Between 2013 and 2023, healthcare costs in the U.S. increased by 43 percent. More recently (and locally), the New York Department of Financial Services announced a 13% average hike for small group rates. We’ve all felt it for a while, but the numbers confirm: rising healthcare costs is the new normal.

And if that’s the case, sitting around and doing nothing is itself a costly course of action.

Thankfully, there are plenty of actions you can take to reduce your health insurance costs. In this article, we’ll lay out the options so you can make the best decision for your business.

Key Takeaways

• Healthcare costs are rising faster than ever, and doing nothing about it will expose businesses to unpredictable expenses, compliance risks, and shrinking leverage in small-group markets.
• Proactive strategies like partnering with a Professional Employer Organization (PEO) help small and mid-sized employers control costs, access better benefits, and offload complex HR and compliance tasks.
• Working with a Certified PEO like Ethan Allen HR Services gives businesses the best of both worlds: local expertise, national-level benefits, and long-term cost stability.

Why Health Insurance Costs Are Likely to Keep Increasing

The problem of rising health insurance costs isn’t going away anytime soon. Too many factors are pressuring the market toward continual increases:

• Reduced enrollment in the NY small group market has dropped by 24 percent, as younger, healthier enrollees are leaving for more affordable options
• Remaining enrollees tend toward high-cost risk pools, continuing a process colloquially referred to as a “death spiral”
• Limited provider competition and higher hospital and provider charges in Upstate New York also contribute to price differences and increases
• Medical costs continue to increase, including more expensive hospital stays, prescription drugs, and diagnostic and treatment technologies
• Broader economic factors like inflation, labor shortages, and provider consolidation contribute to rising costs; for example, if the enhanced Affordable Care Act (ACA) tax credits expire, premiums could as much as double

What’s the Cost of Doing Nothing?

Based on these trends, it’s natural to ask: If healthcare costs are going to increase anyway, why put time and effort into fighting them?

The answer is simple: if you do nothing to change your approach, you could end up incurring even greater costs. By insisting on continuing to handle your health insurance programs in-house, here are some costs you could potentially incur.

Financial Risk and Cost Uncertainty

Unpredictable and rising medical costs make it difficult to budget month to month. High-cost claims, such as expensive treatments or chronic illnesses, can impose significant financial strain on organizations, particularly for those with self-funded plans or small groups that have risk mitigation measures.

Administrative Burden and Complexity

Handling your entire program in-house can be overwhelming, especially for small businesses that don’t have dedicated HR or insurance expertise. Regulatory compliance (e.g., ACA requirements, ERISA rules for self-funded plans) adds a layer of complexity that, if not properly managed, can lead to penalties or coverage issues.

Exposure to Risk Pool Adversity

Doing nothing in a shrinking risk pool market tends to worsen adverse selection; in essence, healthier individuals opt out. This increases premiums for those remaining in the market, as coverage pools tend toward sicker, higher-risk individuals.

Limited Negotiation and Coverage Control

Individuals or small employers may lack leverage to negotiate better rates or customize plans suited to their needs. This leaves them at the whims of insurers, who are naturally incentivized to raise costs and reduce coverage.

Cash Flow Pressures

Variable and often rising medical and premium costs can cause cash flow strain for budget-conscious small businesses. This is especially the case for those who lack the financial planning tools or reserves to absorb fluctuations.

What Are Your Options for Mitigating Rising Healthcare Costs?

When it comes to controlling healthcare costs, there are a number of options under your control, some of which are better than others. Here’s a quick breakdown of the pros and cons of each.

 

Why Partnering with a PEO Is the Smartest Move for Employers

Out of all these options, one approach effectively reduces costs without sacrificing coverage quality: a Professional Employer Organization (PEO). A PEO functions as a co-employer, sharing certain HR and administrative responsibilities with your business. This model gives small and mid-sized companies access to the same cost-saving advantages that large corporations enjoy without sacrificing control or flexibility.

Here are some ways a PEO not only controls costs but also minimizes risks and simplifies everything that comes with being an employer.

1. Cost Control Through Scale

PEOs leverage the collective buying power of hundreds of client companies to access large-group health insurance plans at lower rates. For small and mid-sized employers, this means you can offer high-quality benefits that attract and retain talent without absorbing the steep premiums typically charged to small groups.

2. Predictable and Managed Risk

From payroll tax filings to workers’ compensation and ACA compliance, a PEO helps to protect your business from costly errors and penalties. With certified experts managing compliance and risk mitigation, you gain peace of mind and budget predictability, even as regulations shift.

3. Administrative Efficiency

A PEO also consolidates payroll, benefits, compliance, and onboarding under one platform, freeing business owners and HR teams to focus on strategy, operations, and growth instead of paperwork.

4. Employee Experience That Competes with Big Employers

In a tight labor market, employee benefits can be your biggest differentiator. A PEO allows small businesses to offer competitive health insurance, retirement plans, and wellness programs that rival those of national employers, helping you attract and retain high-quality employees without blowing your budget.

5. Local Expertise with National Strength

When you partner with a locally based, IRS-Certified PEO like Ethan Allen HR Services, you get the best of both worlds: personalized, relationship-driven service rooted in Hudson Valley values, backed by national-level compliance, technology, and benefits access.

Final Thoughts

Taking no action to control your health insurance costs isn’t just risky. It’s expensive. Between rising premiums, administrative strain, and compliance exposure, a DIY approach to HR can quietly drain profitability and momentum.

At Ethan Allen HR Services, we help businesses across Upstate New York navigate the complexities of payroll, benefits, and compliance through our Certified PEO model. We take the administrative and financial burden off your plate so you can focus on what really matters: growing your business and supporting your people.

Interested in a cost comparison? Contact Ethan Allen HR Services and we can show you just how much you’ll save.