Cost containment. It’s on every employer’s mind. Some employers consider providing employee benefits a painful but unavoidable cost of doing business. Many feel trapped between needing to keep costs down and wanting to provide good benefits to their employees.
And some small employers are breathing a sigh of relief at our new health care directives, while at the same time realizing how the changes are affecting their pool of desirable employees. It all comes down to one very simple question: “How can I decrease the staggering cost of our employee benefits without shifting costs to employees or decreasing the value of their coverage?”
There are some proven strategies to decrease employee health plan costs that have saved innovative employers millions of dollars and improved employee health and satisfaction. In doing so, productivity and performance can also significantly improve, as can your company’s competitiveness.
Health care costs are continuing to rise, outpacing corporate growth and workers’ earnings. The primary underlying cause: unhealthy lifestyles. According to the Centers for Disease Control, at least 75 percent of total health care costs is due to preventable diseases exacerbated by obesity and poor health habits. Preventing disease will decrease the cost of health care for employers and employees and improve employees’ quality of life and productivity. No less important is that the health care industry benefits when patients are sick, not when they are encouraged to stay well. Also, good health habits lead to better medical outcomes.
For years now, property and casualty policyholders have saved on premiums by addressing risk management — installing safety programs to control risk. In the employment benefit realm, the first mention of an Illness Prevention Program (aka wellness plan) as a means to control health care costs is met with concern about time, cost and efficacy. The critical point here is that effective IPPs are proven cost-saving strategies, directly impacting a business’ bottom line. Health risk management decreases medical claims. Employer investments in effective IPPs have yielded returns of a minimum of $3 for every $1 invested, with some situations yielding as much as $10 or more for each dollar put into the program.
An added benefit is improved employee productivity, loyalty, retention and recruitment, and a reduction in new-hire training costs — a win/win investment. But they must be structured properly to accomplish these goals, starting at the top with the CEO creating a health-conscious culture through education. Employers are in a unique position of power to make a dramatic improvement to employee health and to ensure employees take responsibility for their own health through IPPs. You can change the future of America’s health.
Restructuring your employee benefit plan is the next step to saving money. Fully insured employers, who move to partial self-insurance restructuring (works well for companies that employ 30 or more) can reduce their total costs most dramatically by the built-in stop-loss options, claims and compliance management, improved cash flow, and plan design flexibility. One Acadiana oilfield service client is on track to save almost $75,000 in its first year of restructuring to partial self-insurance. Additionally, partial self-insured and self-insured companies (200+ employees) increasingly offer dedicated primary care clinics for employees and their families.
Regardless of your company size, raising your deductibles — calendar year, out-of-pocket and pharmacy — provides immediate savings while maintaining benefit levels. Also, while it certainly is a benefit to the employees when their employer pays part of the premium for their spouses and children to be on their plan, many times spouses have the ability to get coverage at their place of employment. By implementing a policy that if an employer’s spouse has comparable coverage at his/her place of employment, that spouse is not eligible for the plan, substantial savings will be realized by the employer, not only in reduced premiums but by eliminating the risk of additional potential claims.
There is a lot to like about Health Savings Accounts, too. A significant percent of large group employers offer an HSA for their employees. The funds are deposited pre-tax and grow tax-free, and so long as they are spent on qualified items, they are dispersed tax-free. The account can be turned into a retirement stream and taxed as ordinary income at age 65. And, when the employees are spending their own money, it gives them pause to consider how they purchase their health care and what is most cost-effective. The argument that it discourages people from seeking care is negated by the fact that all wellness care is now being covered at no cost to the employee.
Offering a number of group supplemental insurance products brings value to both the employee and the employer, and are typically employee paid. The risk of disability is greater than the risk of premature death. Knowing Workers Comp only covers on-the-job injuries, savvy employers understand that short-term disability can help reduce the incidence of fraudulent workers compensation claims, thereby reducing employer premiums.
Going hand-in-hand with an IPP is dental coverage. Oral health has a direct effect on overall physical and mental health. The three basic plan types, managed care (PPO and DHMO), fee-for-service, and the new consumer-driven dental plan lower employee and employer costs through deductibles, coinsurance and maximums.
To help with pharmacy charges, many of the large pharmaceutical chains offer discount drug programs that could have a dramatic impact on reducing prescription costs. With a little education from your broker and employee education, savings are available.
And finally, not all brokers are created equal. Your strongest resource is a broker who specializes in health care, keeps current with industry trends and developments, seeks out the leading thinkers in the industry, and engages clients with the top companies in the industry. Your broker should not simply deliver your renewal 30 days prior to its end-date, but should perform a comprehensive annual bid to ensure you receive the optimal balance between pricing and plan design. Ask yourself the hard question: Am I with my broker because he’s a nice guy, or because he is delivering cost containment ideas? The answer could be costing you thousands of dollars.
With a coordinated comprehensive program that includes all of these elements, employer and employee financial savings have proven to be astounding.
Shaye Evans specializes in employee benefit plan design and is the manager of the Lafayette office of Alford Staples Lapeyre & Robichaux.
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