Health insurance costs are soaring in Colorado –– which has business owners scrambling to find out how to lower health care costs for themselves and their employees alike.
According to Colorado Department of Insurance data, smaller companies––those with 99 employees or fewer, faced 2025 premium increases averaging about 7%.
That’s more than the 5.6% increase in premiums consumers in the individual health insurance market saw, and well above the 2.9% overall inflation rate.
Why Are Costs Rising?
First, general inflation rates have hit Coloradans hard. Rocky Mountain State residents have seen prices rise some 20% across the board since 2020.
Prescription drug prices continue to escalate – especially with new designer drugs and gene therapy prescriptions that can now cost six figures and up for a course of treatment.
And our hospitals around the state are facing labor cost increases as high as 16%. And that’s just for direct labor costs: Since 2019, Colorado hospitals have also seen their costs for contracted labor increase as much as 248%(!)
Colorado insurance carriers and insurers have been renegotiating long-term contracts to address the economic hangover from the Pandemic.
Health care cost inflation has been aggravated by reduced competition and even regional monopolies in some areas of Colorado.
Business owners are struggling to manage these rising expenses while staying competitive in an increasingly globalized marketplace.
But for Colorado businesses who have been grappling with these issues, we have good news: There are proven strategies to help you rein in escalating employee healthcare costs. And you can do it without sacrificing the quality of benefits your workers need and deserve.
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Strategy 1: Consider Health Sharing Plans
Health sharing plans are gaining popularity as a cost-effective alternative to traditional insurance.
Unlike insurance, health sharing involves members contributing to a community fund that pays for eligible medical expenses. Faith-based or community organizations typically administer these plans.
In Colorado, health sharing plans such as Medi-Share, netWell, and the all-in-one employee health benefits package 1Complete Solution each offer plans that are 30-50% cheaper for employers than traditional group health insurance premiums.
These plans work especially well for businesses with relatively younger, healthy, and active employees.
Pros of Health Sharing Plans
- Lower monthly contributions compared to insurance premiums.
- No narrow managed care networks for most plans. Your employees can use their benefits with any provider.
- Simplified administrative requirements.
- No fiduciary liability exposure.
- Flexibility to design benefits tailored to employees’ needs.
- Costs are tax-deductible to employers as a compensation expense.
Cons of Health Sharing Plans
- Health sharing plans impose waiting periods before they will share costs related to pre-existing conditions.
Tip: You can create a health reimbursement arrangement to help employees with pre-existing conditions use tax-free dollars to purchase an ACA-qualified health insurance policy that will provide the immediate coverage they need. Our Personal Benefits Managerscan help you set it up. - Health sharing plan costs are taxable as income to employees. Some employers “plus up” cash compensation to make up for the higher tax bill.
- Benefits for drug or alcohol rehab and prescription drugs may be limited.
- Some religious plans may restrict maternity benefits to married couples.
Health sharing works best for companies where employees are generally healthy and understand the trade-offs compared to traditional insurance.
Learn More: How Much Money Can Health Sharing Save?
Strategy 2: Offer High-Deductible Health Plans (HDHPs) with HSAs
Offer at least one high-deductible health plan (HDHP) among your group health insurance offerings –– and encourage employees to choose it.
Because HDHPs have higher deductibles than traditional group health plans, premiums are lower – by about 10 to 12 percent, on average, according to data from KFF.
Employers can save hundreds of dollars for every employee who switches to an HDHP. If the worker has a family, employers can save about twice that amount, assuming they pay for at least half of the workers’ group premiums.
HDHPs make your employees eligible to make tax-free contributions to health savings accounts, or HSAs. For 2025, the maximum allowable HSA contribution is $4,300 for individuals, and $8,550 for families.
Essentially, HSAs allow your employees to pay for future healthcare expenses with tax-free dollars. This can save them many thousands of dollars in taxes in the future. And there’s no “use-it-or-lose-it” rule like flexible spending accounts have. Assets in HSAs belong to the employee permanently, as his or her own asset.
The up-front, first-year tax savings for employees alone can be worth over a thousand dollars per year.
Money in the HSA grows tax-deferred as long as it’s in the account. Employees can also potentially invest their HSA money in assets other than cash, such as stocks, bonds, funds, and ETFs, in the hope of faster growth.
Any money remaining in the HSA at age 65 is available to supplement retirement income, penalty-free. Your employees will just pay income taxes on amounts withdrawn for other than qualified medical expenses.
And, of course, HSA assets can still be withdrawn to pay qualified medical expenses tax-free, even after age 65.
Learn More: What Are the HSA and HDHP Limits for 2025?
How Much Does HDHP Insurance Save?
| Plan Type | Average Single Coverage Premium | Average Family Coverage Premium |
|---|---|---|
| HDHP | $7,982 | $23,436 |
| Traditional | $8,951 | $25,572 |
| Average Savings | $969 | $2,136 |
Learn More: How Much Money Can HSAs Save?
How HSA Contributions Work
Employee Contributions
Employees can contribute to their own accounts pre-tax via payroll deduction. You can route them through a Section 125 cafeteria plan, and any contributions they make will also be free of payroll taxes. This saves employers money directly.
