Running a small to medium-sized business (SMB) can be financially challenging, especially when it comes to providing competitive employee benefits and managing insurance costs, since economies of scale generally benefit larger organizations. However, with strategic planning and calculated decision-making, SMBs can maximize savings without compromising on the well-being of their employees. In this article, we’ll explore cost-saving methods for SMBs in the areas of health insurance and employee benefits.

1) Conduct a Comprehensive Benefit Audit

Before making any changes, start by conducting a thorough audit of your current benefits package. This will help you understand where your company is overspending or underutilizing benefits. Key points to consider:

  • Employee Communication: Ask your employees which benefits are most important to them through surveys, emails, etc.
  • Data Review: Analyze the usage of existing benefits and what is driving claims to identify areas where costs can be optimized or solutions should be introduced.
  • Benchmarking: Compare your benefits package with industry standards to ensure competitiveness.

2) Emplore Self-Funded Health Plans

Many smaller organizations look past a self-funded model due to resource constraints and risk appetite, but various versions of self-funding can work for smaller employers. According to Kaiser Family Foundation’s 2022 Annual Survey, 35% of workers in small firms (3-199) are in a level-funded plan, a self-funding option. Level-funded plans often have a steady monthly rate employers contribute to cover claims, administrative costs, and stop loss coverage. Many of these plans limit offerings to smaller companies with fewer covered lives.

3) Leverage Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), and Flexible Spending Accounts (FSAs)

Consider HSAs, HRAs and FSAs for employee healthcare expenses, or if you are already offering one of these solutions, be sure to communicate the offering and encourage utilization among your workforce. These help employees pay for medical expenses beyond what is covered by your health plan and are particularly well-suited to pair with a high deductible health plan. Some offer tax advantages and can help reduce the financial burden on employees demonstrating that the company is invested in them. Depending on what path is chosen, employers can contribute to the account.

4) Offer Telemedicine Services

Telemedicine services have gained popularity, especially in the wake of the COVID-19 pandemic. By offering telehealth options as part of your health plan, you can potentially reduce healthcare costs associated with office visits and encourage preventative care. In 2023, most health plans provide some level of telehealth, but allowances and nuances vary, and it is worth a closer look.

5) Implement Wellness Programs

Wellness programs can lead to healthier, more productive employees and lower healthcare costs. Consider offering incentives for employees who participate in wellness initiatives such as fitness challenges, smoking cessation programs, or health screenings.

6) Negotiate with Insurance Providers

Leverage your broker/consultant to negotiate with insurance carriers and ensure you are getting the best coverage at the best rate. Our team helps clients explore options for bundling different types of coverage or increasing deductibles to reduce premium costs, and regularly seek competitive quotes from multiple providers.

7) Promote Employee Education/Communication

Educate your employees about their benefits and how to use them effectively. By ensuring that employees understand their coverage, they are more likely to make informed choices, reducing unnecessary healthcare expenses. Effective open enrollment communication strategies are essential in ensuring employees take advantage of benefits offered.

8) Consider Voluntary Benefits

Voluntary benefits, such as dental, vision, and life insurance, can be offered at little cost to the employer. These benefits can be partially funded by the employer, or fully funded by employees, depending on your budget and strategy. In any case, it will help bring costs down and provide nontraditional and more customized coverage for employees based on their needs (e.g., pet insurance, identity theft protection).

9) Review and Adjust Annually

Market conditions and employee needs change over time. Regularly review your insurance, health plans, and benefits package to ensure they align with your business goals, budget, and employee demographics. Adjustments may be necessary to stay competitive and cost-efficient, and new tools and solutions are being launched at a rapid pace.

10) Seek Professional Advice

Consult with insurance brokers, benefits consultants, or financial advisors who specialize in working with SMBs. Subject matter experts, like our team at Spring, can help you navigate the complexities of insurance and benefits, ultimately saving your company time and money.

In conclusion, cost-saving methods in insurance, health plans, and employee benefits for SMBs require strategic planning and a commitment to employee well-being. By conducting regular reviews, being as targeted as possible, negotiating with providers, and exploring innovative options like telemedicine, SMBs can achieve a balance between cost savings and providing valuable benefits to their employees. Remember that a well-crafted benefits package can be a valuable tool for attracting and retaining top talent in a competitive job market. If you’re interested in reevaluating your current benefits package or wonder how your programs stack up, our consultants and actuaries would be happy to assist.