Health care insurance premiums climb higher and higher each year. While there are many variables involved, the biggest factor is your company’s medical spend. Doctor visits, surgeries, hospital stays, and consultations add up, and industry stakeholders demand bigger profits each year. You can fight back. By digging into your plan data, you can uncover new strategies for eliminating unnecessary spend for employee medical care.
Four of the most effective strategies for businesses that want to lower their medical costs are HSAs, HRAs, reference-based pricing, and employee education. Here’s how they work:
1. Health Savings Accounts (HSAs)
HSAs are powerful additions to high-deductible health plans because they offer employees a simple, effective strategy for saving money they can apply to their future deductibles.
For HSAs to be effective, however, employees must fully understand how they work. If employees fail to invest inside of the HSA or if they don’t understand how to use it properly, an HSA could negatively impact their health and financial wellness.
If an HSA is a good choice for your business, spend time training your employees so that they understand its complexities. Consult your advisor if you need assistance.
2. Health Reimbursement Arrangement (HRA)
Under a Health Reimbursement Arrangement (HRA), an employer offers a monthly stipend to employees so they can seek their own health care on the open market. HRAs can be powerful win-wins for employees and business owners alike, but they must be executed correctly.
For employees, an HRA means upfront work because they are responsible for finding, selecting, and enrolling in their own health plans. Once that health plan is in place, however, the monthly stipend often covers the entire plan cost, meaning they could pay less for health care than they did on the company’s plan. Employers entering into an HRA should express these benefits to team members before launching a company-wide HRA.
3. Self-Funding For Reference-Based Pricing
Reference-based pricing is a powerful way to control your medical spend, but it is only possible by self-funding your plan. Companies with more than 100 employees may be capable of self-funding on their own, while smaller companies may need to join a coalition to have enough purchasing power to self-fund.
Once the self-funding is in place, you can use reference-based pricing to access the best hospitals, surgeons, and facilities. The lack of network requirements gives you the freedom to work with the best resources in the industry.
This access to better care unlocks additional benefits, including:
- Substantial reductions in overall health care spend. Although the initial cost of a surgery at a premier hospital may be higher than the same procedure at a low-cost facility, the overall savings are greater because better care leads to fewer complications and improved recovery time.
- New opportunities to invest in your workforce. Many of the companies we work with decide to take their new health care benefits savings and invest them back into their workforce. Some contribute more to their employees’ health care premiums while others look to other initiatives, like retirement benefits or profit sharing, to reward employees.
- Improved employee retention and talent acquisition. A better health care package and paycheck can help you retain top performers and attract new talent into your company. We recently heard from an engineering firm that lost its star employee in part because its C-suite allowed the company health care plan to become too expensive for the employee’s family.
4. Employee Education
Employee education is critical for reducing medical spend. When employees understand the plan, they make better health decisions that result in better health outcomes. For most companies, however, employee education is a challenge. Employees hate sitting through meetings, and healthy workers tune out the most critical plan details because they think the plan doesn’t impact them. To help the plan details stick, try these strategies:
- Make the plan relevant on a personal level. When employees understand how a plan could impact their day-to-day life, they’re more likely to pay attention. Tell stories or cite statistics to encourage your young and healthy populations to listen.
- Get in front of your team. Open enrollment meetings are common, but they’re critical for establishing a baseline. With the coronavirus keeping teams separated, however, virtual meetings through Zoom or Microsoft Teams could be more effective than in-person team sessions.
- Offer one-on-one attention. Most open enrollment processes fail to deliver personalized attention to each employee. To offer a personal touch, provide a dedicated concierge service to guide employees through their most pressing benefits questions.
Your company can’t afford to absorb annual rate hikes indefinitely. By taking action now, you protect your company for years to come. Even better, driving improvements means your employees receive better health care service and outcomes. The result is a win-win for your business and the employees within it.