The Benefits Balancing Act
5 Tips to Manage Company Health Care Costs While Still Providing Valuable Benefits
One of the most frequent complaints we hear from clients and other business advisors is about the cost of health insurance. Employee benefits were costly already, and every year, without fail, prices go up. Employers want to offer benefits to provide a great employee experience and attract and retain the best employees, but with costs consistently rising, affordability and sustainability are ever-present concerns. The five tips below can help you balance affordability, competitiveness, and sustainability when it comes to your employee benefits plan.
#1 – View Benefits as an Ongoing Strategy
Renewal is once a year, but it shouldn’t be the driver when it comes to benefits decisions. Your annual renewal is one option to move forward, and your overall process should include a market review as part of an ongoing strategy cycle to evaluate the other options that are available. Doing so is essential to be sure you are getting the best benefits for the price.
A market review is part of our annual process with all our benefits clients. Our process is to start early, ahead of the expected renewal date, to allow time to discuss our client’s goals and any changes they’ve experienced throughout the year. We go to market to evaluate the options, considering a client’s hiring and retention goals, company size and growth stage, and employee needs and demographics. We then review the options with the client, and once decisions are made, we help with implementation.
#2 – Evaluate Medical Plan Structure
The structure of your medical plan can have a major impact on costs without reducing the value of the coverage. A fully insured plan is the traditional approach, offering lower risk but generally higher premiums. Another option to evaluate is a level-funded plan, wherein an employer pays a set monthly amount to cover expected claims, stop-loss insurance, and administrative fees. While they have stop-loss insurance in place to protect against high-cost claims, the employer takes on more risk than with a traditional fully-insured plan.
Our annual market review includes a look at plan structure to help our clients understand the different options available to them in the marketplace. Remember, each of these approaches is unique and has its own benefits and potential challenges to be aware of.
#3 – Give Your Employees Options
Everyone loves options, and the employees in your workforce probably need different things. You may have younger employees who don’t need much from the benefit plan, but you also may have employees with family members who need regular healthcare, including ongoing visits and prescriptions. Providing options allows the employee who doesn’t need much to opt for a base plan and the employee whose family needs more to buy up.
In addition, ancillary benefits are a great way to provide more options to employees without major cost increases. Employers may opt to fund ancillary benefits, offer them as employee-paid, or offer some combination of the two.
There is a vast array of ancillary benefit options, but the most popular include dental, vision, life, short-term and long-term disability insurance. Providing ancillary benefits helps to round out your benefits package and, in some cases, employees consider these benefits to be key. In fact, a recent Life Insurance Marketing and Research Association (LIMRA) survey found that employee satisfaction tends to increase when employers offer more benefits. For example, 63% of employees said they were satisfied when their employer offered 10-13 benefits options, whereas only 27% of employees said they were satisfied when their employer offered 1-3 benefits.
For more details on the LIMRA study, please visit the following URL:
#4 – Think about Contribution Strategy
Along those lines, just because an employer is offering a benefit doesn’t mean the employer has to fund it. Many employees will pay for ancillary benefits that are valuable to them. When it comes to the medical plan, there are ways to incentivize plan selection as well, such as offering an HSA matching contribution for employees enrolled in the high-deductible health plan, which may serve as the base plan.
Another important practice is to help frame the total compensation package for your employees. If you are contributing any amount toward benefits, you should help your employees understand that their take-home pay is only a portion of the overall compensation you are providing to them. Our system generates total compensation statements that can be used at annual employee reviews to help explain an employee's total compensation.
#5 – Provide Employee Education
Employees are more likely to be happy with the benefits plan if they understand it and know how to use it. On the other hand, employee confusion can lead to administrative costs and frustration on behalf of the employee and the employer.
Our process includes employee education meetings, virtual or in person, as part of implementation. In a group setting, we cover the features of the plan and the essential details about how it works. We also cover best practices when it comes to saving money for the plan. Every plan participant contributes to the cost of the plan at renewal time, so we try to empower participants to make responsible decisions as consumers. For example, using primary care or urgent care rather than an emergency room for non-life-threatening emergencies is a major cost savings.
In addition, for employees who need a little more guidance, we offer one-on-one consultations to answer their questions confidentially. This service allows an employee to speak with a benefits expert rather than ask their manager about sensitive health questions.
Cost Management through Better Decisions
Benefits are a long-term investment in your workforce, and they are a wonderful way to both sweeten the deal for prospective employees and encourage current employees to stay put. Alternatively, benefits can feel heavy both administratively and financially. Therefore, it’s key to have a trusted partner in your benefits broker to help you keep ahead of the renewal cycle (focusing on strategy over reaction), structure the plan to provide the options that you and your employees need, and educate your employees so they understand the value of what you are offering them and are able to make full use of it.
Have Questions?
If you’d like to discuss your benefits plan, please contact our team.
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