Best Practices for Health Benefit Cost Savings

Among large employers, those Gallagher identifies as best-in-class use proactive planning to spend less, while best-in-class mid-size employers rein in costs without shifting the burden to employees.

Findings from Gallagher’s two new Best-in-Class Benchmarking Analysis reports reveal strategies large and mid-size employers are using to balance health benefit costs with providing benefits that attract and retain top talent.

While large employers (1,000 or more full-time employees) spend more than mid-size employers on benefits, what Gallagher calls the best-in-class in the large group leverage their scale to keep a tighter lid on their financial outlay. Sixty-two percent of the best-in-class group spend less than $10,000 per eligible employee on benefits, compared to just 42% of large employers overall.

Some per-employee savings are due to the best-in-class paying a smaller share of employee health and long-term disability premiums, but they also take a more strategic approach to benefits planning. Forty-six percent have a multi-year strategy versus just 27% of their peers. Advance planning enables these top employers to make more informed spending and health care decisions.

The best-in-class are also more likely to view total compensation as an investment in maximizing workforce performance to achieve business outcomes (38% vs. 25%) and prioritize objectives that support production and productivity, such as employee health and wellbeing.

What mid-size employers are doing

Compared to other mid-size employers, the best-in-class were less likely to increase employees’ contributions to health plan premiums (43% vs. 57%) and their cost share through plan design changes (41% vs. 55%), such as higher deductibles, copays or coinsurance.

Instead of passing along higher health insurance costs to employees, the best-in-class are experimenting with other ways to manage total health care spending, such as offering fewer plan options—often choosing to self-insure their medical plans and carving out pharmacy benefits.

Mid-size best-in-class employers also invest more in programs for employee wellness (63% vs. 54%) and disease management (45% vs. 31%). Measures of success include employee engagement and satisfaction as well as participation.

This year’s reports use selected data from 1,192 mid-size employers and 315 large employers that responded to Gallagher’s 2017 Benefits Strategy & Benchmarking Survey. View the reports here: