Outdated and Overpriced: Why Employee Benefits Need a Major Overhaul

Image Credit, Paul Diaconu

Insurance is everywhere—your home, your health, your car. If you’re a celebrity, maybe even your backside (Jennifer Lopez, we’re looking at you). But let’s focus on something far more relevant: the benefits employees receive at work. In an evolving world, where everything from technology to how we work has changed dramatically, why hasn’t insurance kept up? The policies being offered by employers today often feel like relics of the past—either too much coverage in areas no one uses or not enough in places that actually matter.

Take home insurance, for example. The industry has adapted with single-limit coverage, meaning a homeowner gets a lump sum of, say, a million dollars. That amount can be allocated however they need—toward rebuilding, replacing contents, or covering external structures like a shed. The idea is flexibility: instead of rigid limits that may not match a homeowner’s actual needs, coverage shifts to where it’s most required. Now, compare that to employee benefits, where the rigidity remains. You either get coverage that’s excessive or completely inadequate, and there’s often no option to move things around to better fit individual needs.

One of the most glaring examples is travel insurance. Many employee benefit plans offer generous travel coverage, which sounds great—except most employees will never use it. With rising costs of living and stagnant wages, a large percentage of the workforce isn’t jetting off to tropical destinations. Yet, a sizable chunk of their benefits is tied up in coverage they’ll never claim. The same goes for massages. Most employees don’t even realize they have it, let alone take advantage of it. And then there’s aromatherapy—yes, that’s actually included in some plans. If half the workforce can’t even spell aromatherapy, why is it a standard benefit?

Then, of course, there are the big-ticket items: prescriptions and dental. The logic behind these coverages makes sense—benefit plans have traditionally been designed with families in mind. That’s why there’s an emphasis on prescription drug coverage, which is crucial for children, spouses, and aging parents. But what if you don’t have a family? What if your kids are grown and off your plan? What if you rarely need prescription medication? You’re stuck with an inflated benefit that no longer aligns with your life stage. Unless, of course, you decide to turn into a black-market prescription dealer (just kidding—but you get the point).

Dental insurance is another area that doesn’t evolve with the employee. When you’re younger, coverage for wisdom tooth extractions and braces is useful. But once your wisdom teeth are out, they’re not growing back. So why are older employees still paying for coverage that assumes they’ll need an orthodontist? What they actually need is specialized coverage—things like implants or gum disease treatments that become more relevant as they age. But do benefit plans adjust for this? Not really.

Then there’s the divide between men’s and women’s health coverage. For men, vasectomies are often covered, but the newer, less invasive procedures? Not so much. Want your post-vasectomy lab results online? That’s an extra cost. For women, the health needs of an 18-year-old are vastly different from those of a woman entering menopause. Yet, benefit plans rarely reflect these shifting priorities. If insurance is covering aromatherapy, why isn’t it covering acupuncture, yoga, or alternative fitness options that could genuinely improve an employee’s well-being?

And speaking of fitness—why are employee benefit plans still not incorporating fitness memberships as a standard offering? Gym memberships are one of the biggest barriers to maintaining health, and plenty of employees would love to hit the gym but can’t justify the extra $50 a month. If the whole point of health benefits is to encourage healthier lifestyles, why isn’t fitness a priority?

So, who’s making these policies? And why aren’t they evolving? Insurance companies are raking in billions, selling the same cookie-cutter plans, while employers blindly purchase them without questioning their relevance. They aren’t pushing back and asking, “Is this actually benefiting our employees?” Just like home insurance adopted single-limit policies, it’s time for employee benefits to do the same. Employees should have an annual coverage limit that they can allocate based on their actual needs. If they don’t need travel insurance, they should be able to shift that coverage toward something they will use—maybe more dental, more physiotherapy, or, yes, even a gym membership.

Better yet, employees should have the ability to opt out of certain coverages altogether and replace them with services they actually need. Employers still control the purse strings, but at least employees would have the flexibility to make benefits work for them rather than being stuck with outdated policies. The cost of replacing a good employee is astronomical, and many workers stay in jobs purely for the benefits. If companies want to keep top talent, they need to offer benefits that actually make sense for their workforce.

Large employers have the power to dictate terms to insurance companies, yet they rarely use that power. It’s time for them to start acting like the bosses they claim to be and push for benefit plans that work for employees—not just for the companies selling them.