The escalating cost of employee benefits — and how PEOs can help
For smaller companies, these rising costs can feel especially burdensome—and they rarely go down. In 2023 alone, employer health insurance expenses rose 5.2%, with more increases expected, according to Mercer's National Survey of Employer-Sponsored Health Plans.
That means employers are left facing a consistent challenge: how to contain the cost of employee benefits without sacrificing quality.
Why Benefit Costs Keep Rising
Some cost increases are beyond an employer's control, including:
Medical inflation (the rising cost of care)
Regulatory and reporting requirements
Another major factor: claims history. Like car insurance, higher claims often lead to higher premiums. But predicting claims year to year is difficult.
Additionally, small and mid-sized businesses often lack the time, resources, or expertise to:
Analyze claims data
Identify cost-saving opportunities
Negotiate competitive rates
Their smaller employee headcounts also reduce bargaining power. In fact, the National Conference on State Legislatures reports that small businesses pay 8% to 18% more for the same coverage as larger companies.
Why Providing Benefits Still Matters
Even with high costs, offering quality benefits remains crucial. Here's why:
Attract top talent: Job seekers expect strong benefits. Without them, you can't compete.
Boost engagement and retention: Good benefits foster loyalty and job satisfaction.
Promote health and productivity: When employees have access to care, they're more likely to stay healthy and miss fewer days.
Stay compliant: Companies with 50+ full-time employees may face penalties under the Affordable Care Act if they don't offer affordable, compliant plans.
In short, cutting benefits isn't an option for most companies— but managing them more efficiently is.
How a PEO Can Help Control Benefits Costs
A professional employer organization (PEO) can be a game-changer for small and mid-sized businesses struggling with rising benefit costs.
1. Save Time and Resources
PEOs typically sponsor and manage benefit plans for their clients, assuming responsibility for:
Negotiating with vendors
Ensuring compliance
Managing benefit administration
That means your internal team no longer has to spend time researching plans, comparing rates, or handling day-to-day benefits tasks— saving you both time and money.
2. Improve Employee Education and Enrollment
PEOs also manage employee education and support during benefits enrollment. They offer tools to help employees understand their options and choose wisely—without burdening your internal team.
This enhances the employee experience while freeing you from answering routine benefits questions or managing enrollment logistics.
3. Offer Additional Health & Wellness Support
Reputable PEOs often include access to wellness services and fringe benefits that encourage a healthier workforce—helping reduce future claims and boost morale. These may include:
Wellness programs focused on stress, fitness, nutrition, and tobacco cessation
On-site health screenings to increase awareness and detect early health risks
Workplace safety policies to prevent injuries
Employee Assistance Programs (EAPs) for mental health, grief, or personal struggles
These initiatives can proactively reduce medical claims, absenteeism, and long-term healthcare expenses.
The Bottom Line
Containing the cost of employee benefits is a growing concern for businesses of all sizes, but especially for small and mid-sized companies that lack leverage and HR capacity.
Key takeaways:
Health insurance costs rise annually, often beyond what small businesses can control.
Smaller employers often pay more and struggle with the administrative workload of benefits management.
Partnering with a PEO can help you control costs, save time, reduce risk, and offer better employee experiences.
If you're looking for a way to support your employees while protecting your bottom line, exploring a PEO relationship could be a smart move.
At Insperity, it's not just HR outsourcing, it's HR that makes a difference. Our comprehensive, scalable HR solutions offer an optimal blend of service and technology to facilitate growth by streamlining processes related to payroll, benefits, talent management and HR compliance. We provide the tools to help you lighten your administrative load, maximize productivity and manage risks – so you can focus on growth. Because that's what it means to have a true HR partner. insperity.com.
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Ideally you should find solutions outside of that unless you have some sort of medical condition that requires it." She also noted that it's important to speak to your doctor before taking melatonin supplements. 20. Give your sleep a scent And finally, create a sleep environment with a relaxing scent. Lavender-scented pillow mists have always been my go-to sleep aid, but you can use any scent you want — as long as you find them relaxing or comforting. In fact, sleep writer Jenny Haward recently tried (and loved) the 'French woman sleep hack', where you wear the same perfume to bed every night for some sleep-inducing aromatherapy.
