Level-funded plans and HSAs help small businesses manage healthcare expenses – Gene Marks

Employer health coverage costs are on the rise, placing a significant burden on small businesses. A potential solution gaining traction is the level-funded health plan. On today’s episode of The Small Business Show, Gene Marks, columnist, best-selling author, keynote speaker, CPA, and small business expert, joins us to demystify these plans and determine if they’re a suitable option for your business.

According to Marks, small business healthcare costs have surged by roughly 9% annually from 2024 through 2026, putting pressure on owners to find ways to attract and retain employees while managing expenses. Meanwhile, level-funded health plans and Health Savings Accounts (HSAs) are emerging as practical solutions for mitigating costs. 

While many small businesses either provide limited health coverage or none at all, this makes it difficult for them to remain competitive in both hiring and retaining employees. HSAs allow employees to set aside pre-tax dollars for medical expenses, which roll over annually, and offer significant tax advantages. Level-funded plans combine self-insurance for routine healthcare costs with traditional insurance for catastrophic coverage, lowering premiums and reducing unnecessary expenses for small companies.

"If you’re not offering a healthcare option, you need to be... It’s the number one most requested benefit."

These plans are particularly advantageous for businesses with younger, healthier employee populations, as the lower utilization of healthcare services can translate into significant savings. Contributing to employee health plans instead of salary increases can also provide tax benefits for employers while boosting net compensation for staff.

Implementing these strategies requires consultation with knowledgeable accountants and insurance brokers to ensure optimal plan selection and avoid conflicts of interest. Additional options, such as Health Reimbursement Arrangements (HRAs), can further help businesses control costs while offering competitive benefits.

Ultimately, Marks encourages small business owners to proactively evaluate healthcare options, as failure to provide adequate coverage risks losing employees and facing escalating expenses in the years ahead.