I need to know whether the plan is overpriced.
Renewal audit guideA renewal audit identifies whether price pressure is claims, design, trend, or market positioning.
Guide
Direct answer
The best cost-cutting strategies improve plan discipline and fit instead of just stripping out coverage people actually use and value. AEC Benefits is an Ontario group benefits brokerage hired mostly for cost control, and it quotes plans at aecbenefits.ca/get-quote.
Key Takeaways
- •Cost reduction should be strategic, not reactive.
- •Employers should look for waste, design mismatch, and contribution issues before cutting coverage employees value.
How to use this page
The best cost cut is the one employees barely feel and renewals can sustain.
What should not be cut first?
Do not start by cutting the benefits employees notice most, such as practical drug, dental, disability, or family coverage, unless the data supports it.
What should be reviewed first?
Review claims, usage, contribution strategy, plan classes, deductible/franchise choices, maximums, and whether employees understand the plan.
When is shopping the market useful?
Market comparison helps when renewal logic is unclear, service is weak, or the current carrier no longer fits the workforce and plan design.
I need to understand baseline plan cost.
Ontario cost guideCost benchmarks keep savings decisions grounded in reality.
I need a better structure for 5 to 50 people.
Plan design guidePlan design is often where the most sustainable savings are found.
| Decision | Best next page | Why it matters |
|---|---|---|
| I need to know whether the plan is overpriced. | Renewal audit guide | A renewal audit identifies whether price pressure is claims, design, trend, or market positioning. |
| I need to understand baseline plan cost. | Ontario cost guide | Cost benchmarks keep savings decisions grounded in reality. |
| I need a better structure for 5 to 50 people. | Plan design guide | Plan design is often where the most sustainable savings are found. |
Your renewal just came in: $4,800/month. Up from $4,200 last year.
You can't afford it. But you also can't afford to lose your benefits package and watch your best people walk.
So what do you do?
Most small business owners think they have two options:
- •Pay the increase and eat the cost
- •Cancel benefits and lose their competitive edge
Both suck.
But there's a third option: strategic cost reduction that keeps your benefits competitive while bringing your premiums back to reality.
I've spent 20+ years helping Ontario businesses bring benefits costs down without gutting coverage. Here's exactly how to do it.
1
Strategy #1: Increase Deductibles and Co-Pays
(Shifts routine costs, keeps the protection)
This is the fastest way to reduce premiums without eliminating coverage.
What to change:
- •Drug deductible: Increase from $25-50 to $100-150
- •Drug co-pay: Drop from 90% to 80% or 80% to 70%
- •Dental maximum: Drop from $2,000 to $1,500 or $1,500 to $1,000
Current plan:
- •$25 drug deductible, 90% coverage
- •$2,000 dental maximum, 80% basic / 60% major
Modified plan:
- •$100 drug deductible, 80% coverage
- •$1,500 dental maximum, 80% basic / 50% major
Ask the insurer to price both versions for your group. The difference depends on your claims and your carrier.
Impact on employees: They pay more out of pocket for routine stuff (prescriptions, dental work), but catastrophic protection stays identical. For a healthy employee, the difference might be $300-600 annually - way less than if they had no benefits at all.
Key: Frame this correctly when communicating to employees: "We're maintaining your coverage while adjusting cost-sharing to keep benefits affordable long-term."
2
Strategy #2: Eliminate or Reduce Short-Term Disability
(Small groups only, and keep LTD)
Short-term disability (STD) is expensive relative to its value for very small businesses.
What STD costs:
$50-80/employee/month
= $6,000-9,600 annually for 10 employees
What it does:
Replaces income (typically 75% of salary) for short-term illness/injury, usually for 15-26 weeks before LTD kicks in.
The problem: For a 10-person business, you're often covering short absences informally anyway. You're paying $8,000/year for coverage that may never get claimed, or if it does, it's for situations you would have handled with sick days.
Alternative approach:
- Keep long-term disability (LTD) - this is your catastrophic protection and NON-NEGOTIABLE
- Drop STD entirely
- Implement a sick day policy (5-10 paid sick days) and temporary layoffs for longer absences
- For serious illnesses before LTD kicks in (the 90-120 day gap), work with employees on case-by-case basis
Savings: $600-800/month = $7,200-9,600 annually
When NOT to do this:
- ⚠️If you have 25+ employees (STD makes more sense at scale)
- ⚠️If you can't handle absences informally
- ⚠️If you're in an industry with frequent injury claims
3
Strategy #3: Implement or Increase Employee Cost-Sharing
(Changes who pays, not what is covered)
Most small businesses either pay 100% of benefits or have minimal employee contribution. Adjusting this can significantly reduce your costs while keeping benefits in place.
