Law firms spend enormous amounts of time thinking about clients, billable hours, partner compensation, recruiting and profitability. Employee benefits, however, can sometimes become something that is simply renewed from one year to the next.
That can be a costly habit.
Healthcare is one of the largest recurring expenses for many employers, and benefits can also influence how a firm attracts and retains attorneys and professional staff. Yet firms don’t always step back and ask whether their current benefits strategy still makes sense for the organization they are today.
A firm that has grown from 25 employees to 75 may have very different needs than it did several years ago. A firm that has added new practice groups, expanded geographically or changed its workforce demographics may also need to rethink how its benefits are structured.
The annual renewal should therefore be more than a discussion about the percentage increase in the premium.
It should be an opportunity to reevaluate the entire strategy.
- Is the Current Health Plan Still the Right Fit?
The first question is deceptively simple:
Does the firm’s current health plan still make sense?
Many organizations remain with the same carrier and general plan structure for years because changing benefits can seem disruptive. But familiarity isn’t necessarily the same as effectiveness.
Law firms should periodically examine their plan design, employee contributions, deductibles, copays, out-of-pocket maximums and provider networks.
They should also consider whether employees are actually using the benefits in the way leadership expects.
A plan that looked competitive several years ago may no longer be the best fit for the firm’s current workforce.
This doesn’t automatically mean changing carriers or moving to a different type of plan. It means making the decision intentionally rather than allowing the existing arrangement to continue simply because it has always been there.
Law-firm leadership should periodically evaluate whether its benefits strategy still reflects the firm’s workforce, financial objectives and recruiting needs.
- Are Healthcare Costs Being Examined Beyond the Renewal Rate?
A renewal percentage tells only part of the story.
If a firm’s health insurance premium increases by 12%, the natural reaction may be to negotiate with the carrier or shop for another plan.
But leadership should also ask what is actually driving the increase.
Medical utilization, large claims, prescription drug spending, provider contracts, plan design and other factors can all affect the cost of healthcare.
Understanding those drivers can lead to a more productive conversation about what should change.
The objective isn’t necessarily to eliminate an increase. Healthcare costs are complicated, and some increases may reflect legitimate changes in utilization or medical costs.
The objective is to understand what the firm is paying for and whether there are alternative strategies worth evaluating.
- Pharmacy Benefits Deserve More Attention
Prescription drug spending is another area that deserves closer examination.
Pharmacy benefits can be difficult to understand because contracts, rebates, formularies, specialty medications and pricing arrangements can make the true economics difficult for an employer to see.
For law firms with a relatively small number of employees, one or two high-cost specialty medications can also have a noticeable effect on the overall plan.
Leadership should understand how the firm’s pharmacy benefit is structured and whether the current arrangement continues to provide appropriate value.
Pharmacy shouldn’t be treated as an afterthought simply because it represents one component of the overall health plan.
- Should the Firm Reevaluate How Its Plan Is Funded?
For some law firms, the biggest question may be the funding arrangement itself.
Many firms remain fully insured because the model is familiar and provides predictable monthly premiums.
But eligible employers may have other options.
A level-funded health plan can combine characteristics of traditional fully insured coverage with greater visibility into claims and healthcare spending. Depending on the firm’s size, demographics, claims experience and risk tolerance, it may be worth evaluating whether a level-funded arrangement could provide a different approach to managing healthcare costs.
This isn’t a recommendation that every law firm should move away from fully insured coverage.
The right answer depends on the firm’s circumstances.
But the funding question should at least be part of the conversation.
Alternative funding arrangements can give eligible employers another option to evaluate when reviewing their healthcare strategy.
For firms interested in examining benefits specifically through the lens of a legal practice, employee benefits for law firms can be evaluated alongside the firm’s broader compensation and retention strategy.
- Are Benefits Helping the Firm Compete for Talent?
Compensation will always matter.
But law firms are competing for more than attorneys. They are competing for paralegals, legal assistants, administrative professionals, technology professionals and other employees who have options outside the legal industry.
Benefits can therefore become part of the firm’s overall value proposition.
A firm may have an excellent health plan but fail to communicate it effectively. Another firm may offer a broad range of benefits but have a plan design that creates significant employee out-of-pocket costs.
Leadership should look at the benefits package from the employee’s perspective.
What does an employee actually receive?
What does the employee have to pay?
How easy is it to understand the benefits?
