By Jennifer Schaefer, MBA, ChFC, CLU, RHU, REBC, SHRM-SCP
Founder & CEO, JS Benefits Group | Forbes Business Council Contributor | Co-Host, Executive Leaders Radio
For years, employee benefits were something many employers focused on when the annual renewal came around. The rates came in, the plan was reviewed, changes were made if necessary, and then everyone moved on to the next issue.
That approach is becoming harder to maintain.
I work with small and mid-sized employers on employee benefits, healthcare costs, plan design, and HR strategy. I’m in the trenches with employers regularly, and I’m seeing firsthand how much more attention companies are paying to their benefits programs.
Healthcare costs have become too significant to simply wait for the next renewal and hope for the best. Benefits have become part of the overall business strategy.
Employers Are Looking More Closely at Healthcare Costs
Healthcare is one of the largest expenses many employers have to manage. At the same time, companies still need to provide benefits that help them attract and retain good employees.
That creates a real balancing act.
Employers are asking more questions about their health plans. What are we actually spending? Where are those dollars going? Are employees using the benefits? Are they getting value from the coverage? Is the plan designed appropriately for the workforce?
Those are questions I think every employer should be asking.
Simply choosing the least expensive option isn’t always the right answer. A lower premium may look good on paper, but if the plan creates higher out-of-pocket costs for employees or doesn’t meet the needs of the workforce, the savings may come at a cost somewhere else.
At the same time, spending more doesn’t automatically mean employees are getting a better benefits package.
The goal is to find the right balance.
Employees Want Benefits They Can Actually Use
I’m also seeing a change in what employees expect from their benefits.
Employees want benefits that are useful, understandable, and affordable. They don’t necessarily expect their employer to pay for everything, but they do expect the benefits they’re offered to make sense for their lives.
A benefit can look impressive on paper, but if an employee doesn’t understand how to use it or can’t afford the cost associated with using it, it doesn’t have much value.
That’s why communication is so important.
Employers can spend a significant amount of money providing health insurance and other benefits, but employees may not recognize the value if they don’t understand what they have.
Benefits education shouldn’t happen only during open enrollment. Employees have questions throughout the year, and they need to know where to go for answers.
For employers looking at the broader picture, employee benefits strategy and solutions should be about more than simply selecting an insurance plan. It should include how the benefits fit the workforce, how they are communicated, and how the overall program supports the company’s goals.
Benefits and Retention Go Hand in Hand
Employee benefits are also closely connected to retention.
Compensation matters, but it isn’t the only reason people stay with an employer. Employees also look at health insurance, retirement benefits, paid time off, flexibility, workplace culture, management, and whether they feel valued.
For smaller employers, this can be especially challenging. They may not be able to compete with a large corporation on salary alone.
That doesn’t mean they can’t compete.
A thoughtful benefits package can be part of the overall value an employer provides. The key is understanding what employees actually value instead of simply adding more benefits and hoping that improves retention.
The same thing applies to recruiting. Employers sometimes spend a lot of time thinking about what they need to offer to attract new employees while overlooking the people they already have.
Keeping good employees starts with understanding why they stay and what could eventually cause them to leave.
The Cheapest Plan Isn’t Always the Best Plan
One of the biggest mistakes I see employers make is focusing too heavily on price.
Cost matters. Employers have budgets, and healthcare costs need to be managed responsibly.
But the cheapest plan isn’t necessarily the most cost-effective plan.
Employers should look at the entire picture, including plan design, employee contributions, utilization, pharmacy costs, funding arrangements, and the needs of their particular workforce.
For some employers, alternative funding approaches such as level-funded health plans may be worth considering. Whether that approach makes sense depends on the employer’s circumstances, workforce, budget, and risk tolerance.
The important thing is not to choose a strategy simply because another company is using it.
What works for one employer may not work for another.
Benefits Strategy Shouldn’t Start at Renewal
I believe one of the biggest changes employers need to make is moving away from a renewal-only mindset.
Benefits strategy should be an ongoing process.
Employers should be looking at their workforce throughout the year, paying attention to employee feedback, reviewing utilization and costs, and considering whether the benefits package still makes sense for the company’s goals.
That doesn’t mean changing the plan every few months.
It means understanding what’s happening before the renewal arrives so you’re not making decisions under pressure.
When employers wait until they receive a large renewal increase, their options can become much more limited. Starting the conversation earlier gives them more time to evaluate plan design, funding options, employee contributions, wellness strategies, pharmacy costs, and other areas that may affect the overall cost.
Employees Need Help Understanding Their Benefits
Another area that deserves more attention is employee education.
Health insurance is complicated. Employees shouldn’t have to become insurance experts just to understand their own coverage.
Employers can improve the employee experience by making benefits easier to understand and providing clear explanations about how and when to use them.
That can also help employees see the value in the benefits their employer is providing.
If employees understand their coverage, they’re more likely to use it appropriately and appreciate what the company is investing in their overall compensation package.
The Role of the Benefits Advisor Is Changing
As healthcare costs continue to rise and benefits become more complicated, I believe the role of the benefits advisor has become more important.
Employers don’t simply need someone to present insurance options at renewal.
They need someone who can look at the entire picture and help answer practical questions:
What is driving our costs?
Are we getting the value we should be getting?
Are our employees actually using the benefits?
Is our plan competitive?
Are there alternatives worth considering?
And perhaps most importantly, what actually makes sense for our company?
There isn’t one benefits strategy that works for every employer. A company’s size, industry, workforce, budget, employee demographics, and business goals all matter.
Looking Beyond the Annual Renewal
Employee benefits are no longer something employers can afford to put on the shelf for 11 months of the year.
Healthcare costs are too important. Employee expectations are changing. And competition for good employees remains strong.
The employers that take a more thoughtful approach will be in a better position to manage costs while still offering benefits employees value.
That doesn’t necessarily mean spending more.
It means understanding where the money is going, designing benefits around the workforce, communicating those benefits clearly, and continuing to evaluate the strategy throughout the year.
Employee benefits are ultimately about two things: managing an important business expense and taking care of the people who make the business run.
The companies that can balance both will be better positioned to compete, retain their employees, and build stronger organizations over the long term.
