3 challenges small businesses face when selecting benefits
Though each small business is unique, they face similar challenges to selecting benefits for their workforces.
Small businesses are the backbone of the U.S. economy. There are more than 33M firms nationwide — generating 43.5% of GDP and employing nearly half of the U.S. workforce.1 That makes their success essential, not just for local communities but for the nation overall.
Yet many small business owners face mounting responsibilities — from managing day-to-day operations to recruiting talent — all while navigating the rising cost and complexity of health benefits. With limited time and resources, choosing the right approach to benefits can feel overwhelming.
Health care coverage remains one of the most important benefits to employees. In fact, 88% of employers say health care–related benefits are “very” or “extremely important” — more than any other benefit category.2 To stay competitive, small employers often need support balancing affordability, flexibility and employee satisfaction. Brokers and carriers can play a key role in providing that support.
Choosing the most affordable option
Selecting the most affordable health plan is critical, especially as premiums continue to rise. In 2024, the average annual premium was $8,951 for single coverage and $25,572 for family coverage.3 On average, workers contributed $6,296 toward family premiums.3 At the same time, 63% of covered workers were in self-funded plans — a sign that many employers are seeking alternatives to traditional fully insured models.3
The options:
- Fully insured: Fixed monthly premiums; insurer takes on the risk
- Self-funded: Employer pays claims directly; potential for savings, but also more risk
- Level funded: Hybrid model that combines predictable monthly costs with the potential for a surplus refund* if claims are lower than expected
UnitedHealthcare offers all 3 funding approaches — and small businesses rely on all 3 — though fully insured and level funded plans are typically most popular among smaller group sizes. Level funded plans may be a particularly good fit for small businesses ready to switch from a fully insured plan since they provide predictable costs and may return unused funds if claims run low. Brokers can help employers evaluate which funding approach best fits their budget and risk profile.
Case study: Rubber & Accessories
When a Florida-based company faced a 14% premium increase in 2020, it switched to a UnitedHealthcare Level Funded plan. The result: a 20% rate reduction, and a 16% average annual surplus refund* given their claims have consistently come in lower than projected. This has allowed the business to continue funding 70% of its employees’ health care contributions — while gaining stability and predictability in its budget.
Assessing which health plan may be best
Even after choosing a funding type, employers must decide which plan design works best for their team. With limited time and resources, small business owners can feel overwhelmed by the options.
The options:
- High deductible health plans (HDHPs): Lower monthly costs; can be paired with health savings accounts (HSAs) or health reimbursement accounts (HRAs) to help employees manage expenses
- Preferred Provider Organizations (PPOs) and Health Maintenance Organizations (HMOs): Broader coverage and more predictable costs
- Hybrid strategies: Combining HDHPs with traditional plans to meet diverse employee needs
UnitedHealthcare helps employers simplify plan selection by offering a broad portfolio of options and by equipping brokers with tools to guide small business owners through the decision-making process. For instance, copay-only plan designs like the Surest® health plan from UnitedHealthcare may help simplify the health care experience for employees by removing deductibles and coinsurance. Employees can see upfront copays, not estimates, through an intuitive digital experience, enabling employees to make more informed decisions about providers and sites of care, potentially leading to better health outcomes and reduced out-of-pocket expenses.
Discover plan options recommended for small businesses
Answer a few quick questions to get a list of recommended plans that may be the right fit for small businesses and their employees. This can include custom priced plans, as well as traditionally priced plans.
Keeping employees engaged with their health
Health benefits only deliver value if employees understand and use them. Engagement affects recruitment, retention, productivity and long-term cost control — making it just as important as funding and plan design.
Even with the best intentions, small businesses often struggle to manage engagement for various reasons:
- 98% of small employers offering health insurance worry costs will be unsustainable in the next 5–10 years4
- One-third of small businesses say figuring out which benefits to offer is challenging, and another third wish they had more external help5
- Barriers include limited budgets (40%), rising costs (37%) and lack of resources (19%)5
To boost engagement, employers may want to:
- Promote virtual visits for anytime, anywhere access to care
- Offer and encourage participation in wellness programs that support healthier lifestyles and may lower long-term costs
- Provide clear, consistent employee communication around benefits
Small business employers who help educate their employees about their health plan and benefits can help drive engagement, which may result in better outcomes and lower costs. UnitedHealthcare supports small businesses with wellness programs, digital engagement tools and the Employee Engagement Planner®, which auto-populates a calendar with materials and reminders that can be shared with employees — from flu shot campaigns to preventive care prompts. This reduces the administrative burden for small business owners while helping employees make the most of their coverage. Brokers can also work with employers to ensure these resources are fully leveraged.
Supporting small business success
The challenges small businesses face extend beyond health benefits. Economic pressures, workforce shortages and shifting employee expectations create added complexity. For example, 41% of small business owners report trouble filling job vacancies.1 In this environment, health benefits are more than a cost — they’re a competitive differentiator.
Employers that provide flexible, well-communicated benefits may be better positioned to attract and retain talent. Predictable funding models can also help protect margins during periods of inflation or interest rate fluctuation.
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