Managing employee benefits costs is a critical concern for many businesses, especially as premiums and healthcare expenses continue to rise. The average price of providing employee benefits has increased by 5-7% annually over the past five years. To keep your organization competitive while controlling expenses, consider these six strategies for reducing group benefits costs without compromising the value you offer employees.
1. Assess Employee Utilization of Benefits
Understanding which benefits are used and which are underutilized can help pinpoint areas for cost savings. Conduct surveys or gather data to identify which programs employees engage with most. For example, wellness programs and smoking cessation initiatives can be promoted further if engagement is low. Conversely, benefits that aren’t being used—such as a seldom-accessed vision plan—can be eliminated, reducing unnecessary costs.
2. Optimize Plan Design
Instead of adopting a one-size-fits-all approach to benefits, tailor your offerings to fit the needs of your workforce. High-deductible health plans (HDHPs), zero-cost sharing options, and telemedicine are all viable choices for reducing premiums. Work with a benefits advisor to design a plan that balances cost control with value, ensuring employees receive meaningful coverage. Some more custom options for group benefit programs include:
- Tiered health plans: Offer multiple levels of coverage, from basic to comprehensive, allowing employees to choose based on their needs and budget.
- Health savings account (HSA)-compatible plans: Pair high-deductible health plans (HDHPs) with HSAs to give employees a tax-advantaged way to save for medical expenses.
- Flexible spending accounts (FSAs): Provide FSAs for healthcare and dependent care, helping employees manage out-of-pocket costs with pre-tax dollars.
- Supplemental insurance options: Employees can add voluntary coverage like dental, vision, life, disability, or critical illness insurance.
- Zero-cost or low-cost preventive care: Cover routine checkups, vaccinations, and screenings at little to no cost to encourage proactive healthcare.
3. Encourage the Use of Telehealth
Telemedicine has rapidly grown in popularity, and for good reason. Encouraging employees to use telehealth services for non-urgent issues can dramatically reduce costs by cutting down on unnecessary emergency room visits and in-office consultations. This is especially effective for remote or rural employees with limited access to healthcare providers.
4. Invest in Employee Education
A common mistake companies make can be offering benefits without properly educating employees about how to use them. Employees who don’t understand their benefits may make costly decisions, such as visiting the emergency room for minor illnesses instead of using telehealth services. Providing comprehensive benefits education—through in-person sessions, webinars, or digital tools—can help employees make better choices and reduce overall healthcare expenses for your company, like keeping your premiums from increasing.
5. Explore Pharmacy Cost Management
Pharmacy costs are a major driver in rising employee benefits expenses. Encourage employees to opt for generic or biosimilar medications, which can provide the same therapeutic benefits at a lower cost. A prescription risk management program can also help identify and mitigate unnecessary pharmacy spending, ensuring employees use medications efficiently and affordably.
6. Streamline Administrative Costs
Benefits administration can be costly, mainly if it’s handled manually by HR staff. To reduce overhead, consider using an automated online platform for enrollment, benefit communications, and claims management. This saves time and empowers employees to manage their benefits, leading to fewer mistakes and greater self-sufficiency. Outsourcing some of these administrative tasks to a third-party provider can further reduce in-house costs.
Keeping Quality High and Costs Low: Using Your Group Benefits Program Right
By employing these six cost control strategies, businesses can keep their employee benefits programs affordable without sacrificing quality or employee satisfaction. The key is to stay proactive—regularly assess your plans, gather feedback, and adjust based on the evolving needs of your workforce. With careful planning and strategic partnerships, reducing benefits costs is possible while offering a competitive package that attracts and retains top talent.
Need help working out the best group benefits plan for your company? Our agency offers a free consultation to discuss group benefit strategies. Contact one of our agents today.