6 Ways Employers Can Cut Costs, Not Benefits
Today, most employers make health plan and benefits decisions blindly. Employees know how much they’re spending on health care, but they have little say in deciding which plans a company will offer them. Yet you share a common goal: lowering healthcare costs.
If you’re like most employers, the rising cost of healthcare has created a hardship for you and your employees. See if the following scenario sounds familiar.
Barbara runs a 120-person digital printing company. She’s watched the company’s health insurance premiums increase every year, some years by double digits. The company’s earnings are getting squeezed and, as a consequence, more and more of the cost burden has shifted to the employees. At the same time, employees are seeing rising premiums and out-of-pocket expenses. And, each year, they have less perceived value for what they’re paying.
Small-to-Midsize Employers—and their employees—are getting squeezed
Large companies hire consultants and actuaries. These consultants create health risk models, expense forecasts, and customized health plans for large groups, but Barb has neither the time to vet consultants nor the budget. Besides, any cost savings gained by optimizing the company’s health plan would be wiped out after paying for the expensive consultants.
But—it is possible to cut costs without sacrificing benefits
If your company is in what seems like a no-win situation, there are steps you can take to mitigate rising healthcare costs. And, the good news is, it is possible to cut your company costs while actually improving the benefits you provide to your employees. Follow these six steps to get ahead of the problem.
How do your benefits stack up?
6 Ways to Cut Healthcare Costs
1. Get visibility into your group’s health needs.
A strong benefits consultant will be able to analyze your spending, and a strong broker will be able to negotiate the best rates from that insight. If Barb had insight into how her group was spending towards medical costs, she’d be able to insist that her broker fight for fair rates based on their risk profile instead of paying trend renewals each year. Read our post on The Game Theory Behind Health Plan Renewals.
2. Figure out whether you’re over- or under-insured based on your needs.
Data visibility can help you forecast your groups spending for the next year, allowing you to tailor your health insurance options. Barb, for example, could strategically plan her budget to ensure she’s not overpaying for health coverage that doesn’t meet her people’s needs or that she’s not under-insuring in order to save money.
3. Understand the employee profiles that qualify for plans with lower premiums.
Lower premium bronze plans can make sense for both high and low need employees. Low consumption employees save money by lowering their monthly cost of coverage, that is, lowering the cost it takes to insure them relative to their medical spending.
With high consuming employees, they can still save money with lower premium plans given certain employer contribution levels that make them better off. If Barb could see that her high-need employees would hit their out-of-pocket (OOP) maximums on both bronze and gold plans, for example, it would be clear that a bronze plan would provide cost savings.
4. Optimize contributions towards lower premium plans.
With confidence gained from knowing that bronze plans would save most of her employees’ money without sacrificing coverage, Barb could decide to encourage her employees to choose bronze plans by paying 100% of the premiums for them. It would still save her money beyond paying a lower percentage of a high premium gold plan. With a data-influenced optimization strategy, you can know the exact percentage of employees who save money through a premium contribution.
5. Make an Employer Health Savings Account (HSA) Contribution.
An HSA contribution will incentivize adoption of low premium plans and offset employee out-of-pocket expenses. HSAs empower employees to take control of more of their health care costs, allowing them to simply save money from lower monthly premium costs, or contribute the money into an HSA for use on qualified health expenses.
Your high need employees receive savings with low premiums but also the confidence in knowing there is money in their HSA that you provide to help meet their anticipated needs. Your low need employees are also encouraged to choose bronze plans to accrue that HSA contribution for use when they have a medical incident. Read our series on How to Drive HSA Adoption.
6. Understand that your group’s health needs may change throughout the year.
During any given year, the number of employees you have may change. Some may have medical emergencies and others may get well from a previously costly medical experience. Whatever the case, health plans and benefits that were optimal one year may be redefined the next.
With the insights and tools to make sense of how health plans are affected by a groups needs, Barb, and companies like hers, can have increased confidence in their ability to maximize earnings, save money, and maintain competitive health benefits.
Where should I start?
If implementing these steps sounds like a lot of extra work, Lumity is here to take on the heavy lifting. Lumity brings to the midmarket the kind of plan performance insights that are typically only available to big, self-funded companies.
At no cost to you, our benefits experts will benchmark your current rates. And you’ll find out whether you’re overpaying.