Human Resources and Benefits

Combating Rising Benefit Costs During Periods of High Inflation

rising insurance costs

The U.S. inflation rate has risen by 3.3% over the past year, according to the Bureau of Labor Statistics (BLS). This has led to notable price increases across various consumer goods, including employee benefits and health insurance. These rising costs pose challenges for employers amid one of the most difficult hiring markets in recent memory. Fortunately, employers can implement strategies to mitigate increasing benefits costs without passing the burden onto employees, helping maintain their attractiveness to current and prospective employees.

Eliminate Underutilized Insurance Benefits

One simple strategy is to eliminate underutilized benefits. Resources from unused benefits can then go toward more expensive benefits. Regularly survey employees to evaluate which benefits best suit their needs and which benefits may not provide value to your organization.

Wellness Programs

While there are skeptics and believers when it comes to actual cost savings provided by wellness programs, they often play an important role in other positive workplace developments. For instance, promoting and achieving a healthy workforce often improves morale and productivity. These programs can also lead to improved employee attraction and retention as well as increased loyalty to the employer.

There are a variety of wellness benefits you can offer to suit your company’s needs. Potential options include providing in-office perks for nutrition, fitness and stress management, gym memberships, fitness challenges, smoking cessation programs, and mental health resources.

Telemedicine

Taking time off to go to the doctor can often be a time-consuming and expensive undertaking. Telemedicine may help lessen these issues by eliminating associated costs—such as transportation—and providing faster and more affordable care to those seeking medical services. By meeting with healthcare providers over the internet, employees can get the care they need more quickly and are likely to be more productive as a result. Additionally, telemedicine allows employees to take less paid time off work, making it much easier for them to avoid obstacles that could get in the way of seeking health care, such as child care.

Alternative Plan Types

Offering High Deductible Health Plans (HDHPs) paired with Health Savings Accounts (HSAs) can lower premiums and encourage employees to become more conscious of their healthcare spending. Additionally, offering Flexible Spending Accounts (FSAs) allows employees to set aside pre-tax dollars for out-of-pocket healthcare expenses, reducing taxable income for both the employer and employee. Together, these benefits promote cost savings and smarter healthcare choices, benefiting both parties financially and encouraging better management of medical expenses.

Larger companies may consider self-insurance, a model where they pay for employee health claims directly rather than purchasing insurance. This can lead to significant cost savings and more control over benefits design.

Other Effective Approaches

Additional steps employers can take to combat rising insurance benefits costs include the following:

Dependent Verification Audits: Conducting audits to ensure only eligible dependents are covered can eliminate unnecessary costs.

Employee Education: Educating employees about cost-effective ways to use their benefits, such as choosing generic medications and utilizing in-network providers, can reduce overall costs.

Prescription Drug Management: Employers can manage prescription drug costs by negotiating better prices with providers, using pharmacy benefit managers (PBMs), and encouraging the use of generic drugs.

Value-Based Insurance Design (VBID): VBID plans reduce or eliminate copayments for high-value treatments and medications, encouraging employees to adhere to necessary treatments, which can prevent more costly health issues down the line.

Leveraging Technology: Using benefits administration software can streamline enrollment and benefits management processes, reducing administrative costs and errors.

These steps can help employers manage and potentially reduce the costs associated with employee benefits while maintaining a competitive benefits package. To learn more about these options, contact your Leavitt Group insurance advisor.

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