Employer Contributions
You can make contributions to HSAs on your employees’ behalf.
Your contributions are fully deductible to you, and if properly structured, non-taxable to your employees. That also means there’s no payroll tax. So it’s a good idea to encourage employees to contribute via salary reduction or make direct tax-free contributions yourself.
Contributions will be noted on your employees’ W-2 forms.
If you make HSA contributions on your employee’s behalf, the money vests to them immediately, and is available immediately to pay tax-free for medical or dental expenses. There’s no “use-it-or-lose-it” rule like flexible spending accounts have.
Consumer-Directed Healthcare
HDHP/HSA combinations are a form of consumer-directed health care.
This means that consumers have more power to make decisions regarding their health care, and are contributing more of their own money.
With money in their HSAs, employees don’t have to worry too much about higher deductibles. Any time they have a qualified medical or dental expense, they can tap their HSAs, tax-free.
Businesses benefit by reducing their healthcare spending while giving employees more control over their healthcare dollars.
Learn More: Is There a Way to Pair a Healthshare Plan with an HSA?
Strategy 3: Implement Employee Wellness Programs
Wellness programs are an investment that pays off by reducing healthcare utilization.
Since your group premiums are a function of the expected healthcare utilization of the group as a whole, improving the overall health of the risk pool leads to lower premiums.
These programs encourage healthy behaviors, which can lower the risk of chronic illnesses like diabetes, heart disease, and obesity.
It also leads to lower indirect costs, as well, such as absenteeism, presenteeism, and turnover.
Popular Wellness Initiatives in Colorado
Corporate wellness programs can take many forms. But here are ten of the most common and effective programs employers use that generate a solid return on investment.
- Health Risk Assessments (HRAs). Identifies employee health risks early, enabling targeted interventions that reduce long-term healthcare costs.
- Smoking Cessation Programs. Reduces smoking-related healthcare expenses and improves productivity, with long-term savings significantly outweighing program costs.
- Mental Health Support. Offers therapy, stress management, and mindfulness programs to address mental health issues, reducing absenteeism and boosting employee productivity.
- Telehealth Services. Provides affordable and accessible healthcare consultations, minimizing time away from work for medical appointments and lowering overall healthcare claims.
- Weight Management Programs. Helps employees manage their weight through structured coaching and incentives, reducing the prevalence of chronic conditions like diabetes and heart disease.
- Flexible Work Hours. Improves work-life balance, reducing stress-related health claims while increasing employee satisfaction and retention.
- Flu Vaccination Clinics. Prevents widespread illness and absenteeism during flu season, yielding immediate savings in lost productivity and healthcare costs.
- Incentivized Wellness Challenges. Engages employees in healthy habits with minimal investment, fostering a culture of wellness and reducing healthcare utilization over time.
- Chronic Disease Management Support. Offers targeted resources for managing diabetes, hypertension, and other chronic conditions, significantly lowering long-term medical costs.
- Nutrition Counseling. Provides employees with actionable strategies for healthier eating, contributing to the prevention of costly chronic conditions.
Well-designed and implemented wellness programs have a proven track record of generating positive ROI for employers.
A Harvard study showed that every dollar invested in wellness programs saved $3.27 in healthcare utilization costs. Additionally, employee absentee costs fell by $2.73 for every dollar invested.
By promoting a healthier workforce, Colorado employers can reduce claims and improve productivity.
Strategy 4: Help Workers Purchase Their Own Coverage Using Health Reimbursement Arrangements (HRAs)
Health Reimbursement Arrangements (HRAs) help employers offer competitive health benefits while keeping costs predictable.
Unlike traditional group health plans, HRAs let employers set fixed reimbursement limits. This ensures costs stay manageable, even when health insurance premiums rise faster than inflation. HRAs put employers in control, shielding them from unexpected financial shocks.
What Are HRAs?
HRAs are employer-funded, tax-advantaged accounts that reimburse employees for qualifying medical expenses or health insurance premiums.
The employer decides how much to contribute, and employees use the funds to cover eligible costs. Contributions are tax-deductible for employers and tax-free for employees. Amounts contributed to HRAs are also free of payroll taxes as well as income taxes. This creates tax savings for both.
Employers like HRAs because they can control the cost. They don’t have to set aside capital to fund HRAs in advance. All funds are available as operating capital until an employee comes with a reimbursement request.
And there are no ongoing obligations. Employers retain full flexibility and control.
Workers like them because they can choose the insurance plan that suits their needs, rather than a one-size-fits-all plan imposed on them by their employer.
For many Colorado companies, HRAs are a practical and affordable way to provide health benefits without the high costs and unpredictability of group insurance.
Types of HRAs
There are several types of HRAs, each with unique benefits and drawbacks:
1.) Individual Coverage HRA (ICHRA)
Employees use ICHRA funds to purchase individual health plans. Employers avoid managing a group plan and can tailor reimbursement levels for different employee classes. ICHRAs offer maximum flexibility, but require employees to find their own insurance.
