For years, employee benefits decisions were often made using the same basic information: last year’s renewal rate, the carrier’s proposal, and what similar employers appeared to be offering.
That approach is becoming harder to justify.
Healthcare costs continue to put pressure on employers, while employees expect benefits that are competitive, affordable, and easy to understand. At the same time, employers have access to more information than ever before.
The opportunity isn’t simply to collect more data. It’s knowing what to do with it.
In my work with employers, I’ve seen how much better the benefits conversation becomes when decisions are based on more than a renewal percentage or a carrier’s proposal.
For growing businesses, data analytics is becoming an increasingly important part of employee benefits strategy.
Benefits Data Can Tell Employers More Than the Renewal Rate
When an employer receives a significant renewal increase, the natural reaction is often to ask whether the increase is reasonable.
That’s an important question, but it is only the beginning.
A renewal rate by itself doesn’t tell an employer why costs are increasing or whether the current plan is still the best structure for the organization.
A more useful analysis can look at factors such as:
- Claims experience
- Employee and dependent utilization
- Prescription drug spending
- High-cost claims
- Plan participation
- Deductible and out-of-pocket patterns
- Employee demographics
- Contribution strategies
- Historical cost trends
- Benchmarking against comparable employers
Looking at those factors together can give an employer a much clearer picture of what is actually happening inside the benefits plan.
The Goal Isn’t Just to Find the Cheapest Plan
One of the biggest mistakes employers can make is treating healthcare benefits as a simple price comparison.
The lowest premium doesn’t necessarily produce the lowest overall cost.
A plan with a lower premium could expose employees to significantly higher out-of-pocket costs. A plan with a higher premium could provide better value depending on how employees actually use their benefits.
This is where data can change the conversation.
Instead of asking:
“Which plan has the lowest premium?”
employers should be asking:
“Which plan provides the best overall value for our company and our employees?”
That’s a much more strategic question.
Data Can Help Employers Evaluate Different Funding Strategies
Data analytics can also help employers evaluate whether their current funding arrangement still makes sense.
For some organizations, a traditional fully insured plan may remain the right choice.
For others, alternatives such as level-funded arrangements may deserve a closer look.
The decision shouldn’t be based simply on the promise of saving money.
Employers should evaluate the financial risk, employee population, claims experience, plan design, stop-loss protection, carrier structure, and administrative requirements.
For employers considering this approach, level-funded health plans can be one option to evaluate as part of a broader benefits strategy.
Benchmarking Can Put Healthcare Costs Into Perspective
Another valuable use of data is benchmarking.
An employer may know that its healthcare costs increased 12%, but that number doesn’t mean much without context.
How does that compare with similar employers?
Are employee contributions significantly higher or lower than the market?
Is the employer’s plan design competitive?
Are deductibles and out-of-pocket maximums creating problems for employees?
Benchmarking can help answer those questions.
Employers can also use an employee benefits benchmark calculator to get an initial sense of how their current costs compare with available market benchmarks.
That kind of comparison can give business owners and leadership teams a better starting point for conversations about benefits spending.
Employee Data Matters Too
Healthcare strategy shouldn’t focus exclusively on the employer’s costs.
Employee experience matters.
Employers can look at participation levels, enrollment patterns, employee feedback, utilization trends, and the questions employees repeatedly ask about their benefits.
Sometimes the problem isn’t that an employer has a poor benefits package.
The problem is that employees don’t understand what they have.
A benefits program can be financially competitive and still fail to deliver its full value if employees don’t know how to use it.
That makes communication and education an important part of the data-driven benefits conversation.
Where AI Fits Into Benefits Strategy
Artificial intelligence is beginning to create another layer of opportunity.
AI can help organizations identify patterns, organize information, automate certain administrative processes, and make large amounts of data easier to analyze.
But AI shouldn’t replace professional judgment.
Healthcare and employee benefits decisions involve financial considerations, compliance requirements, employee needs, and business objectives that can’t be reduced to a single algorithm.
The strongest approach is to use technology to improve the decision-making process—not to remove the human element from it.
Data Can Help Employers Ask Better Questions
Perhaps the biggest benefit of analytics isn’t a particular report or dashboard.
It’s the questions the data allows employers to ask.
Why did our costs increase?
Where are we spending the most?
Are our employees getting meaningful value from the plan?
Are there areas where plan design could be improved?
Would a different funding strategy make sense?
Are our employee contributions competitive?
Are we paying for benefits employees don’t value while overlooking benefits they do?
Those are questions that can lead to better decisions.
What Growing Businesses Should Do Next
Employers don’t need a sophisticated data science department to start using data more effectively.
A good starting point is to establish a clear picture of the current benefits program.
Review the cost trends. Examine the claims and utilization information available to you. Benchmark the plan. Evaluate employee contributions and plan design. Then compare potential alternatives based on both cost and risk.
Most importantly, don’t wait until the renewal arrives to start the conversation.
Benefits strategy works better when employers have time to evaluate their options rather than making decisions under a deadline.
The Role of an Employee Benefits Consultant
This is where an experienced employee benefits consultant can provide value.
The consultant’s role isn’t simply to obtain insurance quotes.
A good advisor should help an employer interpret the information, identify opportunities, evaluate alternatives, and connect benefits decisions to the organization’s broader business strategy.
For growing employers, that can mean turning a complicated collection of healthcare and benefits data into decisions that leadership can actually use.
At JS Benefits Group, we work with employers to evaluate employee benefits strategy, healthcare costs, plan design, funding options, and the changing needs of their workforce.
The future of employee benefits will be increasingly data-driven. But the employers that benefit most won’t necessarily be the ones with the most data.
They’ll be the ones that know what questions to ask and what to do with the answers.
About Jennifer Schaefer
Jennifer Schaefer, MBA, ChFC, CLU, RHU, REBC, SHRM-SCP, is the Founder & CEO of JS Benefits Group, an employee benefits consulting firm serving employers with healthcare strategy, benefits plan design, cost containment, and workforce benefits solutions.
Jennifer is a Forbes Business Council Contributor and Co-Host of Executive Leaders Radio, where she discusses leadership, business strategy, and the future of work.
Her work focuses on helping employers move beyond simply renewing their benefits plans and toward more strategic, data-informed decisions about healthcare and employee benefits.
