Summary
Rising benefits costs are likely putting pressure on many HR teams, but some of that spending may be preventable. Learn how working with the right benefits administration partner may help identify and address wasteful spending by:
- Helping identify claims payment errors and billing and payroll mistakes.
- Supporting one-time eligibility audits and ongoing verification.
- Offering tools that may help employees make more informed enrollment decisions and encourage better use of available benefits.
Benefits leaders face many challenges when it comes to controlling budget spending. Benefits budgets are likely tight, with little room for errors or wasteful spending. And companies that exceed their allotted budgets for benefits administration may find it necessary to make cuts in other critical business areas, such as customer service, innovation and growth.
Benefits make up approximately 30 percent of total compensation costs,1 according to the June 2026 Employer Costs for Employee Compensation News Release from the Bureau of Labor Statistics. Despite the increasing costs of medical insurance, this proportion has held steady in recent years. But that doesn't mean that employers won't see that figure grow, especially as expenses continue to climb. Regardless of future projections, companies' leadership teams may rightfully push for benefit budgets, including the costs associated with benefits administration, to get leaner and more efficient.
As a result, benefits leaders may feel the pressure to improve processes, reduce errors and root out sources of wasteful spending in benefits administration. One practical approach is to lean on the capabilities of your benefits administration partner to help identify opportunities for improvement and support cost management efforts.
In this article, we'll explore five specific challenges that can contribute to wasteful spending. By working with the right vendor, employers may be better positioned to address these issues and get more value from their benefits budgets.
1. Claims Payment Errors
Errors in claims payments can go unnoticed and may add unnecessary costs for employers. That makes an efficient audit process important. Since your benefits administration partner may have already integrated your claims data, it can make sense to consider having them support claims audits and the subsequent recovery process. This approach may help identify and resolve errors while giving your team additional support with a complex task.
Overpayment is sometimes the result of simple human error like a data entry mistake or something equally unintentional. In some cases, benefit programs may also be vulnerable to fraudulent activity. Claims fraud can cost an employer tens or even hundreds of thousands of dollars more than their actual responsibility in just a single instance of deception.2,3 Working with a partner that keeps your claims audits up to date may help identify questionable claims activity, which can be an important step in benefits cost management.
2. Billing and Payroll Errors
Errors in benefits billing and payroll deductions are another common issue that can contribute to wasteful spending. These benefits administration errors may affect budgets month after month if they are not identified. Outsourcing your billing and payroll processes may help simplify a complex, time-consuming challenge that can otherwise be prone to errors.
To get the most out of this move, consider outsourcing these three key tasks:
- Direct billing, which your benefits administration partner can automate to help reduce the chance of missed premiums while employees are out on leave or once they return.
- Carrier billing services, where the benefits administration partner can gather list bills, generate self bills, reconcile against enrollment data, allocate by cost center and make payments on behalf of the employer.
- Payroll reconciliation, which your benefits administration partner can tackle to validate actual payroll deductions against enrollment information, identify differences and make future deduction adjustments as appropriate. This closed-loop process is important because it can help reduce the risk of overpayment for the organization and employees.
3. Ineligible Dependents
Ensuring that you only cover eligible dependents is important to the financial and operational integrity of your benefit plans. But for some benefit teams, determining eligibility can be a long, tedious and overwhelming effort. It can also lead to tension with employees if not handled carefully.
Benefits administration vendors may provide dependent verification services to help make the process easier to manage. Offering both one-time dependent eligibility audits and ongoing verification, they can support your plan rules and help identify savings opportunities. A benefits administration partner can also help manage the paperwork and details so your team can focus on supporting your people.
4. Poor Enrollment Decisions
A common, yet largely invisible, cause of wasted benefit spending can stem from enrollment decisions that do not align well with employees' needs. Some employees may select more coverage than they need, which could leave less money available for retirement or other expenses. Others may select less coverage than they need, which could contribute to delayed care, use of emergency savings or early withdrawals from a 401(k) plan.
Generally, a poor plan fit might happen when employees do not fully understand their benefit options or which choices may support their needs and priorities. Working with a vendor that can provide employees with personalized guidance about enrollment decisions can offer benefits for everyone involved. Benefits teams may spend less time on repetitive questions, and employees may feel better equipped to make informed choices.
5. Poor Benefit Utilization
Even when employees are enrolled in benefit programs that fit their needs, those benefits may still be underused. Making sure employees are equipped to make informed benefit decisions is the first step. Beyond that, one common strategy for supporting utilization involves proactively engaging with employees about their benefits throughout the year, not just leading up to the open enrollment period. Personalized employee communication or behavior-based incentives can help build awareness and encourage engagement with your benefits program.
Educating employees with information on where to get care can help in several ways. Clear communication may help them consider options other than making a costly trip to the ER when appropriate, or choose a covered, in-network doctor rather than a provider that may be closer but more expensive.
Embracing the Future of Benefits
Leveraging the support of a quality benefits administration partner can be one strategy for identifying and managing various causes of wasteful spending. The optimal partner may help reduce the likelihood of errors and connect employees with personalized benefits guidance. Over time, these efforts can support cost savings for your organization and help employees make more informed health and financial decisions.
