Have any questions

Schedule Appointment

SIMRP vs. Traditional Health Plans: Which Saves Employers More Money?

As benefits costs continue to rise, employers are actively searching for cost-effective alternatives to reduce employee benefits costs. Among the leading options is the Self-Insured Medical Reimbursement Plan (SIMRP), a lesser-known but powerful strategy for companies looking to control benefit costs while still offering valuable benefits coverage to their employees.

In this in-depth comparison, we’ll explore the cost-effectiveness, tax advantages, and flexibility of SIMRP vs. traditional employer-sponsored plans to help decision-makers choose the smarter option.

What Is a Self-Insured Medical Reimbursement Plan (SIMRP)?

A Self-Insured Medical Reimbursement Plan (SIMRP) is a type of Employee Self-Insured Wellness Plan where tax savings is created to pay for qualified benefit expenses, instead of paying high premiums to an insurance company. SIMRPs are structured under Section 105 of the Internal Revenue Code, allowing them to operate on a pre-tax basis and deliver significant payroll tax savings for both the employer and employee.

Unlike traditional health insurance, which relies on insurance carriers to manage risk and claims, SIMRP gives employers more control over the design and administration of the plan. It can work alongside existing health insurance or the tax savings created by the SIMRP can be used to purchase qualifying coverage.

What Are Traditional Health Plans?

Traditional group health insurance plans are the most common form of employee health benefits. Employers pay some or all of the fixed monthly premiums to a commercial insurer, which in turn pays for covered services based on the policy’s terms. These plans typically include comprehensive coverage, co-pays, deductibles, and provider networks.

While convenient, traditional health plans are often expensive, especially for small to mid-sized businesses. Premiums increase annually, and employers have little flexibility in plan customization.

What Benefits Are Included With Our SIMRP Program?

24/7 unlimited telemedicine doctor visits for any physical or mental health issue for your employee and their family.
RX Valet with 37 commonly prescribed medications with zero co pay.
Discounts on hundreds of other prescription drugs.
Discounts on Dental and Vision coverage.
The tax savings created by the SIMRP can be used to purchase a variety of supplemental insurance benefits and/or qualifying coverage if the employee does not have primary health insurance from another source.

SIMRP vs. Traditional Health Plans: Cost Comparison

Premium Costs vs. Self Insured Costs

Traditional plans require employers to pay some or all of the high monthly premiums, regardless of how much employees actually use the coverage. In contrast, SIMRP benefits are paid for with tax savings created by the program. This model makes results in no out of pocket costs for the employer or employee and creates payroll tax savings for the employer.
Administrative Expenses

With traditional health plans, employers incur built-in administrative fees and commissions paid to brokers and insurance providers. On the other hand, SIMRP administrative costs are paid for with the tax savings, especially when managed by a third-party SIMRP provider like Fidelity Professional Relief Services. This reduction in operating costs further adds to the overall savings and bottom line profits of your organization. This lowers an employer’s unemployment tax liability.
Tax Savings

Traditional plans may offer pre-tax premium deductions for employees, but employers still pay a lot of payroll taxes on employee wages. SIMRP stands out with more substantial decreases to employee taxable wages without reducing the net income of the employees. This results in substantial savings on FICA, FUTA, and SUTA taxes for the employer, while employees benefit from tax-free reimbursements and a slight net pay increase. By reducing taxable wages through SIMRP, businesses may lower their workers’ compensation insurance costs.
Workers Compensation Insurance Savings

One factor in the cost of workers’ comp insurance is the amount of gross taxable wages your company reports. Using the SIMRP strategy reduces the gross taxable wages your organization pays, which can result in a reduction of your workers comp insurance cost by 10%-30%.

Tax Benefits Of SIMRP

One of the biggest advantages of SIMRP is its favorable tax treatment. Employers avoid paying payroll taxes on reduced gross taxable wages, and employees receive reimbursements tax-free, increasing their take-home pay. Additionally, all employer costs are more than paid for by the tax savings created by the SIMRP are deductible as a business expense. This triple-tax advantage makes SIMRP one of the most cost-efficient benefit strategies available to employers today.

While convenient, traditional health plans are often expensive, especially for small to mid-sized businesses. Premiums increase annually, and employers have little flexibility in plan customization.

Flexibility And Customization

SIMRP offers employers greater control and flexibility than traditional benefits. We work with employers to utilize the tax savings created to give employees the benefits that will be most beneficial for their situation. Moreover, it integrates seamlessly with other health plans and can be used to supplement a high-deductible health insurance plan or function as a standalone benefit. In contrast, traditional health plans have rigid structures defined by the insurer, leaving little room for customization to suit unique workforce needs.

Compliance and Risk Management

SIMRP, when set up correctly, is fully compliant with IRS rules. Partnering with a provider like Fidelity Professional Relief Services ensures that the plan is properly documented, administered in accordance with IRS Section 105, and regularly updated to meet regulatory changes. Traditional plans, while generally compliant by default, do not offer the same strategic flexibility when it comes to cost management.

Ideal Use Cases For SIMRP

SIMRP is particularly advantageous for:

Small to mid-sized businesses seeking better control overall costs.
Organizations encouraging their workforce to be more proactive with their health.
Businesses looking to offer competitive benefits without high premiums.
Employers aiming to reduce payroll tax liability.

Larger companies may also benefit by using SIMRP as a supplemental benefit to traditional insurance, particularly to pay for some benefits they are not getting or replacing benefits the employees or employer are paying for out of pocket.

Employee Satisfaction And Retention

Despite being cost-effective, SIMRP doesn’t sacrifice employee satisfaction. With valuable benefits and not out of pocket costs, employees often feel more empowered and valued. Employers can position SIMRP as a premium benefit that promotes flexibility, wellness, and financial support—all of which contribute to higher retention and morale.

The Bottom Line: Which Plan Saves Employers More?

While traditional plans offer familiarity and full-service coverage, their high costs, limited flexibility, and annual rate hikes make them less attractive for cost-conscious businesses. SIMRP, on the other hand has no net costs, substantial payroll tax savings, workers comp insurance cost savings, and high employee satisfaction.

For employers focused on cost-efficiency, tax optimization, and strategic flexibility, SIMRP clearly emerges as the smarter, more sustainable choice.

Get Expert Help Setting Up SIMRP

At Fidelity Professional Relief Services, we specialize in helping businesses design, implement, and manage Self-Insured Medical Reimbursement Plans tailored to their workforce and financial goals. Whether you’re considering replacing your group health plan or supplementing existing benefits, our experts are here to guide you through every step.

We have over 20+ years of experience

With our experience and commitment to quality, we can help you achieve your business goals and overcome any challenges you may face along the way.

Contact Info & Business Hours:

Phone: +1-657-373-3777
Email: info@fprscorp.com
Weekdays: Monday to Friday
Hours: 8:00am to 5:00pm PST

SIMRP vs. Traditional Health Plans: Which Saves Employers More Money?

What Is a Self-Insured Medical Reimbursement Plan (SIMRP)?

What Are Traditional Health Plans?

What Benefits Are Included With Our SIMRP Program?

SIMRP vs. Traditional Health Plans: Cost Comparison

Premium Costs vs. Self Insured Costs

Administrative Expenses

Tax Savings

Workers Compensation Insurance Savings