Emerging EB Business Insights
Is Your Contribution Strategy Helping or Hurting Your Benefits Budget?
SEPTEMBER 1, 2026
If your health plan renewal came in higher than expected, you're not alone. Many employers are seeing premium increases averaging around 11%, with some markets experiencing increases of 15% to 30% where carrier options are limited. While employers can't control every factor driving healthcare costs, they can evaluate whether their contribution strategy is helping manage costs — or unintentionally driving up plan spending.
How much the company pays for coverage, and how those contributions are structured, can influence employee plan selection, overall health plan costs, and the value employees receive from their benefits. In today’s environment, employers should consider whether their contribution strategy is:
- Driving employees toward higher-cost plan options.
- Helping the business compete with larger employers that are required to offer affordable coverage and can often provide richer benefits.
- Providing a competitive level of spouse and dependent contributions, compared to larger businesses in the market.
Employees want options. Offering more than one plan can help companies meet that expectation, but balancing enrollment between plans allows employees to choose the coverage they prefer while helping to keep employer costs low.
How Does Plan Richness Impact Enrollment?
Employers might believe they’re offering a wide diversity of plans based on deductibles, but those plans may be closer in value than they realize. Evaluating plans by “metal tier” can help determine whether employee contributions and out-of-pocket (OOP) expenses are guiding members toward the most cost-effective coverage.
Health plans are categorized into levels, or metal tiers, based on the percentage of medical expenses covered by the plan. This percentage is referred to as “actuarial value,” or AV. As illustrated in the table below, a silver plan covers approximately 70% of medical expenses, while employees cover the remaining 30% through OOP costs like copays and deductibles.
How Metal Tiers Compare by Actuarial Value
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Covers 60% of |
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Covers 70% of |
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Covers 80% of |
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Covers 90% of |
Richer gold or platinum plans offer lower OOP costs for employees, but come with higher premiums. Less rich plans, like bronze and silver, shift more of the cost to employees through higher OOP expenses but lower the overall cost for employers.
Compare Cost Savings Between Contribution Strategies
Modeling adjustments to a contribution strategy can help employers see the potential cost savings between metal tier options and make changes to ensure benefits are balanced. For example, an employer that currently splits contributions evenly with employees for both a silver base plan and gold buy-up may be incentivizing plan members to choose the richer (and more expensive) gold-tier plan. Switching to a defined contribution strategy may help lower the amount employees pay for the base plan, increasing enrollment in a less expensive silver-tier option.
To ensure plans are competitive with other organizations, contribution modeling should be paired with benchmarking. This can help employers see how their plan richness compares to similar companies, and adjust contributions to better manage health plan spending.
How USI Can Help
USI Insurance Services helps employers understand the value of their health plans by using our proprietary contribution decision support tool. This models several predesigned strategies and evaluates the potential impact of employee enrollment on total health plan spending. By using this modeling, employers can better understand what’s driving employees to specific plans and what changes would provide the most value.
USI can also provide employers with a detailed plan performance assessment, highlighting opportunities to adjust plan design and contribution strategies to make health plans more competitive and affordable. Read our recent article about USI’s Benefits Benchmarking Study to request a custom assessment for your company.
Looking at the whole picture — including contribution strategies and OOP expenses — can help you align your benefits with employee needs and better manage health plan spending for your company. Contact your local USI benefits consultant or email ebsolutions@usi.com to learn more.
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