10 Health Care Cost Reducing Strategies for Employers

Since the launch of this blog site earlier this year, the majority of posts have been focused on compliance issues. This week, I’m changing things up, and shifting the focus to strategies that can help employers and employees REDUCE the cost of their health insurance.  These strategies are not merely theoretical, conceptual ideas, but rather, time tested and proven ways to reduce the cost of health insurance.  And depending on the type of coverage you offer today, there may be no better time than NOW to consider making some changes!

Unlike any other form of insurance, health insurance has a high claims loss ratio.  In fact, approximately 80 cents of every dollar of premium collected is paid back out in claims to the policyholder. (Note: The Affordable Care Act includes a provision known as “minimum loss ratio”, or MLR, which requires health insurers to pay out 80% or 85% (depending on the size of the insured company) of every dollar of collected premium in claim benefits, or rebate the shortage.)  Health insurance is expensive because health care is expensive, and becoming ever increasingly so. There are a number of strategies that employers can consider to reduce the cost of health insurance.  Here are ten (10):

1. 1. PREMIUM COST SHARING – Review the employee premium contribution strategy and complete benefit plan offering.  It may be time to change the way premiums costs are shared (for both employee and dependent coverage, independently), and the benefit offerings made.  There are times when a review/change is more necessary than others, such as when a new health insurance plan(s) is introduced, and/or when the funding method changes.  ACA compliance certainly demands a review of the manner in which health insurance premiums are shared.  
   2. EVALUATE/CHANGE ELIGIBILITY – Review the cost of dependent coverage, along with the percentage/number of employees electing spousal coverage, and consider modifying plan eligibility.  Note: Some nationally recognized employers have ceased offering coverage to their employees’ spouses altogether. (e.g. UPS and the University of Virginia).  A less severe, but potentially equally effective approach is instituting “spousal assessments”.  This approach involves charging workers more if a covered spouse has access to other, employer based coverage. 
   3. PLAN DESIGN – Introduce a Consumer Directed Health care (CDH) plan option.  Studies continue to reveal significant savings attributable to the introduction of high deductible/account based plans.   Do some plan modeling and/or “CDH readiness” assessments before implementing CDH.  If you have/offer a CDH option, evaluate the “take up” rate, and decide if its acceptable.  If it isn’t, deploy methods to increase enrollment rates (see no. 5 below).
   4. PRESCRIPTION DRUGS – Examine prescription drug usage and costs.  Is your Prescription Benefit Manager (PBM) doing the best job for you?  Are you getting the rebates or an administrative credit from your plan administrator?  Are your employees being given cost saving options?
   5. EMPLOYEE EDUCATION/COMMUNICATION – Educate your employees on the finer points of your health and other plans, and give them suggested ways to reduce costs.  Studies show that employees generally do not understand their benefits, resulting in misuse of the plan.  Employees would benefit from an in depth orientation of the health care market and a thorough overview of your company’s benefit plan.
   6. WELLNESS/HEALTH RISK ASSESSMENT – Provide a health risk assessment (HRA) to your employees (and their spouses) and provide incentives for their completion.  This data will give you a much better idea of the particular challenges facing your organization, and provide a plan for the future.  It may be time to introduce a wellness program(s), and the results of the HRA will help dictate objectives.
   7. FUNDING – If you’re fully insured, you’re paying more than you need to for health insurance simply due to claim reserves, and other fees and costs that are specific to fully insured health plans.  Partial self funding is much safer and more effective than it was just 10 years ago, and plans can be set up to resemble fully insured approaches.  If you are not currently taking advantage of some form of partial self funding, there are a variety of creative ways to reduce cost/risk worth consideration.  And, there are a number of Affordable Care Act (ACA) requirements that do NOT affect partially self insured plans.
   8. PPO NETWORKS – Are you getting the best discounts available in your market, from the available PPO networks?  Should you look at offering network tiers?  What about a network carve out for things like mental/nervous, substance abuse, chiropractic care?  Perhaps its time to examine some alternatives and consider altering plan designs to encourage use of lower cost providers.
   9. INDIVIDUAL MAJOR MEDICAL – Depending on a number of factors, including the size of the organization, plan participation levels, premium cost, and how important health insurance is to employee attraction and retention, it might make sense to consider Individual Major Medical as opposed to Group Health Insurance. The cost is usually less, and effective January 1, 2014, coverage is guaranteed issue, with NO exclusion riders or pre-existing condition limitations.
   10. DEFINED CONTRIBUTION/PRIVATE EXCHANGES – The idea behind defined contribution was widely accepted back in the early 80’s when employers realized the challenges associated with funding defined benefit/pension retirement plans. In short, defined contribution places the burden of evaluating, purchasing and implementing health insurance coverage on the EMPLOYEE rather than the EMPLOYER. The employer provides each employee with a set amount of dollars (pre or post tax, depending on the arrangement) which employees then use to pay for, or offset the cost of individually selected benefits. Private health insurance exchanges (as opposed to the ACA public exchanges/marketplaces) are springing up all over the country as yet another source from which employees can shop for and purchase insurance benefits. 

I recently came across a great article from Kaiser Health News that discusses a number of employer strategies being considered and deployed. Click – http://www.kaiserhealthnews.org/Stories/2013/September/17/employer-sponsored-health-insurance-trends.aspx?utm_source=khn&utm_medium=internal&utm_campaign=skybox