Every employer wants to take care of their people.
That is why business owners often gravitate toward lower deductibles, lower copays, broader networks, higher employer contributions, and richer medical plans. Those decisions feel generous—and they can make a meaningful difference for employees.
But “more generous” and “better” are not always the same thing.
In 2025, the average annual premium for employer-sponsored family coverage reached $26,993. Workers contributed an average of $6,850 toward that coverage, and the average deductible for single coverage among workers in plans with a general deductible was $1,886.
Mercer projects that the average cost of employer-sponsored health coverage will exceed $18,500 per employee in 2026, following an expected 6.7% increase. (KFF)
In that environment, every benefits decision has to serve two objectives:
Help employees access meaningful, affordable care.
Remain financially sustainable enough for the employer to continue offering it.
As Gabriel Cuellar, SVP at BestFit PEO Solutions, put it during a recent conversation:
“Are you too rich? Too poor? Or right on par?”
That is the question brokers should help their clients answer before renewal season—not after a major increase arrives.
Consider a small employer offering a medical plan with a very low deductible, minimal cost sharing, and nearly 100% employer-paid premiums.
On the surface, it looks like an exceptional benefit. But the plan may also create two predictable effects.
First, when employees pay less at the point of care, overall utilization generally increases. One well-known employer study found that moving employees from free medical care to a high-deductible plan reduced total spending by approximately 12% to 14%. Nearly all of that reduction resulted from employees using fewer services—not from shopping for lower-priced providers. (NBER)
That does not mean employees with richer coverage are abusing the system. They are responding to the plan they were offered. The employer created the incentives, and employees are using the benefit as designed.
Second, employees with higher anticipated healthcare needs naturally place greater value on more generous coverage. Research involving a large employer found that both increased utilization under richer coverage and the tendency of higher-cost employees to choose the richer plan contributed to differences in spending between plan options. (NBER)
This is sometimes described as attracting the “wrong talent,” but that language misses the real issue. Employees who need healthcare are not the problem. The risk is designing a benefits promise that is materially richer than the market, shapes enrollment in an unintended way, and cannot be supported by the company’s long-term budget.
The employer controls the plan design. That is where the strategic conversation belongs.
When an employer receives a difficult renewal, the immediate response is often to raise the deductible, increase employee contributions, reduce employer funding, or eliminate the richest plan.
Those actions may reduce employer costs, but cost shifting is a blunt instrument.
The same employer research that found higher deductibles reduced spending also found that employees reduced both potentially unnecessary care and potentially valuable care, including preventive services. In other words, people do not always distinguish perfectly between care they should avoid and care they should continue receiving. (NBER)
A plan that is too lean can create its own business problems:
Employees may decline coverage because they cannot afford the payroll deduction.
Employees may delay necessary care because of the deductible.
Recruiting teams may lose candidates to competitors with more usable benefits.
Employees may see little value in a plan they cannot afford to use.
The employer’s benefits investment may fail to produce meaningful retention or engagement.
Healthcare benefits remain a major workforce priority. In SHRM’s 2025 Employee Benefits Survey, 88% of employers rated healthcare benefits as “very important” or “extremely important.” SHRM also notes that employers consider workforce demographics, industry standards, budget, and recruitment and retention goals when setting their benefits policies.
The objective, therefore, is not simply to reduce benefits. It is to right-size them.
A national average may be useful for context, but it does not tell a regional construction company, a six-person dental practice, or a 75-person technology company what it should offer.
A meaningful benefits benchmark starts with a true peer group.
That includes employers with similar:
Industries
Employee counts
Geographic markets
Workforce demographics
Wage levels
Recruiting challenges
Job types
Growth stages
SHRM’s benefits benchmarking resources, for example, allow employers to evaluate results by industry, organization size, region, and state. Those are the same dimensions Gabriel emphasized when describing how he historically helped clients understand whether their benefits were above, below, or aligned with comparable employers.
A broker should then compare more than the premium. The review should include:
Employer and employee premium contributions
Employee-only and dependent contributions
Deductibles and out-of-pocket maximums
Copays and coinsurance
Network access
Prescription drug coverage
HSA or HRA funding
Plan options and buy-up costs
Participation and waiver rates
Eligibility and waiting periods
Utilization patterns
Renewal history
The benchmark is not intended to tell every client to become average. It gives the client enough context to make an intentional decision.
An employer may choose to offer benefits that are 10% or 20% richer than its market. That can be a valid recruiting strategy. But the employer should understand the cost of that choice and budget accordingly.
Generosity should be intentional—not accidental.
The answer does not have to be one rich plan or one high-deductible plan.
A well-designed benefits package can create multiple levels of choice.
For example, the employer might:
Offer a competitive base plan with a sustainable employer contribution.
Allow employees to buy up to a richer option by paying the additional premium.
Pair a qualified high-deductible plan with an employer-funded HSA contribution.
Keep preventive and other high-value care accessible.
Use network and pharmacy strategies to guide members toward higher-value options.
Phase in major contribution or deductible changes over multiple renewals.
Provide decision-support tools so employees understand the tradeoffs.
Use total compensation statements to show the full amount the employer is investing.
A base-plan-and-buy-up structure can be especially valuable. It gives employees access to richer coverage when they value it, while preventing the employer from automatically funding the most expensive option for everyone.
It also creates accountability without eliminating choice.
A high renewal is not always proof that the client’s employees used too much healthcare.
Healthcare cost trend reflects multiple factors, including provider prices, utilization, prescription drugs, new therapies, large claims, network contracts, demographics, and the carrier or PEO’s rating methodology. Mercer notes that both healthcare prices and utilization are currently contributing to cost growth. (Mercer)
The funding arrangement matters as well.
In the ACA-compliant individual and small-group markets, insurers generally use a single risk pool, and premiums can vary only according to permitted rating factors such as age, geography, family size, and tobacco use. A specific small employer’s claims are not simply used to experience-rate that employer’s renewal. Other large-group, self-funded, level-funded, and pooled arrangements may treat claims experience differently. (Centers for Medicare & Medicaid Services)
That means the broker should first determine:
What actually drove the increase?
How much is market trend?
How much is plan design?
How much is pharmacy?
How much is related to claims experience?
How does the funding arrangement affect the calculation?
Would changing the plan solve the problem or simply shift more cost to employees?
Is the current PEO or provider still the right fit?
Shopping the market may be appropriate. But going to market without understanding the underlying problem can produce a temporary discount instead of a long-term strategy.
Clients do not need a broker who automatically recommends the cheapest plan.
They also do not need someone who assumes the richest plan is always the best employee experience.
They need an advisor who can translate business strategy into benefits strategy.
That means helping the client answer three questions:
Is the package competitive enough to support our talent strategy?
Is it affordable enough for employees to use?
Is it sustainable enough for the business to keep?
The benefits sweet spot will be different for every organization. But the methodology remains consistent: benchmark the market, understand the workforce, evaluate the financial tradeoffs, create meaningful choice, and communicate the value clearly.
At BestFit PEO Solutions, we support brokers with PEO market expertise, financial analysis, comparison support, and the operational resources needed to evaluate options while the broker remains at the center of the client relationship.