Nine powerful strategies to help you get health care costs under control.
As organizations look at their balance sheets this year, one area that will undoubtedly undergo intense scrutiny is the cost of employee benefits. It is a notoriously difficult item to manage due to the increasing cost and utilization of health care, not to mention ACA compliance burdens. Human resources and finance managers need to take a longer view and commit to developing a multi-year strategy instead of relying on short-term tactics to contain employee benefits costs.
It all begins with the three C’s
Depending on your organization’s goals, you may focus on a specific aspect of cost management when re-aligning your benefits plan. An easy way to think about it is the three C’s of cost savings:
- Consumerism - Do you want your employees to be smarter health care consumers and make better decisions that bring down the total cost of the benefits?
- Choice - Do you want to offer more options in order to attract and retain employees without increasing your total benefits costs?
- Control - Do you want to reduce financial risk and create long-term, sustainable cost savings
Building a cost-effective benefits plan
Once you have determined your overall cost savings goal, there are a number of ways to redefine the structure of your employee benefits plan to better manage costs. Consider the following nine strategies:
High deductible – Potential savings: two to eight percent through lower annual premium increases. The high deductible health plan allows employers to reduce costs while motivating them to carefully consider how and when to access health care services.
Self-Funding – Potential savings: eight to 10 percent in annual premium increases. Growing increasingly popular even with smaller organizations, self-funding allows businesses to create more cost-efficient employee benefit programs.
Telemedicine- Potential savings: 5-to-1 return on investment. Telemedicine enables the delivery of care at a lower cost than the traditional health care model and reduces unnecessary emergency room visits and urgent care services.
Reference based pricing– Potential savings: Up to 20 percent of total medical claims. Reference-based pricing promotes comparison shopping by establishing caps for selected services that have a wide-range of prices from providers.
Voluntary benefits– Potential savings: reduction of the annual eight to nine percent premium increases down to zero percent. Voluntary benefits supplement fixed plan options and can include hospital-stay expense coverage, dental, vision, disability, life insurance and more.
Pharmacy Carve Out– Potential savings: 20 percent for an expense that typically comprises 20 percent of overall health care costs. To curb the steep rise in pharma costs in recent years, a pharmacy contract management company can re-negotiate new terms, including better contract provisions, discounts and rebates.
Narrow networks – Potential savings: six to 17 percent annually versus a total network of providers. Under narrow network plans, 99 percent of health care costs are covered when in-network providers are utilized. These providers have track records for the highest quality of care and have proven over time to deliver it at a lower cost.
Defined contribution– Potential savings: five to 10 percent savings on annual premium increases. This strategy allows organizations to directly manage costs and encourage employee plan selection and ownership. It can be coupled with an employer exchange shopping technology solution or steering employees toward a public exchange environment.
Metallic spectrum product plan– Potential savings: avoid the $3,000 per eligible employee penalty the IRS will levy on non-compliant affordable plan options. Multi-plan benefits options or a metallic spectrum of plans – silver, gold, platinum – is a way of serving a wide range of employee needs, budgets and concerns and reducing the potential of over-insuring the healthiest employees.
Ultimately better benefits management
While each of these strategies holds the promise of lowering your cost of employee benefits plan, the key is finding the ones that best suit your organization’s culture and employee needs. For a more in-depth look at employee benefits cost management, download the full e-book.