Small businesses are cutting healthcare costs — without cutting benefits

• What's at Stake: Rising premiums threaten SMB financial stability and benefits competitiveness.
• Expert Quote: "Small firms will prioritize employee coverage despite tight margins," says Julia Miller, Gusto.
• Forward Look: Prepare for wider HRA, HSA adoption and insurer‑negotiation strategies among SMBs.
• Source: Bullets generated by AI with editorial review

Small businesses are shouldering disproportionately higher healthcare costs as prices continue to climb, but they're refusing to cut their workforce's access to benefits. 

The median health insurance premium for small businesses in America has risen 23% since 2022, according to recent data from payroll and HR management platform Gusto, outpacing inflation by 13% over that same period. Still, 22% of those small businesses are committed to providing their workforces with robust benefit packages. Providing adequate coverage with limited resources is difficult, but not impossible with the right strategy. 

 "Small businesses care deeply about their teams and they will try their best to continue to look out for their teams," says Julia Miller, Gusto's general manager and head of product and benefits. "They will do everything they can to continue to take care of them, [even without] an abundance of profits to support their workforces with."

Read more: Flat-fee 401(k)s help small businesses build competitive retirement packages

Some are switching to high-deductible plans with HSAs, which have lower premiums and let employees set aside tax-free money for medical bills. In fact, in 2020, about 33% of companies offered these plans, according to Gusto, compared to nearly 48% in 2025. This significant increase suggests that employers are looking for ways to give employees more control over their health costs. 

Small business owners are also exploring level-funded plans, paying a fixed monthly amount to cover expected medical costs. This can  help keep yearly price hikes smaller, Miller says. 

Health Reimbursement Accounts (HRAs), are another rapidly growing trend in the space, Miller says. HRAs allow employers to give workers tax-free money to buy their own health insurance or pay for medical expenses.

"There's a lot small businesses are already trying to do," she says. "More and more they're adopting these lower cost alternatives so that they can still provide access to health insurance, but in a way that is more conscious of their spending."

Read more: How offering seamless healthcare can lower costs

Leveraging tech and data for additional support

Unlike large organizations, small businesses don't have the luxury of spending too much time or resources on figuring out what plans do or don't work for their population. This is where partnering with a data-driven payroll and HR solution could help speed up that process. For example, Gusto uses technology such as algorithms, education tools and software to help customers sort through tens of thousands of health plan options more efficiently. Their system can compare plans across carriers, evaluate factors like premiums, deductibles and networks to recommend choices that can save money or reduce premium increases. The goal is to assist small businesses in navigating their chosen path more effectively so they can start seeing results as quickly as possible. 

"We can help small businesses negotiate with providers and bring some of these big company strategies and tools [they couldn't previously afford] to them," Miller says. "Advocating on behalf of small businesses is going to be increasingly more important moving forward." 

Until there is federal level change to address the rising costs of healthcare, small businesses will be faced with this challenging balancing act of providing care without sacrificing their own stability.  But it's not a challenge they have to face alone, Miller says. 

"Small businesses aren't going to stop caring about their employees," she says. "But the cost of insurance is going to continue to go up and it's just not sustainable, so we have to keep trying to help small businesses get ahead."