How to Maximize Your Employee Benefits Without Sacrificing Quality

While an employee benefits plan is a vital part of employee compensation, it also represents a significant expense for many businesses in Nova Scotia. In most cases, the cost of employee benefits rises annually, often outpacing inflation. Whether you run a small business or a large corporation, here are four effective strategies to lower your employee benefits costs without sacrificing the quality of your plan:

1. Rethink Your Funding Model

Your employee benefits plan can be fully insured, self-insured, or a combination of both. Many small to medium-sized businesses opt for a fully insured model, but self-insured or Administrative Services Only (ASO) plans may be a better fit in certain cases.

While changing your funding model can lead to cost savings, it's important to proceed with caution. Before making a switch, review claims data from the past three years and consider factors such as employee turnover and company size. Additionally, assess the level of risk associated with different funding models—while self-insured plans can reduce costs, they also come with higher financial risks for the employer.

2. Review Your Plan Type

Is your benefits plan part of a larger pooled plan or a standalone plan?

A pooled plan combines your benefits with those of other businesses, distributing risk across a larger group. While this approach can provide stability for small businesses, your rates are influenced by the overall performance of the pool rather than your company’s individual claims.

In some cases, switching to a standalone plan can be more advantageous. These plans offer greater flexibility in design and customization, allowing you to tailor coverage to better suit your workforce while potentially lowering costs.

3. Optimize Your Plan Design

Small adjustments to your plan design can result in significant savings. One of the most effective ways to reduce costs is by adjusting co-insurance, which is the percentage of expenses covered by the insurance provider.

For example, if your dental plan currently offers 100% co-insurance, reducing it to 80% means employees will cover a portion of the cost. This not only lowers premiums but also encourages employees to be more mindful of their healthcare spending.

To offset this change while still providing value, consider adding a Healthcare Spending Account (HSA). For instance, reducing healthcare and dental co-insurance from 100% to 80% while introducing an HSA of $500 per employee per year can lower overall costs while offering employees more flexibility in how they use their benefits.

4. Market Your Plan Regularly

Marketing your benefits plan—obtaining quotes from multiple carriers—can help you secure competitive rates. We recommend marketing your plan every three to five years. When your current provider knows you're exploring other options, they are more likely to offer better pricing and terms to retain your business.

However, it’s crucial to ensure that any new quotes are sustainable in the long run. A thorough analysis by your benefits advisor can help determine whether proposed rates are realistic.

Regardless of whether you switch providers, negotiating a rate guarantee can help stabilize costs. For example, a guarantee that caps renewal increases at 10% or less ensures better budget predictability, even if claims fluctuate.

The Bottom Line

These are just a few strategies to reduce employee benefits costs while maintaining a high-quality plan. By carefully reviewing your plan structure, funding model, and market options, you can make informed decisions that benefit both your business and employees.

Importantly, you don’t have to wait until renewal time to make changes. There’s no penalty for switching providers or adjusting your plan before your renewal date. If you haven’t reviewed your benefits plan in the last three years, now is the time.

With over 20 years of experience helping employers optimize their benefits, we’re here to provide an objective review—at no cost or obligation. Get in touch today to learn more!