Employee benefits represent a high cost for many employers, especially in today’s environment, where employer-sponsored health plan costs are rising. In fact, according to recent data from the Bureau of Labor Statistics, the average compensation for private sector employees totals to $46.15 per hour, with nearly 30% of that cost going towards employee benefits.
With so much tied to employer-sponsored health insurance, many businesses of all sizes face the same challenge: how to offer competitive benefits while maintaining affordability.
Fortunately, there are many practical strategies employers can use to help relieve financial stress without sacrificing value. Here’s how you can take control of your health insurance spend while staying competitive in attracting and retaining talent.
Audit Your Health Insurance Plan Design
One of the most effective ways to reduce costs is by evaluating your current health plan design. This strategy goes beyond simply adjusting budgets; it’s about identifying opportunities to deliver similar (or better) coverage more efficiently.
When evaluating your current employee benefits plan structure, consider the following:
- How much is the company contributing toward employee benefits?
- Are employees actively using the benefits offered?
- Which plans are underutilized or unnecessary?
- Does your benefits package have proof that shows support for employee retention?
- How do your offerings compare to those of similar organizations?
A simple lineup of critical thinking questions helps identify clear weaknesses of your current offerings and opens the conversation to opportunities that could potentially help you save on your health insurance offerings.
When performing an in-depth analysis of your company’s benefits offerings, you’ll want to evaluate the following:
- Current vendor and carrier contracts
- Employee and employer contribution rates
- Plan performance and utilization trends
- High cost claims (chronic conditions, specialty drugs, etc.)
- Premium increases year-over-year
Understanding the “why” behind rising costs allows you to make better-informed decisions to relieve the cost burden. Whether you decide it's best to cut underutilized insurance plans, renegotiate contracts with carriers, adjust plan offerings, or explore alternative, creative benefits plans, you’ll be tackling the issue at the source by restructuring how you offer and ultimately spend on employer-sponsored health insurance.
Shift to Consumer-Driven and High-Deductible Health Plans
Many employers are turning to consumer-driven health plans (CDHPs) or high-deductible health plans (HDHPs) to better control costs while giving employees more flexibility.
Here’s a quick breakdown on what CDHPs and HDHPs are and how they work:
- CDHP: Allows employees to use pre-tax dollars towards paying off healthcare costs, often paired with accounts such as HSAs, HRAs, and FSAs
- HDHP: Plans with lower monthly premiums in exchange for higher deductibles, making them cost-effective for both employers and employees
For further context, here’s how employee health savings accounts work:
- Health Savings Account (HSA): A tax-advantaged account funded by either employees and / or employers, with remaining / unused funds rolling over year to year
- Health Reimbursement Account (HRA): Employer-funded accounts with rollover rules determined by the plan specifications
- Flexible Spending Account (FSA): An employee-funded pre-tax account, typically with use-it-or-lose-it rules
To maximize the effectiveness of these plans, employers should prioritize employee education, ensuring workers understand how to use these tools to manage their health care costs effectively. This will also help increase benefits adoption throughout your workforce.
Expand Supplemental / Voluntary Benefits Offerings
Expanding your benefits offering doesn’t always mean increasing costs. Voluntary benefits allow employees to customize their coverage to help fill the gaps their standard health insurance does not cover, while keeping employer contributions low.
In most cases, employees pay the premiums for voluntary benefits, often at discounted rates. Employers may choose to help fund voluntary benefits if they so choose.
Common voluntary benefits plans can include more tailored healthcare experiences, including:
- Dental insurance
- Vision insurance
- Disability insurance (long-term or short-term)
- Accident or critical illness insurance
- Life insurance
By offering a variety of supplemental offerings, employees can now get the full coverage they need while you get to boost the amount of offerings that are a part of your entire benefits package, all with a lower cost.
Securing voluntary benefits can be challenging, especially when you’re trying to integrate new plans as a part of your overall benefits package. Employers can reach out to employee benefits consulting experts to help structure their new offerings and secure carriers that fit the needs of their employees best.
Promote Preventive Care and Cost-Conscious Behaviors
Preventive care and smarter healthcare decisions can significantly reduce long-term insurance costs. When employees address health issues early and choose the right type of care, employers can lower the frequency of high-cost claims, especially those tied to chronic conditions and unnecessary emergency room visits.
To help encourage more cost-effective healthcare behaviors, employers can:
- Incentivize preventive care
- Offer premium discounts, HSA contributions, or rewards for annual checkups or vaccinations
- Expand access to telehealth services
- Provide low-cost or free virtual options for minor illnesses to reduce unnecessary urgent care or ER visits
- Offer wellness and lifestyle programs
- Support initiatives like fitness reimbursements, smoking cessation programs, and mental health resources to address long-term health risks
- Encourage cost-conscious prescription choices
- Educate employees on the cost differences between generic and brand-name medications while providing tools to compare pricing
Balance Affordable Health Insurance and Competitive Benefits
As healthcare costs continue to rise, employers must take a proactive approach to managing benefits expenses. By evaluating current offerings, exploring cost-effective alternatives, and encouraging smarter healthcare usage, businesses can reduce costs without compromising value.
Affordability doesn’t mean cutting your benefits offerings; it means optimizing your strategy to deliver meaningful coverage in a sustainable way.
Taking a long-term, employee-focused approach will not only control costs but also strengthen retention and your overall employer brand.
If you're looking for support in evaluating or optimizing your benefits strategy, contact us to work with experienced advisors helps you stay both competitive and cost-effective.
