Human Resources and Benefits

Creative Ways to Control Your Health Benefit Premiums

health benefit premiums

Employee benefits are a vital part of maintaining a healthy work environment and attracting great talent, but they can be expensive. You want to save money on your insurance premiums; there’s no doubt about that. A common first place to look for savings is in insurance company choice.

Insurance companies vary in price and doing your homework on options can pay off. But for how long?

Your health benefit premiums are likely to increase every year. So, the insurance company you choose can save you money upfront, but there are other ways you can decrease your employee benefit spending in the long run.

Consider using leveled or self-funding.

One way to save money on your employee benefit premiums is to participate in a leveled-funding plan. Leveled funding is a “mediated” form of self-funding and therefore is less aggressive than what most people think of when they hear the term self-funding. Here are some helpful definitions:

  • Leveled-funding: You pay a fixed monthly premium to your carrier but have the opportunity to earn money back at the end of the year if claims are minimal. If there’s a year with an unusually high number of insurance claims, you don’t have to worry about paying the difference because your health benefit premium is capped. You don’t spend more than your fixed monthly rate.
  • Self-funding: As defined by the Self-Insurance Institute of America, “Self-insured employers pay for claims out-of-pocket as they occur instead of paying a fixed premium to an insurance carrier.” You can save money by using a self-funding plan, but costs associated with them can be more volatile. Self-funding is also referred to as self-insured.
  • Full-funding: This is the traditional method of insurance where you pay a monthly premium, regardless of your insurance claims. Even if the money isn’t used, you don’t get it back. Traditional insurance can be especially hard on small businesses that don’t have the support or financial standing that larger businesses do.

What’s so great about leveled-funding?

Leveled-funding is a great insurance option for any sized business but is especially beneficial for small-to-medium sized businesses. Some benefits of leveled funding are:

  • Money back at the end of the year if it went unspent.
  • Full transparency, meaning you have complete access to your claims data and information.
  • Consistent and predictable health care costs year-over-year.
  • A single monthly payment that includes claims coverage and administrative expenses.
  • Some plans offer detailed reports that describe where claims costs are incurred and can point out where claims are significantly higher.
  • Detailed insurance claims reports give you the opportunity to evaluate your overall employee health benefits and see if there are areas your program can improve.

Leveled-funding is a relatively new product in the employee benefits market, but many employers across the United States are turning to it. In 2021, 42% of small businesses used leveled-funding, which is a significant increase from the two previous years.

Read this article to learn more about the specific details behind self-funding and leveled-funding.

Use technology alternatives.

In a word, paper is the current standard for employee health benefits tracking. Many companies have their human resource representatives spend their time manually tracking employees’ benefit decisions and changes, which is incredibly time-consuming.

Implementing an online employee benefits technology platform for tasks such as these should be carefully navigated. Tech solutions can often make your human resource representatives feel as though they are being replaced or unappreciated. It’s important to stress how they can better spend their time engaging with employees face-to-face or helping with larger financial-focused tasks.

Tech solutions can seem expensive initially, but they save money in the long run. They can increase the efficiency of new employee onboarding, benefits administration, and payroll processes while minimizing the time needed to manage these various pipelines.

How can I find a suitable technology solution for my business?

If you’re willing to spend the time, you can do your own research and find a solution on your own. There are many existing options, and there will be at least one that will fit your needs. However, this research process can be arduous.

In addition, not all tech solutions are created equally. Some shine in employee benefits administration while struggling in employee onboarding. Others excel at payroll but miss the mark on insurance benefits premium management. You’ll likely dedicate a large chunk of time to researching options because there are so many out there.

Time management is one of the main reasons business owners decide to work with an insurance broker when they’re trying to find tech solutions. A good insurance broker will understand your needs and help you find a program to best fit them.

In review…

There are many ways to save money on your employee health benefit premiums, but switching to leveled-funding or implementing a technology solution are two of the most effective ways to do so.

Figuring out how to approach either can be intimidating, though.

You’re not always sure of where to start — it can sometimes feel like you’re trying to take a sip of water from a fire hose. This is why many employers decide to work with an insurance broker. Brokers can do more than provide an insurance quote. They know the market and its intricacies and can help you find the information you need more effectively.

Leavitt Group—national strength, local trust. Leavitt Group is the 14th largest independently held insurance brokerage in the United States. We pride ourselves on our experience and ability to help our clients succeed. Contact an agency near you