Savvy employers will be prepared to counter the rise in health benefits costs that is almost certain to come in 2021.
Health benefits costs have been trending upward for years — over 50% in the last decade, according to the Kaiser Family Foundation — and the current state of economic uncertainty over COVID-19 won't reverse that trend. Realistically, after enduring months of business closures and managing exhausted workforces, many employers will be lucky to maintain uninterrupted operations.
That's why it's critical for employers to think about reducing healthcare costs right now — figure out cost-effective benefits first so money can be shuffled as needed later. Having a solid plan going into 2021 will better position organizations facing limited budgets.
Here are five cost-reduction strategies employers should explore:
1. Dig Into Health Costs
Employers don't let themselves overpay for the materials they use during production, so why is healthcare any different? Employers should look into every healthcare figure they can, from overall premium costs to individual employee expenditures. Understanding where money goes can help focus cost-cutting efforts.
For instance, if employees are going to the emergency room for every health visit, employers know they must promote more health literacy among their workforce.
2. Embrace Technology
The healthcare landscape of today is starkly different from the one of even a few years ago. Now, the name of the game is virtual healthcare or "telemedicine." There are numerous ways for individuals to take charge of their healthcare without the hassle of in-person consultations.
Here are some examples:
- Tech that can monitor glucose levels to help diabetic employees without test strips
- Virtual visits with doctors, psychiatrists and other health professionals
- Countless wellness apps that can help individuals make proactive health choices
3. Consider Alternative Plan Options
Not every plan option will work for every organization. For years, preferred provider organizations (PPOs) were the standard, but now high-deductible health plans with savings options are having their moment. These plans enable greater heath consumerism and put the decision-making power into employees' hands. Employers should consider offering mechanisms like health savings accounts (HSAs), flexible spending accounts (FSAs) and health reimbursement accounts (HRAs) to shift costs without compromising healthcare quality.
4. Require Active Enrollment
Some organizations allow employees to passively enroll in their health benefits. This may seem like a nice timesaver, but it can actually hinder employee health literacy. Instead, employers should require active enrollment. This approach forces employees to review all their benefits options each year before making selections. Not only does this make employees consider important life events, it also affords them an opportunity to reevaluate the benefits they're paying for and potentially not using. Ultimately, active enrollment can make employees wiser healthcare consumers, improve proactive healthcare and lower overall health expenditures.
5. Change the Funding Structure
A more drastic cost-cutting strategy is changing how health plans are funded. Most organizations use a fully insured model, where employers pay a set premium to an insurance provider, but that's not the only option. For some employers, self-funding, level-funding or reference-based pricing models may be more attractive solutions.
Know Your Options
Suffice it to say, there are a variety of ways that employers can structure their health plans.
Richie Marrero is a Specialist, Employer Sponsored Benefits, with 360 Benefits, which helps companies design employee benefits programs that strategically reduce and control costs year over year while enhancing employee recruitment and retention.