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Top 5 IRS-Compliant Ways to Lower Business Healthcare Costs in 2025
Healthcare expenses continue to be one of the most significant and unpredictable costs for businesses in the U.S. In 2025, business owners and HR professionals are under increasing pressure to provide valuable health benefits while keeping costs manageable. Fortunately, there are several IRS-compliant, tax-efficient strategies to help employers control healthcare spending without compromising employee satisfaction.
In this blog, we’ll break down the Top 5 legal ways to lower business healthcare costs in 2025, including one of the most underutilized yet powerful tools available today: the Self-Insured Medical Reimbursement Plan (SIMRP). If you’re a business leader looking to save money while still taking great care of your team, this guide is for you.
1. Implement a Self-Insured Medical Reimbursement Plan (SIMRP)
A Self-Insured Medical Reimbursement Plan (SIMRP) is one of the most effective IRS-compliant strategies to reduce healthcare costs. Under IRS Section 125, 105, and 213(d) SIMRPs allow employers use this tax code strategy to create payroll tax savings which can cover the cost of wellness benefits and minimal essential coverage.
Rather than paying inflated monthly premiums to an insurance carrier, business have no net cost, while achieving the required coverage for qualified employees. When properly structured, SIMRPs provide significant savings on FICA, FUTA, and SUTA payroll taxes, in addition to employer costs being 100% tax-deductible as a business expense.
Key Benefits:
Here’s how SIMRP compares to traditional group health insurance:
| Feature | SIMRP | Traditional Health Insurance |
|---|---|---|
|
Cost Structure
|
Reimburse actual expenses |
Pay fixed monthly premiums |
|
Payroll Tax Savings
|
Yes |
Limited |
|
Customization Options |
High |
Low |
|
Provider Flexibility |
Limited to network |
Limited to network |
|
Ideal for
|
Small to mid-sized employers
|
Medium to large employers |
By partnering with a provider like Fidelity Professional Relief Services, employers can ensure their SIMRP is fully IRS-compliant and optimized for maximum tax efficiency.
2. Offer a High-Deductible Health Plan (HDHP) Paired with an HSA
Pairing a High-Deductible Health Plan (HDHP) with a Health Savings Account (HSA) is another popular IRS-approved strategy. HDHPs typically come with lower premiums, reducing the overall cost burden for the employer. Meanwhile, HSAs allow employees to save pre-tax dollars for future medical expenses.
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.
Employers can also contribute to the HSA, offering a valuable benefit to employees while receiving a tax deduction. Contributions are not subject to payroll taxes and the funds roll over year to year.
Key Benefits:
- Lower insurance premiums
- Employee-owned savings for healthcare expenses
- Triple tax advantage: contributions, earnings, and withdrawals are tax-free
- Enhances employee engagement in managing healthcare
When designed strategically, HDHP+HSA plans reduce costs while maintaining a robust benefits package.
3. Utilize a Health Reimbursement Arrangement (HRA)
A Health Reimbursement Arrangement (HRA) is an IRS-approved, employer-funded benefit that reimburses employees for qualified healthcare expenses. HRAs can be tailored to fit a variety of business models and sizes.
Unlike HSAs, HRAs are owned by the employer, and reimbursements are made tax-free. Employers can set contribution limits, eligible expense types, and rollover policies. HRAs are especially effective for companies that want to maintain control over healthcare budgets while still offering support to employees.
- Fully tax-deductible for the employer
- Tax-free reimbursements for employees
- Highly customizable
- Can supplement or replace traditional insurance
HRAs are a versatile and scalable tool that work well alongside other strategies like SIMRPs or HDHPs.
4. Conduct a Healthcare Plan Audit & Eliminate Wasteful Spending
Many employers are unknowingly overspending on healthcare due to legacy plan features, redundant coverage, or underutilized services. A comprehensive healthcare plan audit can identify areas of waste and help optimize your benefits package for both cost and value.
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.
This includes reviewing:
- • Premium-to-claims ratios
- • Prescription drug benefit structures
- • Utilization of telehealth services
- • Network adequacy and provider performance
If you’re unsure whether your current plan is delivering the best return on investment, an audit could be the key to unlocking savings.
Key Benefits:
- Identifies cost-saving opportunities
- Eliminates unnecessary or duplicate coverage
- Improves plan performance and ROI
Working with an experienced benefits consultant or SIMRP provider like Fidelity Professional Relief Services can help you uncover hidden inefficiencies and develop a leaner, smarter strategy.
5. Encourage Preventive Care and Wellness Initiatives
Preventive care and wellness programs are long-term cost-control strategies that can significantly reduce healthcare spending over time. Encouraging healthy behaviors can lower claims by reducing chronic conditions and hospital visits.
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.
Some IRS-compliant wellness initiatives include:
- Annual physicals and biometric screenings
- Tobacco cessation programs
- Mental health support and teletherapy
- Fitness reimbursement or discounts
Key Benefits:
- Improves employee health and productivity
- Reduces high-cost claims
- Supports a culture of wellness
- May qualify for tax incentives and premium reductions
These initiatives complement IRS-approved plans like SIMRP and HRA, enhancing their effectiveness while improving employee morale.
Why SIMRP Stands Out in 2025?
While each of the strategies above contributes to lower healthcare spending, SIMRP stands out as the most direct, flexible, and cost effective option. It gives employers control, cuts costs while still offering benefits, and offers a clear IRS-compliant pathway to improving the bottom line.
At Fidelity Professional Relief Services, we specialize in building custom SIMRP solutions that comply with IRS regulations while helping businesses save money and support their teams. With the right guidance, your business can join the growing number of employers choosing SIMRP over traditional insurance models.
Real-World Impact: How SIMRP Transforms Business Health Benefits
To understand the real power of a SIMRP, consider the case of a mid-sized company with 80 employees that switched from a traditional group health insurance plan to a SIMRP managed by Fidelity Professional Relief Services. Previously burdened with unpredictable premium increases and limited plan flexibility, the company sought a solution that balanced savings with employee satisfaction.
Within the first year of implementation, the company saw a 27% reduction in total healthcare spending. Payroll tax savings alone accounted for thousands in recovered funds, which were redirected into employee wellness incentives and operational improvements. Employees also reported higher satisfaction due to the ability to speak to a doctor in seconds through telemedicine.
The HR team appreciated the transparency and control offered by SIMRP, especially compared to navigating the complexities of insurance networks and rigid benefit structures. And because the plan was designed with full IRS compliance from the start, the company avoided unnecessary legal or financial risks.
This is just one example of how a well-designed SIMRP—backed by expert support—can turn healthcare from a cost center into a strategic advantage. As more businesses seek sustainable, scalable benefits solutions in 2025, SIMRP continues to rise as a smart, forward-thinking choice.
Final Thoughts
Reducing business healthcare costs in 2025 doesn’t mean reducing the quality of your employee benefits. By using IRS-compliant tools like SIMRP, HSA, HRA, and wellness programs, employers can balance cost savings with comprehensive employee support.
If you’re a business owner or HR leader ready to take control of healthcare expenses, contact Fidelity Professional Relief Services today. We’re here to help you build a more efficient and sustainable healthcare strategy.
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