How to control costs on employee benefits: five strategies
In an era when costs seem to only go up and revenues are level or falling, how can employers and benefits managers save money on the cost of benefits packages?
A recent study of public sector employers conducted by Colonial Life identified five areas that are proven to help with cost containment. They are:
- Wellness initiatives: Nearly 80 percent of survey respondents include wellness initiatives in their benefits program, and 90 percent of those recommend them to others, two-thirds of those recommending them strongly. Research studies show a return of at least three-to-one or higher for every dollar invested in a wellness program. For large employers with more than 1,000 employees, one study showed an average return of $3.27 over a three-year period for each dollar spent. Another study reported savings as high as $6 per dollar invested. Optima Health offers many wellness options to its members to fit their individual needs.
- Pretaxing benefits: Maximizing employees’ participation in pretax benefit programs is just as highly implemented and recommended as wellness initiatives. More than three-quarters of employers say they offer pretax benefits plans and 86 percent recommend this option. Pretax benefits allow employees the option to buy qualified insurance coverage with pre-tax dollars, making coverage more affordable.
- Benefits communication and education: Employers can transfer the cost of benefits plan communication to their benefits suppliers and can outsource an enrollment system and open enrollment management rather than maintaining these duties in-house, says Colonial Life. While this shift is recommended, it isn’t yet widely implemented. Only 31 percent of those surveyed are outsourcing this responsibility, but of those doing so, 78 percent recommended it, and 84 percent recommended using a benefits carrier to handle benefits education and communication.
- Voluntary benefits: This is an underused solution to the cost problem – moving noncore benefits to employee-paid voluntary benefits. Fewer employers have yet to implement this strategy, but those who have done so give it very high marks. Of the third of employers surveyed who had done so, 87 percent gave it very high marks and 70 percent recommended it strongly.
- Dependent verification: Health plan audits can reveal a significant number of ineligible participants in your plan, such as dependents who are over age or who aren’t a blood relative or spouse, or former employees who haven’t been removed from the plan. There are huge potential cost savings by doing such an audit and performing the audit is sometimes available at no cost to the employer.
While Colonial Life’s survey was conducted for government employers, the findings are relevant for any employer. Consider these tips when concerned about rising costs in your own employee benefits plan.