Cost Containment Strategies That Actually Work

Executive Summary

Group benefits costs are rising—and mid-sized Canadian employers are feeling the squeeze. Prescription drug inflation, disability claims, dental fee guide increases, and paramedical overutilization are pushing plans into unsustainable territory.

But slashing coverage or shifting more cost onto employees often backfires—hurting morale, engagement, and recruitment.

This article outlines evidence-based cost containment strategies that reduce spend without undermining employee value. You’ll learn how to:

• Analyze cost drivers using claims data

• Target the 5 most expensive plan categories

• Leverage smart plan design and funding choices

• Use HSAs, WSAs, and voluntary benefits to contain core plan inflation

• Implement governance and renewal discipline that keeps costs in check long-term

1. Why Cost Containment Is Urgent—but Often Mishandled

Many employers only start talking about cost containment after a bad renewal—but by then, options are limited.

The real opportunity lies in proactive containment strategies that:

• Reduce overuse

• Prevent inappropriate claims

• Increase plan flexibility

• Preserve employee trust

Cutting benefits indiscriminately causes resentment. True containment improves efficiency, not just cost.

2. The 5 Most Common Cost Drivers in Group Benefits Plans

3. Data First: Claims Reporting and Trend Analysis

Before acting, analyze:

• 24 months of claims by category

• Outlier claims (drug and STD/LTD)

• Utilization per employee per year (PEPY)

• Year-over-year trend by benefit type

• High-frequency claimants

Ask your advisor for:

• A claims dashboard or heat map

• Benchmarking data by industry or group size

• Analysis of top 10 drug claims by cost

No data = no strategy.

4. Drug Cost Management Strategies

Prescription drugs are the #1 cost driver in most plans. Contain them by:

• Mandatory generic substitution

• Prior authorization programs for high-cost drugs

• Managed formularies (e.g., tiered or evidence-based)

• Preferred pharmacy networks

• Drug caps (e.g., $10,000 or $25,000 per year, or per script)

• Integration with provincial/federal plans (e.g., OHIP+, NIHB, Trillium)

Note: One $50,000 biologic drug user can blow up your renewal. Use pooling and case management to protect against this.

5. Disability Claims Management and Prevention

LTD and STD are long-tail, high-cost issues.

Containment tactics:

• 3rd-party STD adjudication for consistency and accountability

• Early intervention programs

• Mental health accommodations and EAP promotion

• Graduated return-to-work plans

• LTD elimination period alignment with EI sickness benefits

• Taxable vs non-taxable LTD audit

Don’t wait for claims to pile up—prevention and management save the most money.

6. Dental Inflation: Smart Design, Smarter Communication

Dental inflation (driven by provincial fee guides and utilization) can outpace CPI every year.

Strategies:

• Switch from 100% to 80% co-insurance for basic/major

• Introduce annual limits ($1,000–$2,500)

• Add per-visit or per-service caps

• Reduce ortho maximums

• Move to current fee guide -1 year

Communicate changes early and clearly—many employees are price-insensitive without cost sharing.

7. Paramedicals and Vision: Low ROI, High Visibility

Massage, chiro, physio, and other “parameds” are high-frequency, low-ROI cost drivers.

Containment strategies:

• Combined annual maximum for all parameds (e.g., $500–$1,000)

• Visit limits per year (e.g., 10–15)

• Cap number of paramedical types covered

• Move some services to WSA instead of core plan

For vision:

• Reduce frame limits (e.g., from $300 to $150)

• Extend coverage period (e.g., 24–36 months)

These changes add up—especially for groups over 100 lives.

8. Plan Design Tweaks That Save Without Cutting

• Add deductibles: annual or per-script (e.g., $25 or $100/year)

• Switch from coinsurance to dollar caps (e.g., $50/visit)

• Increase LTD waiting periods (e.g., 120 vs 90 days)

• Use taxable WSAs for “extras” (fitness, personal wellness, etc.)

• Tie HSA top-ups to participation in wellness initiatives

Smart tweaks can reduce claims by 5–15% with little pushback if communicated properly.

9. ASO, Stop-Loss, and Self-Funding Strategies

If you’re fully insured:

• Consider switching to ASO with stop-loss to gain control

• You only pay for actual claims, plus admin

• Surplus is yours—not the insurer’s

For ASO plans:

• Review stop-loss thresholds annually

• Ask for quarterly claims reporting

• Align stop-loss with your risk tolerance and volatility history

Moving to ASO can save 5–20%—but only if your advisor manages it proactively.

10. HSA's and WSAs: Reducing Inflation Risk

• HSA: Tax-free coverage for CRA-eligible expenses

• WSA: Taxable perk for anything wellness-related

Advantages:

• Fixed employer cost (no inflation)

• No impact on core plan renewal

• Encourages employees to spend wisely

• Supplements coverage gaps without ongoing liability

Offer $250–$1,000 per employee per year and fund it from savings in core plan design.

11. Dependent Management and Eligibility Audits

One of the most overlooked strategies: verifying dependents.

• Dependent eligibility audits typically find 5–15% ineligible dependents

• Remove inactive or overage dependents from plan

• Align definitions across carriers and payroll

• Require annual declaration or proof (e.g., student status)

Fewer dependents = lower claims = lower premiums.

12. Renewal Negotiation and Governance Discipline

Annual cost containment depends on how well you:

• Review claims data each quarter

• Set a renewal negotiation calendar

• Challenge trend assumptions

• Benchmark plan design against peers

• Hold your advisor and insurer accountable

Don’t wait until the renewal is delivered. Start the conversation 90–120 days out.

Final Thoughts

Cost containment doesn’t have to mean cutting—it means being smarter, more proactive, and more strategic with your benefits spend.

The best containment strategies:

• Preserve employee trust

• Align with business goals

• Balance control with flexibility

• Deliver results without drama

If you’re unsure where to start—or want an objective benefits cost review—we’d be happy to help.