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Average annual premiums for an employer-sponsored family health plan climbed to $22,221 in 2021, up 4% from the previous year, and no matter how you slice and dice it, a healthy chunk of change.

Whether premiums in the year ahead match or exceed the rate of overall inflation remains to be seen. What we don’t need to wait to see is that employers are beyond sick and tired of ever-rising healthcare insurance costs. And yet cutting benefits or asking employees to bear a bigger share of the cost is pretty much unthinkable at a time of severe labor shortages.

We look at six strategies employers can take to offset rising health benefits costs while improving their benefits offerings.

Indeed, benefits are more important than ever, a crucial tool for recruiting and retaining employees. Complaints about our healthcare system aside, people love their benefits. According to a Society of Human Resource Management survey, 92% of employees indicated that they consider employment benefits as crucial for their overall job satisfaction. Moreover, almost 30% of employees cited benefits as the main reason they started looking for a new job.

With all that in mind, here are six employee benefits strategies employers can take to offset rising health benefits costs, while improving their offerings.

1. Start by figuring out whether you’re over- or under-insured. There’s no use in paying for coverage your people don’t use or need. We’ve seen plenty of instances in which employers were paying for expensive, rarely-used perks. Your broker should be looking closely at utilization data to help you understand which benefits employees value most and how best to tailor your health insurance options to better serve everyone.

To do this right, make sure to ask your employees about their needs. Ask for their feedback through conversations and surveys. Be sure to ask specific questions including what they experienced in the past year in terms of their health, what they expect in the year ahead, what their priorities might be.

Under-utilized benefits should be the first to go, since they can be cut with minimal interruption to most of your employees. It’s not fashionable, we know, but consider cutting weight-loss and smoking-cessation programs, too. If they’re not getting a lot of buy-in, make the cut.

2. Make sure you’ve trained employees on how to select and use their health care plan. This is especially important if you have a lot of younger employees who might not fully understand the difference between deductibles, out-of-pocket maximums, co-pays and more.

It’s also a good idea to offer several informational meetings on various topics throughout the year. For example, you’ll want to make sure people understand flexible spending accounts (FSAs), health savings accounts (HSAs), employee assistance programs (EAPs), and more. This will help ensure they understand each of the options available to them and which ones may be more cost-effective to them and, ultimately, you as their employer.

3. Work with your broker to structure your provider network to encourage enrollees to use providers who can provide better care while bending cost trends. Yes, people hate switching doctors, but many beneficiaries are willing to face limited provider choices as long as the providers in their network are high quality.

4. Switch over to a premium-free, self-insurance plan, in which you pay administrative services and claims in full as they come up, but not for insurance. This type of plan offers more control and flexibility than a traditional health plan and much of the added exposure can be managed with a stop-loss insurance policy.

5. Make sure you’re working with a brokerage that acts as an extension of your HR team. Most HR departments are overworked, as we all know. The savings and efficiency gained by working with a truly full-service brokerage alone can be worth making the switch at renewal.

6. Get a better broker. Yes, we realize this is more than self-serving, but, really, isn’t it time you had a true advocate on your side? A smart benefits advisor will help you keep an eye on your spending, negotiate the best rates and be a steadfast partner as your business grows.

The Mahoney Group is one of the largest independent commercial insurance and employee benefits brokerages in the U.S. For more information, contact us online or call 877-440-3304.


This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

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