How to keep health insurance costs down without cutting benefits

The high cost of employer-sponsored healthcare is a significant burden for business owners. According to data from the Kaiser Family Foundation¹ (KFF), the average premium for family coverage has increased by 20% over the last five years and 43% over the last ten years. As of 2022, employers and their employees paid an average annual cost of $7,911 for an individual policy and $22,463 for a family plan.

However, there are ways to keep these costs down without compromising the benefits you offer to your employees. By implementing a few strategies and making informed decisions, you can effectively manage your health insurance expenses while keeping out-of-pocket costs low for your employees.

In this article, we'll share strategies and approaches to help you save money on health insurance.

See what you can expect to pay for health insurance in your state with our chart

Consider all your options

Don't settle for the first health insurer you come across. Contact multiple health insurance companies to compare coverage options and pricing. Consider the plan's deductible and copays, not just the annual premium. Also, look for providers specializing in serving small businesses since they may offer more affordable plans tailored to your needs.

You may also want to consider offering a high deductible health plan or alternative options to traditional group health insurance coverage.

High deductible health plans

High deductible health plans (HDHPs) can help you provide essential coverage for your employees at a more affordable rate. They typically have lower monthly health insurance premiums but higher deductibles. You can pair these plans with health savings accounts (HSAs), where you and your employees can contribute pre-tax funds to cover out-of-pocket medical expenses, or a group coverage health reimbursement arrangement (GCHRA).

If you don't expect your employees to need many healthcare services, an HDHP is a great option. They are often the most cost-effective option for young, healthy workforces. However, if your employees require more frequent or serious care, a health plan with a higher premium and lower deductibles may be more cost-effective in the long run.

Health reimbursement arrangements

Additionally, look beyond traditional group health insurance and consider all your benefit options. A health reimbursement arrangement (HRA) is one popular alternative for employers on a budget who want more flexibility and budgetary control.

As an employer-funded health benefit, HRAs aren't subject to annual rate hikes. This makes it easier to budget for. You set a monthly benefit allowance for your employees to use on any qualified medical expenses they choose. Depending on the type of HRA you offer, you can also reimburse employees for their individual health insurance premiums. This means they have a say in the insurance carrier they have, the level of coverage they receive, and the healthcare providers they see.

Reimbursements are tax-free to employers and employees, as long as the employees are covered by a qualifying policy that provides minimum essential coverage (MEC).

PeopleKeep offers three popular HRAs:

• Qualified small employer HRA (QSEHRA): The QSEHRA is a standalone health benefit that's designed for small businesses with fewer than 50 full-time equivalent employees (FTEs).
• Individual coverage HRA (ICHRA): The ICHRA works for all employers. You can offer it as a standalone benefit or as an alternative to employees who don't qualify for your current group health insurance plan.
• Group coverage HRA (GCHRA): The GCHRA, also known as integrated HRA, provides additional coverage for expenses that aren't fully covered by a group plan, such as health insurance deductibles.

When managing an HRA, you can choose self-administration or a third-party administration platform, like PeopleKeep. With our benefits administration software, you can easily manage your health benefit in minutes each month. Our experts handle your legal plan documents, verify employee expenses, and send required notices automatically.

Health stipends

Stipends can also help you save money on your health benefit and offer you more flexibility. A health stipend is a set amount of money employers offer to help employees pay for their medical care expenses.

Unlike tax-advantaged HRAs, stipends are taxable to the employer and the employee. A stipend also doesn’t satisfy the Affordable Care Act’s employer mandate for applicable large employers (ALEs). But, they can be a better option than HRAs for organizations with many employees who qualify for premium tax credits.

Swap group coverage for individual coverage

Individual health insurance plans are often cheaper than employer-sponsored group health insurance. By offering an HRA, you can provide your employees with the funds to purchase a quality individual policy and spend less than you would on a group plan.

Investing in a QSEHRA or an ICHRA can help your employees with their individual insurance premium costs and out-of-pocket spending. It also gives them the power of choice. Instead of making your entire workforce enroll in the same group policy, you give each individual employee the ability to purchase the policy of their choosing. Many employees appreciate this freedom. Our 2022 Employee Benefits Survey Report found that 65% of employees value being able to choose their own benefits.

Employees can purchase their own health plan through a private health insurance carrier, a public exchange, or the federal government's Health Insurance Marketplace.

Find out which benefits matter most to your employees

When designing an employee benefits package, it's helpful to explore what specific benefits your employees desire. Our 2022 Benefits Survey Report shows that 83% of employees view an employer's benefits package as a significant factor in their decision to accept a job.

Conduct a benefits survey to find out which benefits your employees value the most and least. This way, you can prioritize what's most important to them while cutting less popular benefits. Doing away with benefits your employees rarely use can help save you money.

Implement a wellness program

Investing in the well-being of your employees can have a positive impact on their overall health and reduce healthcare costs. Offer wellness programs that include elements such as gym memberships, smoking cessation programs, health screenings, or healthy eating initiatives to encourage healthier lifestyles. When you have healthy employees, you can potentially reduce the number of insurance claims and decrease annual premiums in the long run.

As a bonus, employee wellness programs can also improve job satisfaction and employee retention at your organization. MetLife’s 2022 Employee Benefits Trends Study² found that 52% of employees said health and wellness programs like gym memberships are a must-have.

Establishing a wellness program takes a lot of work. If you want to offer wellness benefits without the hassle, consider a wellness stipend. This allows you to offer an allowance for the wellness expenses your employees choose, including gym memberships.

Encourage preventive care

Emphasizing the importance of preventive services to your employees can also rack up additional savings. Regular check-ups, vaccinations, and screenings can help catch health issues early on, leading to lower medical costs in the long term. Some insurance providers even offer incentives or reduced monthly premium costs for employees who participate in preventive care programs.

HealthCare.gov³ offers several examples of how your employees can take advantage of preventive care. We've compiled them in the chart below.

Utilize telemedicine

Telehealth services can also help your employees avoid high medical bills, which can lead to lower health benefits costs in the long run. Telemedicine allows employees to consult with healthcare professionals remotely, often at a lower cost than in-person doctor visits. Encourage your employees to take advantage of this convenient and cost-effective option for non-emergency medical concerns.

According to a study conducted by the Jefferson Health System⁴, telehealth saves employers and employees both time and money. The study revealed that avoiding emergency department visits resulted in cost savings ranging from $309 to over $1,500.

Conclusion

The cost of health insurance is high, but that doesn't mean you should skimp on benefits for your employees. By implementing these strategies and being proactive in managing healthcare expenses, you can strike a balance between providing quality health coverage and maintaining a sustainable budget for your business.

Remember, it's essential to communicate any changes or cost-saving measures to your employees transparently. Openly discuss the reasons behind these decisions and emphasize that your goal is to provide affordable and comprehensive healthcare coverage.

PeopleKeep can help you offer health benefits on a budget. Schedule a call with a personalized benefits advisor now!

This blog article was originally published on October 22, 2013. It was last updated on August 30, 2023.

1. https://www.kff.org/report-section/ehbs-2022-summary-of-findings/
2. https://www.metlife.com/employee-benefit-trends/2022-employee-benefit-trends/
3. https://www.healthcare.gov/blog/learn-the-importance-of-preventive-health/
4. https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/is-telehealth-really-saving-money-for-employers.aspx