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10 Proven Methods for Reducing Health Insurance Costs for Employers

by Andrew Sowell, on September 07, 2022

It's no surprise that health insurance costs for small business employers can be high and can continue to rise yearly. Shifting the cost to your employees can mean the loss of talent or unhappy employees. For the same reasons, you don’t want to take away the benefits they care about.

Reducing employer health insurance costs doesn't necessarily mean moving the costs to your employees. There are multiple ways to reduce costs, including offering various benefit plans.

If you're looking for ways to reduce employee health insurance costs, we've put together a list of 10 proven methods that will answer all your questions and more.

1.Survey Potential and Current Employees

An employee survey is a great way to save money and time and focus on exactly what benefits your current and potential employees want. Knowing this helps you see what benefits are a priority for your employees, as well as which can potentially be removed from your total benefits package.

Potential survey questions can include:

  • Which employee benefits are most important to you?

  • Which employee benefits are least important to you?

  • What would you add to the benefits package to improve it?

Results from the survey will also allow you to understand if your employees are happy with their current benefits package.

2.Provide Benefit Selection Education

Communication is vital in educating your employees on the types of benefits your company offers. Many benefits, and the terminology that comes with them, can be extremely confusing to employees. Speaking to your employees and helping them fully understand available benefits can improve their satisfaction.

It's a good idea to talk to your staff year-round – not just during open enrollment –as life events can happen at any point. Communicating with your employees throughout the year should also decrease the workload during open enrollment. By offering your employees educational tools, they can make better purchasing decisions, which will likely reduce your overall cost.


3.Add Telehealth Alternatives

Telehealth is an excellent, cost-saving alternative for your health benefits plan. It helps reduce healthcare costs by making it easier for employees to get ahead of issues and avoid unnecessary, in-person doctor visits.
Per a telemedicine platform study, cost savings from using telehealth is estimated to be $19 to $120 per visit. Another benefit of telehealth is that you will get a more engaged workforce. By having more accessible and affordable healthcare, employees will likely use it more and get the treatment they need. In turn, employees will be healthier and achieve higher levels of performance while at work.


4.Offer a Variety of Plan Choices

Offering multiple plan choices is a great way to retain your workforce. Not all your employees have the same needs, so a one-size-fits-all plan may not be the best option for your organization. You can meet your employees' needs without overspending by providing flexible options. For example, an employee with more significant medical needs may want a low-deductible plan, while an employee with fewer medical needs may opt for a higher-deductible option.


5.Consider an HSA Plan Option

A Health Savings Account (HSA) is a savings account for your employees that sets money aside to pay for certain qualified medical expenses. Your employees must be enrolled in a high deductible health plan that is HSA eligible. Offering an HSA plan can be a win-win situation for you and your workforce. By providing an HSA plan, you get the benefits of lower payroll taxes and higher employee satisfaction.
Higher employee satisfaction will result in higher talent retention. Your employees will benefit from lower taxable income, more control of their healthcare spending, and long-term savings options. Some people even view their HSA as an added retirement account because there is no "use-it-or-lose-it" policy. They can use it when they're over 65 for either medical expenses (tax-free) or non-medical expenses (regular income taxed).


6.Include a Wellness Program

A wellness program can help "low-risk" employees maintain their positive health while helping "high-risk" employees improve their well-being. This will help lower your overall health insurance costs. According to the CDC, workplace health programs can lead to a 25-percent savings on absenteeism, healthcare costs, and workers' compensation and disability management claims.

Examples of employee wellness programs include:

  • Healthy Lunch and Snacks Longer lunch breaks can help provide employees with enough time to either go to the gym or eat a healthy homemade lunch rather than quickly picking up fast food nearby. Having a cafeteria for your employees to eat on-site is also a great plus.

  • Assistance Programs Help your employees by providing resources for them to help deal with personal issues such as substance abuse, stress, anxiety, and depression. This can help your employees achieve peace of mind and perform their best.

  • Fitness Activities On-site gym services and fitness classes can help employees stay fit. This is especially helpful to employees who are working desk jobs and are sitting most of their day.

  • Community Service Activities Helping out in the community can lead to your employees feeling more fulfilled. Happier employees are more likely to produce high-quality work and stay with your company.


7.Educate Employees on Healthcare Choices

Similar to No. 2 on our list, educating your employees on how health insurance works and their available options is a great and cost-efficient way to help them save. Perhaps surprisingly, many employees often choose a health insurance plan that provides too little or too much coverage. Over time, this can lead to excessive claims or unnecessarily high premiums for you and your team.

Ways in which you can educate your employees regarding health insurance include:

  • Open Enrollment Training

  • Internal emails with informative health insurance content

  • A point of contact within the organization that they can reach out to with any questions

  • Printed materials can help them compare different plans

  • Hire an outside expert to provide training

As you continue to provide health insurance education to your staff, utilize feedback tools such as surveys to gauge how effective the changes are.


8.Explore More Options Through a PEO

By utilizing a Professional Employer Organization (PEO), employers can save money through a PEO's buying power. A PEO can get better rates on benefits, including health insurance, which can help your business save money since your employees will have access to the pool of plans that the PEO offers.

If you are unsure what a PEO is, you can read our PEO Definition and Detailed Walkthrough blog.


9.Exclude Unnecessary Coverages

You can cut costs by removing coverages that your employees aren't interested in or are not using. You can use the results from the first item on our list above regarding the benefits survey. The survey results will help identify what coverages aren't necessary anymore and you can remove them from your plan options if possible.


10.Determine Whether Self-Funding is Viable

Self-funding is when an employer will pay most or all the benefit claims cost. The insurance company will manage the payments, but the employer will pay the claims.

Self-funding isn't always the best option for every employer. A self-funding employer assumes the financial risk for paying the claim costs, so the employer needs cash flow to pay for it, and the claims can be unpredictable. The high cash flow needs and unpredictability can make it difficult for smaller businesses to choose self-funding as a viable option. However, companies with as few as 25 employees can have a self-funded health plan.


Offer Your Employees Top-Tier Health Insurance at a Lower Cost with LandrumHR

Are you interested in partnering with a PEO to help offer your employees Fortune 500 health benefits? Utilize our buying power for employee benefits to attract and retain talent for your business. 

LandrumHR is an award-winning, certified Professional Employer Organization with over 50 years of experience helping small and medium-sized businesses succeed. Our customized PEO services are designed to help your business achieve its goals.

Contact our team today to find out how we can reduce your health insurance costs and help your business succeed.

Andrew Sowell

Andrew Sowell currently serves as the Director of Business Development for LandrumHR. He received his degree in Business Marketing from Florida State University and has an extensive background helping business owners solve problems that impact the bottom line. His passion is consulting with business owners and highlighting areas where the company can save money, increase profits, improve employee engagement, and protect the business from compliance issues.

View more blogs by Andrew Sowell