Are the benefits meaningful to different generations and stages of an employee’s career?
Those questions can reveal opportunities that aren’t visible when leadership looks only at the firm’s total premium.
- Partner and Executive Benefits Should Be Considered Separately
Law firms also have an additional consideration that many other employers do not: the needs of partners and highly compensated professionals may be different from those of the broader employee population.
Executive benefits, supplemental coverage, disability protection and other arrangements can play a role in a firm’s overall compensation strategy.
These decisions need to be coordinated carefully with the firm’s existing benefits structure and compensation philosophy.
The goal isn’t to create unnecessary complexity.
It is to make sure the firm understands whether the benefits strategy adequately addresses the different needs within its workforce.
- Is the Firm Communicating the Benefits Effectively?
Even a well-designed benefits package can lose value if employees don’t understand it.
Employees may not know how their deductible works, where to go for care, how to use telemedicine, what their pharmacy benefits cover or how different plan options compare.
That creates two problems.
First, employees may fail to take advantage of benefits the firm is already paying for.
Second, they may perceive the benefits package as less valuable than it actually is.
Communication should therefore be part of the benefits strategy rather than something that happens only during open enrollment.
Clear explanations, decision-support tools and employee education can help employees make better use of the benefits available to them.
- Is the Firm Using Data to Make Benefits Decisions?
Law firms are accustomed to using data to evaluate their businesses.
The same principle should apply to employee benefits.
Before making a major change, leadership should examine available information about claims, utilization, employee demographics, contributions and other relevant factors.
The more information a firm has, the better it can distinguish between a short-term issue and a structural problem.
Data can also help leadership evaluate whether a proposed change is actually likely to improve the firm’s position.
A lower premium, for example, doesn’t automatically mean a better benefits strategy if employees face substantially higher out-of-pocket costs or lose access to important providers.
- Should Benefits Be Reviewed Before Renewal Season?
Perhaps the most important change law firms can make is simply starting earlier.
Waiting for the renewal proposal puts leadership in a reactive position.
A proactive review gives the firm time to examine alternatives, evaluate plan design, review employee needs and understand the financial implications of different strategies.
That process may ultimately result in keeping the existing plan.
And that is perfectly reasonable if the analysis shows that the current arrangement remains appropriate.
The difference is that the firm has made an informed decision rather than simply accepting the status quo.
A Benefits Strategy Should Support the Firm’s Larger Strategy
Employee benefits should not exist in isolation from the firm’s broader business objectives.
If the firm is focused on growth, benefits may need to support recruiting.
If the firm is focused on retention, leadership should understand whether employees perceive the benefits package as competitive and valuable.
If healthcare costs are putting pressure on profitability, leadership should understand the factors driving those costs and evaluate potential alternatives.
And if the firm is changing its workforce or geographic footprint, its benefits strategy may need to change with it.
For firms looking for broader guidance on employee benefits and benefits strategy, the starting point should be an evaluation of where the organization is today—not simply what it has done in previous years.
The Renewal Should Be an Evaluation, Not an Automatic Decision
Law firms have too many competing priorities to spend time unnecessarily changing things that work.
But there is an equal risk in never questioning what has become routine.
Healthcare costs change. Workforces change. Employees’ expectations change. Firms grow, merge, expand and evolve.
The benefits strategy should evolve with them.
Before the next renewal, law-firm leadership should ask whether its current health plan remains competitive, whether pharmacy spending deserves greater attention, whether alternative funding should be evaluated, whether partner and executive benefits are appropriately structured and whether employees understand the benefits they receive.
The answers will be different for every firm.
What matters is asking the questions.
A thoughtful benefits review can give law-firm leaders a clearer understanding of one of their most significant recurring expenses while also helping them consider how benefits fit into the larger strategy for attracting, retaining and supporting the people who drive the firm forward.
About the Author
Jennifer Schaefer, MBA, ChFC, CLU, RHU, REBC, SHRM-SCP is the Founder & CEO of JS Benefits Group, an employee benefits consulting and strategy firm specializing in group health insurance, self-funded and level-funded health plans, healthcare cost containment, benefits plan design and employee benefits strategy.
Jennifer is a Forbes Business Council Contributor and Co-Host of Executive Leaders Radio, where she discusses employee benefits, healthcare strategy, leadership and the future of work.
Her Forbes Business Council articles have covered healthcare benefits as a retention strategy and the importance of paying closer attention to pharmacy benefits.