Rising health insurance premiums have become one of the most pressing challenges facing many employers. For many business owners, it feels like every renewal season brings another round of increases that strain budgets and make it harder to offer competitive benefits. While these rising costs are frustrating, they do not mean you are out of options. With the right strategy, you can continue to provide meaningful coverage while gaining more control over your expenses.
One of the biggest issues with traditional group health plans is that the employer absorbs most of the financial risk. When premiums rise, your company is expected to either pay more or shift some of that cost onto employees. Neither option is ideal. Higher employer costs impact profitability, while higher employee contributions can lead to dissatisfaction and even turnover. This cycle repeats itself year after year, leaving business owners like you feeling stuck.
A Creative Solution: Defined Contribution Plans
That is why many employers are starting to rethink how they structure their health benefits by moving toward a defined contribution approach. Instead of selecting one or two group plans and committing to paying a percentage of whatever those plans cost, the employer sets a fixed dollar amount they will contribute toward each employee’s health coverage. That amount becomes predictable and controllable, even when premiums increase.
Once the contribution is defined, employees are given access to a wider range of plan options. They can choose from different carriers, network types, coverage levels, and price points based on what works best for their own needs and budgets. Some may prefer a lower premium plan with a higher deductible, while others might opt for richer coverage and pay a bit more out of pocket. The key is that the choice belongs to the employee.
This model creates a healthier dynamic when premiums rise. Instead of the employer scrambling to absorb higher costs, employees are empowered to review their options and make changes if needed. The company’s financial commitment remains stable, while employees retain flexibility. It also encourages more thoughtful decision-making, because people are more aware of how much their plan truly costs and how it fits into their overall financial picture.
From a business perspective, defined contribution strategies also make benefits more sustainable in the long run. They help level the playing field between small and large employers, allowing even smaller companies to offer a competitive menu of plans without being exposed to unlimited cost increases.
At Bay Area Health Insurance, we help companies design benefit strategies that balance affordability, flexibility, and employee satisfaction. Rising premiums do not have to dictate the future of your benefits program. By rethinking how contributions and plan choices are structured, you can build a smarter, more resilient approach that works for both your business and your employees. Give a call to learn more, and we’ll help you revamp your approach to employee health benefits.
