How to Navigate Healthcare as an Employer
If you're trying to figure out healthcare for your organization, you likely want to:
Understand what your options actually are before your broker sends a renewal.
Offer benefits that help you hire and keep people.
Stop watching premiums climb every year with no plan to slow them down.
Most employers approach this backwards. They start with a quote, compare premiums, and pick the lowest number they can afford. The plan type, the funding model, and everything sitting alongside it get decided by default.
In our experience, the premium is the last thing to decide, not the first. It's the output of four earlier decisions. Get those right and the premium follows. Skip them and you'll have the same conversation every renewal, with a bigger number each time.
This guide walks through the plan types, the funding structures, the four decisions, and the three mistakes we see most often.
BenefitSmart is a nonprofit that helps employers make sense of their benefits options. Book a free Benefits Review to walk through your renewal with someone who isn't selling you a plan.
1. Know the four plan types your employees will see
The plan type controls how employees get care: which doctors they can see, whether they need referrals, and what they pay at the door.
HMO. Lower premiums, a set network, and referrals to see specialists. Works well when employees live near the network.
PPO. Higher premiums, broad networks, and some out-of-network coverage. The most flexible and the most expensive.
EPO. A middle ground: no referrals, but no out-of-network coverage except emergencies.
HDHP. A high deductible in exchange for lower premiums, usually paired with a health savings account.
Pick the plan type for how your workforce actually uses care. A young, healthy, remote team and a 24/7 care facility with shift workers need very different things.
2. Understand how your plan is funded
Funding is how the money moves: who holds the risk when claims come in. Most employers never choose this directly, but it shapes everything else.
Fully insured. You pay a fixed premium; the carrier pays claims and keeps the risk. Predictable, but you never see your claims data and never keep the savings from a good year.
Level-funded. A fixed monthly payment that covers expected claims plus stop-loss protection. If claims come in low, you may get money back.
Self-funded. You pay claims directly, with stop-loss insurance capping your exposure. The most control and the most variability, usually for larger groups.
Individual coverage reimbursement (ICHRA or QSEHRA). You give employees a tax-free allowance to buy their own individual plans.
Funding determines whether lower claims ever turn into lower costs for you. On a fully insured plan, a healthy year mostly benefits the carrier.
3. Make the four decisions in order
Every employer makes these four decisions, whether they realize it or not. Made in order, each one narrows the next.
Funding model. How much risk can you carry? This sets which plan designs are even on the table.
Plan design. Plan types, deductibles, and networks, chosen for how your employees use care.
Contribution strategy. What share of premium you pay, by employee and by dependent tier. If you have 50 or more full-time employees, the ACA requires employee-only coverage to cost no more than 9.96% of household income in 2026.
What sits alongside the plan. Pretax accounts, supplemental coverage, and preventive care programs. These are often the cheapest way to improve benefits without touching the core plan.
The fourth decision is where most employers leave money on the table, because it's the one nobody puts in front of them at renewal.
4. Avoid the three most common mistakes
Mistake one: shopping on premium alone. A lower premium with a higher deductible often just moves cost onto employees. They avoid care, small problems get bigger, and those claims drive up the next renewal.
Mistake two: letting the renewal date run the process. Most employers start 30 to 60 days before renewal, when the only options left are "accept the increase" or "cut the plan." Starting four to six months out is what opens up funding changes, new carriers, and additions that take time to set up.
Mistake three: not using the tax code. Many small employers still deduct employee premiums after tax. A basic Section 125 premium-only plan moves those contributions pretax, lowering FICA for both you and your employees. It's cheap to set up and often pays for itself in the first month. (See how employers reduce payroll taxes.)
Getting healthcare right starts before the renewal
Most employers only look at benefits when a renewal forces them to. By then, the decisions that matter most are already made.
Employers who control their healthcare costs look at their options early, understand their funding model, and use the tools that sit alongside the core plan.
Start four to six months before renewal, not four weeks.
Ask for your claims data, even on a fully insured plan. You won't always get it, but asking tells you a lot.
Look at what can sit alongside your plan: pretax accounts, direct primary care, and supplemental benefits.
Not sure where to start? BenefitSmart offers a free Benefits Review for employers. We'll look at your current plan, your renewal timeline, and your headcount, and tell you which options are worth pursuing.
