As healthcare costs rise, business leaders are increasingly concerned about how to protect their bottom line. Benefits now make up roughly 30% of total compensation costs for private industry workers, and this share is expected to continue to increase. Yet competitive benefits remain essential for attracting and retaining qualified employees in today’s market.
Fortunately, businesses do not need unlimited budgets to offer their workforce meaningful benefits. Here is how you can build a competitive package that serves your employees well while keeping costs manageable.
What Actually Drives Your Benefits Costs Higher
The solution to controlling costs is having a clear understanding of where the money is going. Healthcare expenses typically account for the largest share of benefits spending. Employee compensation costs rose 3.8% in 2024, with benefits costs rising 3.6% over the 12 months. This type of steady climb can add up surprisingly quickly.
Keep in mind that reactive approaches cost more than strategic ones. When you constantly address issues as they arise instead of focusing on preventing them, you end up paying a premium for crisis management. High-deductible plans might seem an easy way to reduce your premiums. However, this approach can backfire dramatically if it leads your employees to avoid necessary care and results in costlier conditions down the road.
Look carefully at your claims data, utilization patterns, and demographic trends to better understand your cost drivers. Different industries will encounter various challenges, and what works well for a tech startup may not necessarily be effective for a manufacturing company.
How to Design Plans That Balance Cost and Value
A smart plan design will put your dollars where they matter most. This means being very strategic about which services you cover and at what levels. For example, consider reducing or ending cost-sharing for chronic disease management and preventive care. When your employees can access care early without worrying about copays or deductibles, you could prevent expensive complications later.
Tiered networks can also be useful, steering employees toward high-quality and cost-effective providers. This can reduce unnecessary spending without compromising employees’ access to care.
Some businesses choose to use health savings accounts paired with high-deductible plans, but this is effective only when employees receive proper education about them and when the business contributes meaningfully to these accounts. Working with experienced employee benefits consulting firms can help you understand these complex trade-offs and design plans that will actually work for your workforce.
Plan design shouldn’t be a one-and-done exercise. The most successful businesses review their offerings regularly and adjust based on actual utilization and outcomes.
Why Prevention and Wellness Programs Can Deliver Considerable Savings
Wellness programs often garner mixed reviews, but research shows they can yield clear benefits when done correctly. Some studies have found that employers can realize approximately $6 in healthcare cost savings for every dollar invested in wellness initiatives. The Cigna-commissioned Avalere Health study found that employer-sponsored health programs yield an average 47% return on investment, with projections reaching 52% by 2026.
The secret to getting it right is to focus on programs that address your workforce’s actual needs rather than implementing trendy initiatives that aren’t a good fit. Mental health support increasingly drives value. In fact, employees with mental health challenges often end up leaving their positions, making support programs not just a health benefit but also a retention tool.
Effective wellness programs extend beyond basic gym memberships to include resources for stress management, financial wellness tools, smoking cessation support, and condition-specific coaching. Employee benefits consulting firms point out that making preventive services free at the point of care increases their utilization and helps identify issues early, resulting in significant long-term savings.
How Benchmarking Reveals Opportunities for Savings
Businesses need accurate metrics before they can make helpful improvements. Benchmarking your benefits against similar organizations in your industry and region can reveal where you’ve been overspending and where you may be falling short on competitiveness.
For example, medical care benefits were available to 72% of private industry workers in March 2025. These types of general statistics are fairly easy to research, but benchmarking yields much deeper insight into the metrics that matter to your business and its specific features and concerns. Knowing where your offerings stand relative to your talent market can help you make more informed decisions about where to invest and where you might pull back without jeopardizing your competitive position.
Benchmarking goes beyond simple comparisons of plan types and coverage levels. It should also look at contribution strategies, deductible structures, out-of-pocket maximums, and network configurations. You’ll want to consider how your benefits compare in terms of total cost of care, not just premium contributions.
Regular benchmarking can also help you to identify industry trends before they become expectations among the talent pool. When a specific benefit becomes standard in your market, you’ll know before your competitors start using it as a recruiting advantage against you.
When you use data to support your decisions, you’ll gain a better understanding of which benefits your employees value most and which ones aren’t being used. This enables you to redirect your resources toward offerings that will have a greater impact.
Building Your Strategic Advantage
Creating competitive benefits on a controlled budget requires expertise, data, and a long-term perspective. At Business Benefits Group, we’ve spent nearly three decades helping businesses address these challenges. Our approach combines deep industry expertise with data-driven insights to create benefits strategies that suit your budget and your people.
Are you ready to explore how your organization can offer more substantial benefits while managing your costs more effectively? Contact our team at Business Benefits Group today to schedule a benefits strategy consultation.