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10 ways to lower benefits costs

Okay, I guess that TARP thing isn’t exactly working out now is it? Prudent companies are looking at ways to cut costs. Let’s explore some ways to squeeze real dollars out of your employee benefits program without significantly harming your goal of attracting and retaining employees:

1. Ditch the PEO. If there was ever an inefficient, expensive way to deliver employee benefits this is it. Buying workers comp, payroll administration and group insurance from standalone vendors should afford immediate dollar savings.
2. Reduce non-network medical benefits. It is not unusual for 90 or 95% of medical claims to be incurred with in-network doctors and hospitals. So why have overly generous non-network benefits that few people use? An employer may have non-network medical benefits paid at 80%; consider reducing to 70%. If at 70% consider a change to 60%.
3. Institute an opt-out program. If your plan pays a significant amount of dependent premiums and a decent number of those dependents have access to other coverage (through their employer’s plan), then providing an incentive to get off your plan will lower your premium costs.
4. Install an HSA or HRA plan. This solution is not for everyone. Much will depend on the overall health of your group, you and your employees’ willingness to take on claims liability, and the financial ability of you and your employees to fund the HSA or HRA.
5. Eliminate unused plans. We’ve taken over a number of groups that were paying for benefits that their employees just didn’t use – a vision plan for instance. Go to your employees and have a heart-to-heart. Discuss what forms of compensation are important – salary, commissions, bonuses, each employee benefit, etc. You may be surprised with their candor and understanding.
6. Tighten up your definition of an eligible employee. If presently an employee must work 30 hours a week to be eligible for benefits, consider raising the requirement to 40. If presently an employee must wait 30 days before benefits start, consider increasing that wait to 60 or 90 days.

The suggestions above, in relative terms, have little impact on an employee’s perception of his or her benefits package. Let’s assume, however, that items 1 – 6 did not produce the necessary level of savings. Even though your goal of attracting and retaining employees will suffer, you may be forced to consider these more drastic measures:

7. Reduce benefits. Now we are getting serious. You are shifting costs from the employer to the employee. Increase deductibles, copayments, and patient out-of-pocket costs. Switch from the more expensive PPO and POS plans to the more restrictive, cost effective HMO products.
8. Adjust employee premium contributions. This one will hit to the heart of the matter. Very simple – make your employees pay more out of their pocket for their insurance.
9. Eliminate benefit plans. I always say that you should insure catastrophic risks. Keep your medical and long-term disability plans. Keep your dental plan if possible. Dental insurance is not covering a catastrophic risk, but it is a great employee benefit. In tight times short-term disability and vision plans are luxuries and should be on the chopping block.
10. Eliminate a class of eligible employees. In certain industries (mainly blue collar ones) you may see the elimination of a whole class of employee from eligibility. For example, exclude all hourly employees from the eligible class. Obviously this is a last ditch tactic.

None of this is fun to think about, but know that reducing costs as early as possible will enhance a company’s chance of survival. Some of these suggestions can be implemented with little effect on employees and their moral. Others will have a direct and real impact on the employees’ disposable income.

Effective employee communications is key. How any change is presented to the employee population is important. While I’m biased on this issue, an ethical, competent and experienced insurance broker is your best resource at a time like this. Call us if you need help: 770-300-0001.