Managing employee health benefits has become increasingly challenging over the years. Benefit surveys from both AON and Mercer project an average increase of 9-10% in the cost of healthcare for employer-based plans. Anecdotally, some employers are reporting increases of 20% or more. Healthcare costs are rising at unprecedented rates and more employees now require costly, ongoing care. As a result, benefits planning can no longer be a passive, one-time activity. It requires a strategic, data driven approach that balances consideration for employees with the financial goals of the organization. By proactively designing health plans employers can better manage insurance expenses while supporting employees in living healthier lives.
Some factors driving the increasing costs of healthcare include care for chronic conditions, increased GLP-1 (i.e., Wegovy, Ozempic) drug utilization and cost, and employees not understanding all the offerings of their employer-sponsored health plan.
Data is an important tool that employers may overlook when it comes to employee benefits, yet the information it provides is significant. According to the Employee Benefits Research Institute, over 80 percent of high-cost claimants had at least one condition that fell into five common categories: skin disorders, respiratory conditions, musculoskeletal conditions, mental health conditions, and heart disease. These conditions are not only widespread, but many are chronic and require ongoing care, medication, and management. Employers must recognize these trends as signs that strategic planning is necessary to manage costs.
A simple, yet effective way to manage costs is to regularly go to market. Meaning, rather than accepting the rate you are given by your current carrier, you should also put together requests for proposals from multiple carriers. If you work with a broker, let them know early in the planning process that you are interested in reviewing other options. The offer that an insurance carrier provides should also be reviewed for possible negotiation. If you are working with a broker, they should have a strategy in place and do this on your behalf.
Another effective option is to offer tiered plans. By providing both high and low plan versions, employers give employees more flexibility to choose a plan that meets their specific healthcare needs and financial situations. This can often be done without adjusting cost-sharing with employees, allowing organizations to enhance the offerings with minimal change to costs.
Are you aware of little-known benefits such as gym discounts, savings on weight loss programs, preventative health incentives, and telemedicine perks that might be included in your health insurance plan? Unfortunately, these benefits often go unnoticed or unused simply because employees are unaware they exist. Employers should work with brokers or insurance carriers to understand what is available and communicate these perks to employees; our whitepaper Developing a Benefits Communications Strategy can help. These perks are generally much more cost-effective ways for employees to manage their health needs and chronic conditions, which also keeps plan costs down. By leveraging these additional perks, employees can be encouraged to try other ways to stay healthy or manage certain conditions as accessibility is increased.
Lastly, when having to deliver tough news to employees regarding insurance plan changes, remember to use “we” language. It’s important to show care and compassion when delivering any tough message, and the framing of that message is important. Using “we” language can reinforce shared responsibility and emphasize that the decisions made impact everyone in the company, including HR and leadership.
Ultimately, the most effective way to manage benefit costs is to begin planning early. Employers should review data from the prior plan year well in advance of open enrollment and begin considering budget adjustments, plan design shifts, or potential vendor changes. Early planning allows for better analysis, smoother execution, and more time to educate employees on available choices and resources.
To learn more about effectively administering benefits, consider taking our class Benefit Administration – The Basics from A to Z .