Tip: You don’t have to send your employees out to figure out what health insurance plan they need to buy on their own using their HSA reimbursements. Our team of expert ColoHealth Personal Benefits Managers are available to provide your HR team and your employees with any assistance they need.
No extra charge. Just click the link to set up a consultation or appointment.
Learn more: ICHRAs are Growing in Popularity in Colorado. Here’s Why.
2.) Qualified Small Employer HRA (QSEHRA)
QSEHRAs are ideal for businesses with fewer than 50 full-time employees.
These are only available to employers that do not offer a group health insurance plan of their own. Instead, employers reimburse employees tax-freetax free for individual health premiums they purchase in the individual market.
For tax year 2025, you can reimburse employees for their health insurance premiums up to the following caps:
- Self-Only Coverage: Up to $6,350 annually ($529.16 per month).
- Family Coverage: Up to $12,800 annually ($1,066.66 per month).
Learn more: How To Start a QSEHRA in Colorado
3.) Group Coverage HRA (GCHRA)
GCHRAs work alongside high-deductible group health plans.
They reimburse employees for out-of-pocket costs like deductibles and copays. This approach reduces premiums but still requires you to offer a group health plan.
4.) Integrated HRAs
Integrated HRAs supplement group plans by reimbursing specific expenses, such as copays or deductibles.
They work great with high-deductible health plans. But they are only available to employees enrolled in the group plan.
Cost Savings Compared to Group Health Plans
HRAs offer significant cost savings over traditional group health insurance.
Employers set reimbursement limits, ensuring expenses remain predictable. This avoids the financial risk of group plan premium hikes. Employees also benefit by gaining the freedom to choose health plans that suit their individual needs.
For example, a business offering a family health plan might spend $16,000 per employee annually. By switching to an ICHRA with a $10,000 reimbursement cap, the business saves $6,000 per employee. Over time, these savings can add up, especially for companies with multiple employees.
Why HRAs Work for Employers
Overall, HRAs provide employers with a number of valuable benefits.
They reduce administrative burdens. Employees handle their own insurance selection and claims. Employers avoid the complexity of managing group plans while offering meaningful benefits.
HRAs also protect businesses from the volatility of the health insurance market. With fixed contribution limits, employers can insulate themselves from rising premiums.
In practice, HRAs also enhance employee satisfaction. Employees appreciate the flexibility to choose coverage that fits their needs.
By offering HRAs, employers show they care about their team’s well-being while maintaining control over costs.
Strategy 5: Promote And Encourage Telemedicine Services
Telemedicine has become a cost-effective way to deliver care.
It reduces unnecessary doctor visits, saves time, and lowers costs for both employees and employers.
Key Benefits of Telemedicine
Telemedicine is a proven money-saver.
And since the Pandemic, workers are much more accepting of receiving medical services via video conference call or telephone than ever before.
Telemedicine has several benefits for both employers and employees alike:
- Less time off work. When they can address a problem with a phone call instead of having to leave the workplace, workers can save 2-4 hours per visit.
This translates to increased productivity.
This can save employers an additional $100-$200 per visit in lost wages or productivity.
- Healthcare is more accessible. Most plans offer telehealth services with a very small copay or no copay at all. Often, there’s no deductible (or for health sharing plans, there’s no member responsibility amount to pay.) That means patients can get care with little or no out-of-pocket costs.
- Lower long-term costs. Employees with easier access to telehealth often address health issues earlier, avoiding more costly complications. This can reduce overall healthcare spending by 10-12% annually.
Many Colorado health plans include telemedicine services, but employers can also contract with standalone providers like Teladoc or MDLIVE for additional options.
Regular reviews ensure that employers stay ahead of rising costs and find the best value for their healthcare spend.
From Our Newsletter: Make the Most Out Of Telemedicine Benefits
Strategy 6: Encourage Employee Education and Engagement
Educated employees make better healthcare decisions, which can reduce overall costs.
Providing tools like cost calculators, transparency apps, and plan comparison guides helps employees choose cost-effective care.
Tips for Educating Employees
- Host workshops during open enrollment to explain plan options.
- Share resources on how to find in-network providers and compare prices.
- Promote HSA and wellness program participation to encourage smarter healthcare spending.
An engaged workforce is more likely to use benefits wisely, saving money for both employees and employers.
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Conclusion
Health insurance costs in Colorado are rising, but employers have many tools to manage these expenses.
By exploring health sharing plans, combining HSAs with MEC plans, implementing wellness initiatives, and leveraging HRAs and telemedicine, businesses can offer competitive benefits without breaking the bank.
Regular plan reviews and employee education further enhance cost savings.
For Colorado business owners, these strategies provide a roadmap to balance affordability and quality. Contact a trusted Personal Benefits Manager today to explore the best options for your workforce.
Taking action now will protect your business and employees from rising healthcare costs.
For Further Reading:
Leslie Alford is a Personal Benefits Manager at ColoHealth. Her aim is to help you make smart and informed healthcare coverage decisions that will fit your needs and budget. Read more about Leslie on her Bio page.