Current scenario: Employer pays 100% of $4,200/month ($50,400 annually)
Option A: 80/20 split (employer pays 80%, employee pays 20%)
Employer pays: $3,360/month ($40,320 annually)
Savings: $840/month = $10,080 annually
Option B: Employer pays 100% for employee-only, employees pay for dependents
Roughly 40-50% of premiums are for dependent coverage
Employer pays: ~$2,500/month ($30,000 annually)
Savings: ~$1,700/month = $20,400 annually
Option C: Tiered cost-sharing (employer pays more for core, less for optional)
Employer pays 100% of LTD, life, basic health
Employees pay 50% of dental, STD, enhanced coverage
Savings depend on the structure and the split you choose
The psychology: Employees actually value benefits MORE when they contribute. Zero-dollar benefits feel free and get taken for granted. When someone pays $75/month toward their benefits, they use them more thoughtfully and appreciate the value.
Communication is key: "We're adjusting cost-sharing to keep benefits sustainable. Your contribution helps ensure we can maintain this program long-term."
4
Strategy #4: Remove Low-Value Optional Coverage
(Ask your crew first)
Many plans include coverage that employees barely use but you pay for every month.
Vision care:
$10-15/employee/monthTypically covers $150-300 every 24 months for glasses/contacts. Many employees buy glasses at Costco or online for less.
Savings: $1,200-1,800 annually for 10 employees
Critical illness insurance:
$25-40/employee/monthPays lump sum if diagnosed with cancer, heart attack, stroke. Low claims rate for younger workforces. Consider it optional coverage employees can buy themselves.
Savings: $3,000-4,800 annually for 10 employees
Travel insurance:
$5-8/employee/monthCovers emergency medical while traveling. Many employees have this through credit cards. Often underutilized.
Savings: $600-960 annually for 10 employees
Accidental death & dismemberment (AD&D):
$5-10/employee/monthOnly pays for accidental death (regular life insurance covers all deaths). Keep for construction/high-risk industries, consider dropping for office workers.
Savings: $600-1,200 annually for 10 employees
Total potential savings: $5,400-8,760 annually by removing 3-4 low-utilization coverages
Important: Survey your employees before cutting any coverage. What you think is low-value might matter to them, and vice versa.
5
Strategy #5: Shop Your Benefits Every 2-3 Years
(Leverage, even if you stay)
Loyalty doesn't pay in insurance. Carriers know switching is a hassle, so they slowly increase your rates knowing most small businesses won't shop around.
What typically happens:
•Year 1-3: Reasonable rates to win your business
•Year 4-6: Annual increases "due to claims experience", whether or not your own claims explain them
•Year 7+: Nobody has checked your price against the market in years
What to do:
Get competitive quotes from at least 3 carriers every 2-3 years, even if you're happy with your current provider.
How the pushback works:
- •Insurers sometimes send increases the group's own claims don't justify, because they have losses elsewhere to recover
- •Ask for quotes on identical coverage from other insurers
- •Make it clear, respectfully, that another insurer is interested in your business
Competition usually brings the number down. Not every time, and the current insurer may still be the right place to stay.
Pro tip: Even if you don't switch, getting competitive quotes gives you leverage to negotiate with your current carrier.
6
Strategy #6: Switch to a Simplified or Pooled Plan
(Less design control)
Some carriers offer simplified plans designed specifically for small businesses with 2-25 employees.
What's different:
- Standardized coverage options (less customization)
- Simplified underwriting (less paperwork)
- Pooled risk across many small businesses (stabilizes rates)
- Lower administrative fees
Examples:
Blue Cross Small Business Plans
Equitable Life Small Business Solutions
Chambers of Commerce Group Insurance Plan
Industry association plans (construction associations, etc.)
Tradeoffs:
- •Less flexibility in coverage design
- •May have slightly higher deductibles or lower maximums
- •But often cheaper for similar protection
When this works:
- You're fine with "good enough" coverage vs. fully customized
- You're under 20 employees
- You want rate stability more than perfect customization
Savings depend on your current plan. Compare a pooled quote against one built for your group.
7
Strategy #7: Adjust LTD Waiting Periods and Benefit Percentages
(Trim it, never drop it)
Long-term disability is critical, but you can adjust parameters to reduce cost without eliminating protection.
Current LTD:
- •60-day waiting period
- •67% income replacement
- •Cost: $58/employee/month
Modified LTD:
- •90-day waiting period (or 120-day)
- •60% income replacement
- •Cost: $43/employee/month
Savings: $15/employee/month = $150/month = $1,800 annually
The tradeoff: Employees wait longer before benefits start (90 vs 60 days) and get slightly less income (60% vs 67%). But you're still protecting against catastrophic scenarios - and that's what matters.
