plans with the cost savings potential of self-insured plans.
- Why it works: Monthly premiums are fixed, but if claims are lower than expected, employers may get money back.
- Best for: Healthy employee populations and businesses with over 10 employees looking for lower premiums than fully insured options.
Heath reimbursements arrangements (HRAs):
- What it is: A tax-advantaged way for employers to reimburse employees for individual health insurance plans or qualified medical expenses. Employers typically offer this benefit through an Individual Coverage Health Reimbursement Arrangement (ICHRA) or Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
- Why it works: Employers control the budget, employees get more choice and portability.
- Best for: Employers who aren’t ready to offer a small group plan, remote or multi-state teams, businesses that don’t meet group plan participation thresholds, or those needing more cost control.
These aren’t fringe solutions. They’re quickly becoming go-to strategies for forward-looking small employers, but only if they know they exist and how to make the switch.
Why awareness is so low
Our research shows that 1 in 5 small business owners who work with accountants and business advisors don’t recognize the term ICHRA. It suggests a deeper issue: a lack of accessible, actionable education for employers trying to navigate their benefits options on their own.
Most business owners aren’t benefits experts—and they shouldn’t have to be. But when even the advisors they rely on don’t bring up these alternatives, opportunities get missed.
What brokers and advisors can do
Brokers, accountants, and benefits advisors are the trusted guides for small businesses navigating these decisions. You don’t need to recommend one model over another, but making sure clients know what’s out there is a critical first step.
Here’s how you can help:
- Bring level-funded and HRA plans into your standard benefits conversation.
- Explain in plain language what the trade-offs are vs. traditional group coverage.
- Identify customers where these alternatives might make the most sense (e.g., small distributed teams, businesses frustrated with rising premiums, or early-stage companies looking for budget control).
The bottom line: Small businesses deserve more choice
The future of small business health benefits is choice. But right now, too many employers don’t know they have any.
Whether it’s a level-funded plan, HRA or another creative model, the best solution is the one that fits their people, budget, and business model. But they can’t choose what they’ve never heard of, and that’s where brokers and advisors can make the biggest difference.
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