Healthcare Benefits on Life Support: How Founders Can Navigate Rising Costs

For founders, benefits season brings a stark reality: healthcare costs and insurance premiums are projected to climb 8–11% or more in 2027. As open enrollment approaches, leaders must protect employees while keeping plans sustainable. Three forces are driving the increase:

Medical and hospital inflation

Providers are charging more as labor, supply, technology, and facility costs rise. Clinical staffing shortages add recruiting, retention, and contract-labor expenses, which flow into negotiated rates, claims, and premiums.

Specialty and prescription drugs

Use of costly specialty medications is growing, along with demand for GLP-1 drugs for diabetes and weight management. Their price and long-term use create recurring plan expenses, prompting employers to revisit formularies, authorization rules, eligibility, and cost-sharing while preserving appropriate access.

Federal policy and subsidies

Changes to Affordable Care Act premium assistance can alter individual-market enrollment and pricing. If healthier consumers leave, the remaining risk pool may become costlier. Although employer plans are separate, wider market shifts can affect employee choices, carrier strategy, and the benefits environment.

Founders cannot control these forces, but they can respond strategically through plan design, wellness, and a sharper view of total rewards. Seven steps can turn a difficult renewal into a more sustainable benefits strategy.

1. Work with a strategic benefits broker

Choose a partner who benchmarks your plan, models contribution and design scenarios, evaluates affordable wellness options, negotiates effectively, and explains trade-offs clearly. This is especially valuable for employers with fewer than 100 employees and limited purchasing leverage.

2. Add an HDHP paired with an HSA

A high-deductible health plan (HDHP) can lower premiums, while a health savings account (HSA) gives eligible employees a tax-advantaged way to cover qualified expenses. Employers can favor the HDHP in their contributions and seed HSAs, but must explain deductibles, out-of-pocket exposure, and account use clearly.

I worked with a tech company whose employees were primarily under 30 and had low healthcare utilization. Shifting employer contributions toward an HDHP made sense based on the workforce's needs. Employees benefited from lower monthly premiums, while the company reduced its healthcare contribution costs.

3. Evaluate self-funding or level funding

These models can improve claims visibility, plan flexibility, and savings potential. Level funding offers steadier monthly payments; self-funding places more risk on the employer. Review claims history, cash flow, stop-loss coverage, administration, contract terms, and high-cost claimant exposure with an experienced advisor.

4. Consider a defined benefits stipend where appropriate

A fixed contribution toward eligible coverage can make costs predictable and expand employee choice. Structure it carefully by reviewing tax treatment, nondiscrimination rules, federal and state requirements, access to affordable coverage, and competitiveness for recruiting and retention.

5. Review the pharmacy benefit separately

Carving pharmacy coverage out from the medical carrier may improve visibility into pricing, rebates, fees, and formularies. Compare pass-through arrangements, guarantees, audit rights, specialty-pharmacy requirements, member disruption, and total net cost, not merely headline discounts.

6. Build a focused, measurable wellness strategy

Use workforce and claims data to target needs such as preventive care, chronic conditions, mental health, tobacco cessation, musculoskeletal care, or provider navigation. Establish participation, utilization, health, and cost measures, protect privacy, and assess results over time. Treat wellness as a long-term investment, not a quick fix.

I've implemented wellness programs for several creative studio clients focused on stress management and mental health support. These included employee assistance programs (EAPs), mindfulness apps, and workshops led by trained professionals to help employees manage stress, anxiety, and depression.

7. Rebalance total rewards around what employees value most

Review healthcare, retirement, leave, flexibility, and discretionary perks as one portfolio. Employee feedback and utilization data may show that office entertainment, concierge services, sign-on bonuses, or student-loan assistance deliver less value than stronger healthcare contributions. Redirect spending with minimal disruption.

During a benefits review for a nonprofit client, I identified an opportunity to free up $30,000 by reducing the employer's 401(k) matching contribution. This created room in the budget to address rising healthcare premiums.

The best response will combine informed purchasing, thoughtful plan design, targeted controls, and clear communication.

Rising healthcare costs may be unavoidable, but an unsustainable renewal is not. Founders who plan early, test options with data, and communicate transparently can control costs without weakening the employee experience. The objective is a benefits program that remains affordable, competitive, and aligned with long-term growth.

Related articles by Tamara Morrison:

Unmuted: My Journey as an Introverted CEO and Founder

HR for Startups: 8 Priorities Every Founder Should Address From Day One