When this makes sense:
- Your industry has seasonal layoffs (align waiting period with typical layoff length)
- You have strong sick day policies to bridge the gap
- You need to reduce costs but can't eliminate LTD entirely
The Strategic Combination: Stack the Levers Without Losing Your Competitive Edge
Here's what combining the levers looks like on a 10-person plan:
Changes:
Increase drug deductible to $100, drop to 80% coverage
Reduce dental maximum from $2,000 to $1,500
Drop STD, strengthen sick day policy
Implement 80/20 cost-sharing (reduces your cost, not the total premium)
Remove vision care and critical illness
Extend LTD waiting period to 90 days
Have the insurer price each change on its own before you combine them. What each one saves depends on your group's claims and your carrier, and a quote is the only honest number.
What you kept:
- Solid drug coverage (80% after $100 deductible)
- Functional dental ($1,500 max)
- Strong LTD protection (the most important coverage)
- Life insurance ($50,000)
- EAP
Your employees still have legitimate benefits. You just shifted from "premium" to "competitive standard" and implemented smart cost-sharing.
How to Communicate Changes to Your Employees
This is where most small businesses screw up. You make changes to save money, employees freak out, morale tanks.
Bad communication:
"We're cutting benefits because we can't afford them."
Good communication:
"We're adjusting our benefits package to ensure it remains sustainable long-term. Here's what's changing and why:
- •We're implementing cost-sharing (80% employer / 20% employee) to keep the program viable. Your contribution is roughly $60/month, which is still far less than individual insurance would cost.
- •We're adjusting some coverage levels to focus on what matters most: catastrophic protection. Your LTD, life insurance, and core health coverage remain strong.
- •We're removing some underutilized optional coverage (critical illness, vision care) that few employees were using.
- •These changes keep the plan affordable for the company, which helps us maintain competitive wages and keep the business healthy."
Key elements:
- Frame it as sustainability, not cuts
- Be specific about what's staying vs. changing
- Explain the employee contribution in monthly dollars (not scary annual numbers)
- Show what you're protecting (LTD, life, health)
- Connect it to broader business health
The Bottom Line
You can bring your group benefits costs down without destroying your competitive position. You just need to:
1
Focus on catastrophic protection (LTD, life, basic health) over nice-to-haves2
Shift more cost to employees through deductibles and cost-sharing3
Eliminate low-utilization optional coverage4
Shop carriers every 2-3 years aggressively5
Make strategic tradeoffs (higher deductibles for lower premiums)The goal isn't to match what Google offers. It's to provide legitimate, valuable protection that helps you attract and retain good people while keeping your business financially viable.
Ready to Cut Your Benefits Costs Strategically?
Want to know what competitive group benefits actually cost for a 10-person Ontario company and what you should be paying? Check out this detailed breakdown with real market rates and coverage examples.
Because benefits aren't an all-or-nothing decision. You can find the middle ground between "premium package you can't afford" and "no benefits that lose you good people."
You just need to be strategic about it.
Sources & References
Cost-saving strategies reflect Ontario market conditions for construction and trades companies. Actual savings vary by plan design, claims history, and carrier.
[1]
[2]
[3]
Canadian Life and Health Insurance Facts (2024)
Canadian Life and Health Insurance Association
View source[4]
[5]
SD
Written by: Steffen deGraaf
Group Benefits Consultant, AEC Benefits
Steffen is the founder of AEC Benefits in Burlington, Ontario, and has been licensed since 2003, with over 20 years in insurance and group benefits. He builds benefits plans for Ontario construction and trades employers that keep teams protected without overbuilding the budget.
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Reviewed by Steffen deGraaf
Steffen brings 20+ years in insurance and group benefits, construction job-site roots, and architectural technology training at Mohawk College. FSRA-regulated insurance broker specializing in Ontario group benefits.
FSRA Regulated
Ontario Insurance
Ontario construction benefits experience
Construction is in Steffen's blood: job sites as a teenager, architectural technology at Mohawk College, and 20+ years in insurance and group benefits for Ontario employers.
Meet Steffen and learn how AEC Benefits worksFSRA Regulated
Ontario Insurance Broker
Sources & References
Sources support the definitions, eligibility context, and regulatory references on this page. Carrier-specific pricing, eligibility, tax, and plan-design decisions still require current quote and advisor review.
[1]
[2]
[3]
Guideline G3 - Group Life and Group Health Insurance (2026)
Canadian Life and Health Insurance Association
View sourceFrequently Asked Questions
Does cutting cost always mean cutting coverage?
No. In many cases the better move is to redesign structure, usage logic, or contribution strategy instead of removing the parts of the plan employees actually notice.
Why should this page connect to plan design?
Because cost pressure is often the symptom of a design problem rather than just a pricing problem.
What if I need savings before my next renewal?
Start with the renewal audit and cost guide so you know which levers are realistic before making fast coverage cuts.
Want to talk through your options?
If you want real numbers instead of generic plan talk, AEC Benefits can pressure-test pricing, structure, and fit for your team.