Rising health insurance costs are pinching business owners — and driving them to cheaper alternatives

It’s a never-ending battle for Rebecca Kasavich, owner of Copies at Carson, to fund health insurance for workers at her commercial print shop in Pittsburgh’s South Side.

About 15 years ago, she made employees pay into their plans for the first time — a common move for businesses struggling with health insurance costs.

But prices kept rising.

In 2020, she switched to a new model that promised significant savings. The plan came with high deductible — the amount paid by workers before the insurance company pitches in — but allowed Kasavich to reimburse employees for some costs.

Even that system is starting to feel untenable.

The price of coverage for Kasavich and her 10 workers rises about 20% a year. She expects to face a similar increase when picking a 2026 plan this fall.

“In the past, it’s just something that we’ve absorbed, to an extent,” Kasavich said last week. “I can’t just keeping looking at that as the only solution.”

Health insurance costs go up every year, but they’ve climbed with startling speed lately.

The cost of employer-sponsored health insurance is up 6% from last year, according to survey results released last week by health policy nonprofit KFF, with the average family plan approaching $27,000. That follows 7% increases in both 2023 and 2024.

As the cost of coverage goes up, so does the squeeze on employers providing it.

Something has to give, especially for small businesses.

“We serve thousands of small businesses, and that is a No. 1 issue for them: They can’t secure health insurance,” said Rich Longo, director of Duquesne University’s Small Business Development Center.

Avon Design Group in McCandless is resisting the pressure to have workers chip in. But the architecture firm’s premiums jumped 11% this year. Another increase like that “could play a factor” in reducing raises, according to Business Manager Karen Avon.

Copies at Carson is well past the employee contribution debate, turning to one of several creative solutions to make ends meet while still providing coverage.

But a subset of companies are simply punting on health benefits.

“I think a lot of employers are just saying, ‘Hey, we’ll give you a bump in salary — go get insurance on your own,’” said Kimberly Hrubes, president of Greater Pittsburgh Insurance Consultants in North Charleroi.

Alternative insurance plans

Classic employer-backed insurance plans require a fixed monthly payment to the insurance company known as a premium. It’s increasingly true that workers are shouldering some of this cost.

When an employee uses coverage, the health care provider bills the insurer. The worker may or may not pay a portion of the bill, depending on the plan and type of care.

By grouping employees together under a certain plan, the thinking goes, potential costs can be spread across more people. This practice helps insurers offset individuals who get expensive medical services with those who don’t, leading them to charge lower premiums.

There are ways to trim the cost of these plans — employee contributions, for one. Companies can also opt to not cover certain services or go with a network that includes fewer providers.

A recent survey from consulting firm Mercer found 59% of employers will make cost-cutting changes to their plans for 2026.

Kasavich’s insurance plan combines a low premium and high deductible with what’s known as a health reimbursement account. It’s a risk on her part in the pursuit of savings.

If her employees need only regular checkups throughout the year, the account might go untouched. But if a serious medical emergency arises, the business could be on the hook for thousands of dollars.

Some plans protect against this worst-case scenario with a second layer of insurance, known as stop-loss coverage.

A growing segment of employers, however, are simply leaving this uncertainty behind by giving workers an allowance to find their own insurance. These plans are known as Individual Coverage Health Reimbursement Arrangements, and they were approved by federal regulators starting in 2020.

This year, 4% of firms offering health benefits and 9% of firms not offering health benefits gave workers money for individual coverage, according to the KFF survey.

The Pittsburgh area is especially well-suited for Individual Coverage Health Reimbursement Arrangements, according to Mimi Sibley, who helps small businesses administer these plans for Minneapolis-based health benefit company Gravie.

The region’s competitive insurance landscape drives prices down on the individual market, she said, making these plans a relatively affordable option.

By handing over a fixed sum for workers, business owners eliminate the chance they’ll have to cover unexpected, expensive medical costs.

“It allows them to permanently get out of the risk game,” Sibley said.

‘Actuarial death spiral’

Health insurance costs will likely continue to soar, according to Jonathan Greer, president and CEO of the Insurance Federation of Pennsylvania.

It’s a self-fulfilling prophecy, he explained. Steep premiums drive more people to go without insurance, leaving behind a pool of older, sicker people. Those more expensive patients, in turn, force insurers to raise their rates.

“It could become an actuarial death spiral,” Greer said.

Denise Hughes, a spokeswoman for UPMC, declined to comment on what’s driving up premiums. She referred TribLive to Greer instead.

Emily Mashore, a Highmark spokeswoman, attributed the rising cost of the insurer’s Obamacare plans to pricey care, high usage and enhanced subsidies for the program expiring Dec. 31.

A ‘fundamental’ problem

Experts don’t see group coverage going away. About 98% of workers at large companies still get it and 54% of workers at all firms with three or more employees.

Duquesne’s Longo thinks it might just need to be reinvented, at least for small businesses. He’s an advocate of allowing companies within the same industry to get a shared health plan, which isn’t currently allowed in Pennsylvania.

Shyam Vichare, a partner at New York City-based consulting firm Oliver Wyman, sees group insurance plans becoming more customizable going forward as new alternatives popping up.

But these are merely ways for businesses to buy time until insurance becomes unaffordable once again, in Vichare’s view.

“I don’t think that just shifting how employers offer coverage is going to solve the fundamental problem that health care costs are going up,” he said.