If you’ve heard the term 125 health insurance plans, you may be wondering what it actually means, and more importantly, whether it really offers pre-tax savings. The answer is yes, but the story goes deeper.
A 125 health insurance plan, also known as a Section 125 plan or cafeteria plan, is more than just a tax perk. It’s a structured, IRS-compliant way for employees to pay for healthcare premiums and wellness benefits using pre-tax dollars, which results in significant tax savings for both employees and employers.
At Health Sphere, we offer two industry-leading solutions that fully leverage Section 125: the Revive plan and the Thrive plan. Let’s break down what makes 125 health insurance pre-tax and why it’s such a powerful tool for today’s workforce.
What Is a 125 Health Insurance Plan?
A 125 health insurance plan falls under IRS Code Section 125, which allows employers to set up a program where employees can pay for eligible health-related benefits before taxes are taken out of their paycheck. These plans can include:
- Health plan premiums
- Telemedicine and virtual care
- Mental health and counseling
- Prescription drug coverage
- Family and dependent health benefits
- Flexible Spending Accounts (FSAs)
The end result? Employees lower their taxable income while still receiving top-tier benefits. For many households, that reduction means more money in savings or daily living expenses, making healthcare feel less like a financial burden. Employers also benefit by reallocating saved tax dollars into better wellness initiatives, professional development, or retention programs. It’s a cycle that boosts both financial health and workplace culture.
Is It Really Pre-Tax?
Yes. Under IRS regulations, contributions made to a 125 health insurance plan are not subject to:
- Federal income tax
- Social Security (FICA) tax
- Medicare tax
For employees, this often means hundreds to thousands of dollars in annual tax savings. For employers, this setup lowers payroll tax liability, creating a double benefit.
Health Sphere’s Pre-Tax Plans: Revive and Thrive
Our solutions go beyond basic cafeteria plans. Both Revive and Thrive combine Section 125 with a fully managed Preventative Care Management Plan (PCMP) and a Specialized Insurance Medical Reimbursement Plan (SIMRP). That means:
- Maximum IRS compliance
- Worry-free administration
- Pre-tax coverage for both the employee and their family
- $0 copays across most services
Let’s look at what each plan offers.
Revive Plan: Maximize Value, Minimize Cost
Revive is designed for employers who want to offer rich health benefits with no out-of-pocket cost.
Employee Benefits
- 24/7 virtual care, urgent care, RX, $0 copays
- Family coverage with 12 annual care visits
- Group Term Life Insurance ($60–$100/month value)
- Mental health and wellness tools
- Vision, dental, and prescription discounts
- Minimal Essential Coverage (MEC)
Employer Benefits
- Save ~$1,100/year per W2
- Reduce healthcare claims over time
- Fully automated 30–45 day rollout
- Boost retention, wellness, and performance
Thrive Plan: Boost Take-Home Pay and Mental Wellness
Thrive is ideal for employers looking to increase employee net pay and promote whole-person wellness.
Employee Benefits
- ~$100/month increase in take-home pay
- 24/7 care with $0 copays
- Mental health, addiction recovery, couples counseling
- Mayo Clinic programs and stress management tools
- Spousal and dependent coverage
Employer Benefits
- Save ~$600/year per W2
- 5–10% reduction in healthcare costs
- Seamless compliance and documentation
- Quick onboarding and expert support
Why Employers Are Shifting to Pre-Tax Health Plans
These plans don’t just reduce costs; they create a competitive edge in hiring and retention, which is critical in 2025’s tight labor market. The cost of healthcare is rising, and so is the demand for more meaningful employee benefits. Section 125 health insurance plans offer a rare opportunity to do both:
- Lower costs for employers and employees
- Improve benefit offerings without raising salaries
- Boost employee satisfaction and retention
With Revive and Thrive, Health Sphere delivers a fully compliant, turnkey solution that takes the guesswork out of managing pre-tax healthcare plans, making your workflow much easier.
It’s More Than Pre-Tax, It’s Pro-Family, Pro-Health, Pro-Employee
Both of Health Sphere’s plans emphasize total family coverage. That includes services for spouses and dependents, all with $0 copays. And with features like Group Term Life, virtual urgent care, and wellness tools from Mayo Clinic, the plans go far beyond insurance. They support employee health in the truest sense.
A Smarter, Healthier Future Starts with Health Sphere
By choosing a Section 125 solution now, companies future-proof their benefits strategy against rising healthcare costs and shifting employee expectations. Talk to a Health Sphere advisor today and discover how 125 health insurance pre tax like Revive and Thrive can improve your bottom line while enhancing the lives of your team.
