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Why Cutting Healthcare Coverage Costs More in the Long Run

What are the potential hidden costs of reducing or eliminating healthcare benefits for your workforce?

At first glance, reducing healthcare coverage might seem like an effective way to manage expenses. However, this seemingly simple solution can lead to a cascade of hidden costs and negative repercussions that may ultimately outweigh the initial savings.

Employee benefits, particularly healthcare coverage, play a crucial role in maintaining a healthy and productive workforce. Comprehensive healthcare benefits are not just a perk— they are essential for employee well-being. When employees are healthy, they are more likely to be engaged, productive and committed to their work.

When healthcare benefits are reduced or eliminated, it can lead to increased absenteeism, lower morale and higher turnover rates—factors that can significantly impact a company's bottom line.

In this blog, we will dive into the long-term financial impacts and broader repercussions of cutting healthcare coverage for your business and how HR professionals and business leaders can make more informed decisions on their benefits that align with both their financial goals and their commitment to fostering a healthy, motivated and loyal workforce.

Immediate Cost Savings vs. Long-Term Financial Impact

For many businesses, the prospect of cutting healthcare coverage presents immediate and tangible financial relief. Healthcare costs are often one of the most significant expenses for companies, particularly those offering comprehensive plans.

Reducing or eliminating these benefits can lead to substantial short-term savings, which can be especially appealing in times of economic downturns or financial strain.

The immediate effects of cutting benefits include:

  • Reduction in premium payments

  • Administrative cost savings

  • Potential reduction in payroll taxes

While these immediate financial reliefs can be significant and offer a quick fix to budgetary pressures, it's essential to consider the long-term consequences that such decisions may bring.

Impacts of Cutting Healthcare Coverage

Before you consider cutting your company’s healthcare benefits, you should be aware of the long-term financial impacts of the decision.

Lower Employee Morale and Productivity

Healthcare benefits significantly enhance employee satisfaction and morale by providing financial security and demonstrating that the employer values their well-being. This sense of security and appreciation fosters loyalty and a positive workplace culture, leading to higher morale and reduced turnover.


Challenges in Attracting Top Talent

Companies offering robust healthcare benefits are more attractive to top talent. Candidates often prioritize positions that offer robust healthcare packages because they view them as essential for financial security and well-being. Without competitive healthcare benefits, companies may struggle to attract highly skilled employees, impacting their ability to innovate and grow.


Increased Healthcare Costs

Cutting healthcare benefits can eventually increase a company's healthcare costs  by leading to more severe and costly health issues among employees. Without sufficient coverage, employees may delay seeking medical care, resulting in the progression of untreated conditions that eventually require more intensive and expensive treatments. This can also lead to a higher incidence of emergency room visits, which are significantly more expensive than routine preventive care.

Negative Impacts on Employee Well-Being

Reducing healthcare benefits can increase employee stress and financial strain as they may face higher out-of-pocket medical expenses and lack access to necessary healthcare services. When employees do not have access to the benefits and care they need, their physical and mental health may suffer.


High Turnover Rates

Employees who feel unsupported and undervalued, particularly regarding their health and well-being, are more likely to seek opportunities elsewhere with employers who offer better healthcare packages. This not only results in the loss of experienced and skilled workers but also gains additional costs associated with recruiting, hiring and training new employees. High turnover rates can disrupt team dynamics, lower overall morale and reduce productivity, negatively impacting your company's stability and growth potential.

Implementing a Long-Term Benefits Strategy

Implementing a long-term benefits strategy can be more effective than cutting costs by encouraging sustained employee well-being, satisfaction and productivity, and this contributes favorably toward your company's success and financial health.

A comprehensive benefits strategy that includes robust healthcare coverage ensures that employees feel valued and secure, leading to higher morale and loyalty. This reduces turnover rates and the associated costs of recruitment and training new staff.

Moreover, healthier employees are more productive and less likely to be absent, which enhances overall efficiency and output. By investing in preventive care and wellness programs, companies can mitigate the risk of severe health issues and high medical expenses in the future.

Additionally, a strong benefits package can attract top talent, giving the company a competitive edge in the job market.

Overall, a well-implemented benefits strategy not only protects employees' health but also drives business growth and profitability, which outweighs the short-term savings of cutting costs.

Save money with an effective benefits strategy.

At Ascela, we help businesses implement a long-term benefits strategy that supports employee well-being to drive organizational success. Our experts can help tailor a benefits package that meets your company’s unique needs and supports a healthy and productive workforce to ultimately reduce overall healthcare costs.


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