Healthcare costs can weigh heavily on your company’s bottom line. In fact, according to the Aon Hewitt Health Value Initiative database, the average healthcare cost per employee topped $11,000 in 2015. With this in mind, here are two ways companies can go about lowering costs.
The first is what most people think of – reduce benefits – which is also loathed by employees. How many times have benefits managers said that reducing benefits is a last gasp at saving money? It destroys morale, makes it hard to retain key employees, and makes it harder to recruit talent. Reducing benefits can mean anything from higher deductibles, higher co-pays, and a higher cap on out-of-pocket spending to fewer services covered.
The second is strategic – get more out of every dollar invested in healthcare spending. So, if your company has opted for self-funding, you’ve already taken the first step to reducing costs without sacrificing quality.
How else can you get more value out of every dollar invested?
Unbundle services
Health plan benefits are not like buying the sports package on a new car. When you bundle everything together – high performance tires, sunroof, heated seats – you save money versus buying each a la carte. Instead, what happens when you bundle healthcare – stop-loss, medical, Rx, dental, vision, wellness, and other voluntary benefits – you get some at a fair, or even low, market cost. But you also get some at a higher than market cost.
With bundling, you literally end up paying the price. The problem is compounded since you don’t know the breakout of the individual vendor fees because everything is lumped together. Unbundling invites competition. You have transparency and can see exactly what you are getting and how much you are paying.
One size does not fit all. You never see two companies with the exact same medical profiles and scenarios. Unbundling allows companies to shop around for vendors that are the best fit based on factors like location, company size and overall employee profile. When you unbundle, you choose the best vendors with the best services and the best rates.
Understand your employee base
The more you know about your employees’ healthcare needs and the factors that influence them, the more you can select the appropriate vendor services for your company. A manufacturing company in Utah with 200 employees will have a different healthcare plan profile need than a restaurant chain in Florida with 500 employees.
There are three main components to consider when doing an evaluation.
1. Situational factors – demographics, geography, environment, societal, heredity – all play a role in determining which vendor is best for your company. Medical conditions vary by climate. Employees in remote areas may be less inclined to seek or continue medical treatment if they need to drive a long distance. Heredity also factors into the types of medical issues employees can face, including conditions like breast cancer and Alzheimer’s.
2. Examine prevalent medical conditions in your company. Look at where there may be a high proportion of chronic or acute conditions and their treatments. Examples include dialysis, diabetes, lupus, hemophilia, cardiovascular conditions, cancer and obesity.
3. Stabilize claims for those who are high-cost claimants. Look at these claimants in tiers – the top 1%, top 5%, top 10%, and top 25% – and see what costs are being incurred. As a general rule, use high touch for high-cost claimants and high technology for reducing general costs of service. Is dialysis a big cost? Consider pre-purchasing dialysis treatments. Are emergency room visits high? If employees live too far from quality medical care and use the ER as their regular doctor, telemedicine or on-site clinics may make both medical and financial sense.
Encourage systematic positive behavior
Positive. Positive. Positive. When you see a positive trend related to employee healthcare behavior, it should be further encouraged. Are employees engaged in more preventative care measures? Are employees and their families more consistent in getting the treatments or medications they need thereby avoiding costly ER visits or hospital stays? Do you have a wellness program and is it working? Think smoking cessation, taking medicines as prescribed, better nutrition, and having annual physicals. A strong emphasis in reducing obesity will have long-term benefits.
Vendors that specialize in cost mitigation
It’s a whole new world out there in healthcare, and you don’t need to confine yourself to the plain vanilla healthcare vendors. If you spot a trend, there’s probably a specialized vendor to help you figure out how to contain the cost. We’re talking everything from out-of-network repricing services to telemedicine.
Now, more than ever, having a self-funded healthcare benefit plan makes financial as well as sustainable sense. Using the data and analytics available will help you fine tune your plans so you get the exact services you need and don’t overpay. In addition, a healthcare benefits plan administration platform can make sure you have this essential data at your fingertips. Together, these strategies will help you get the most out of your plan for the least cost.
