It’s no secret that health care is an expensive (but important) line item on a company’s budget. But just how big?
According to the Kaiser Family Foundation, the average premium for single coverage in 2018 was $6,896 per year. The average premium for family coverage was $19,616 per year.
Regardless of how this premium was split between the employer and the employee, this is a huge part of the annual operating budget (~7.6% of the overall budget, according to SHRM).
And, unfortunately, this piece of the pie isn’t getting smaller. Kaiser indicated that single coverage premiums were up 3% year over year, while family premiums were up 5%.
Lowering health care costs almost seems far-fetched. Rather, many organizations are focused on controlling health care costs and maintaining premiums and coverage levels to offset the sustained growth in expenses.
What strategies are employers using to keep costs in check? Here are nine of the most common (and successful!) strategies for controlling health care costs.
A ‘surcharge’ is an additional cost that is passed to employees that meet certain requirements that could increase the cost of providing health care. Surcharges for spouses/partners and smoking are the two most common costs that are applied to monthly premiums. These surcharges vary per company but often average $25 – $50 per person per month.
Spousal/partner surcharges are applied to family coverage when the eligible spouse also works and has a health plan at their own place of employment. If the spouse chooses to forgo their own coverage and instead enroll with on your company plan, they will incur a surcharge. There are a few different ways to execute a spousal surcharge and a few compliance issues to keep in mind.
A smoking surcharge will apply to each person on the health plan that is an active smoker. Offering a treatment plan is often accompanied by this type of surcharge.
Though surcharges can help offset the cost of additional health care expenses by offering an incentive to change behavior, keep in mind that these scenarios are often self-reported and might not catch 100% of applicable employees.
2.) Annual Shopping
Have you been married to the same carrier or the same plans for years? If so, it might be time to start evaluating other options.
Relationships can be important but keeping a close eye on the bottom line is equally—if not more—important.
This is where working with an insurance or benefits broker can be advantageous. Brokers often have existing relationships with multiple carriers and can provide several options for partnerships.
And, remember that you don’t have to use a single carrier for all of your needs. Sometimes it makes sense to use different carriers for ancillary plans than you use for your primary health care plan.
If you don’t work with a broker, do get plans and quotes from several carriers each year to ensure that you are making the best choice for your company and your employees.
3.) Proper Plan Design & HDHPs
Speaking of taking the time to evaluate your carriers each year, you should also evaluate your individual benefits plans and consider progressive changes.
Do you offer a single health plan or multiple health plans? Do you offer ancillary benefits to fill potential gaps left by traditional health plans? Are your plans structured appropriately with enough differences in premiums and coverage levels to incentivize smart choices? Do you offer a high deductible health plan as an alternative to help employees save money on health care?
These are all things to consider when designing your benefits offerings each and every year.
Again, this is an area where it can be helpful to partner with a broker to help guide your plan design and overall benefits offerings.
4.) Wellness Programs
The jury is no longer out on wellness programs. Studies have proven time and time again that wellness programs can dramatically improve workforce wellness and decrease the cost of health care in the long run.
The catch? You have to take the time to educate and engage your employees with your programs. And, not all wellness programs are going to deliver the same results from an ROI perspective. For example, disease management programs are more effective in driving short-term benefits, like managing heart disease, which can reduce the risk of a heart attack. Lifestyle management programs, on the other hand, offer more long-term benefits by promoting behavior changes like eating properly and quitting smoking.
How much could this impact your bottom line? Well, the numbers vary per program, but a recent Rand survey found that the ROI of wellness programs averages 150%. Meaning, employers earn $1.50 in savings for every $1.00 they spend on wellness programs. Pretty impressive numbers!
Take the time to research different programs and providers and then carefully craft a strategy to actively engage your workforce with your new wellness offerings.
5.) Prescription Drug & Treatment Partnerships
As consumers are increasingly more conscious of health care costs and plan pros and cons, many are struggling to see the light at the end of the tunnel when selecting a plan. For example, an HDHP might have the lowest premiums, but the higher upfront costs of paying for treatment and prescriptions could create a financial burden that scares folks away.
Ease some of this concern by exploring alternative prescription drug plans and/or treatment partnerships.
For example, the city of Avarda, Colorado partnered with Paladina Health, a low-cost primary care clinic to provide exclusive treatment for employees at a lower cost. And, in an innovative move, General Motors signed a direct contract with the Henry Ford Health System in Detroit to provide a wide array of health services for employees at a discounted rate.
Other companies offer generic drugs at a very low rate or without a co-pay to encourage the use of these more affordable alternatives.
Gone are the days of waiting hours at urgent care for a quick fix to knock out that mystery cold. As frustrations have grown among employees that are fed up with the hassle of current treatment options and among employers that are concerned about their bottom line, technology has evolved to provide more convenient health care alternatives.
Enter: telemedicine. Programs differ in scope, features and functionality, but the basic premise is the same—remote health care.
Typically, an employee connects with a certified health care provider, either via video call or phone call and discusses symptoms and treatment plans.
Telehealth visits are much more cost-effective and efficient than a traditional doctor’s office or emergency room visits – a win/win for employers and employees. The average telehealth visit costs only $40 while in-office visits average $125 per visit. That’s a 68% increase in savings! Additionally, 75% of doctor, urgent care and ER visits are either unnecessary or could safely be handled via phone or video consult.
7.) Better Benefits Education
How well-educated are your employees on current company benefits? How are employee benefits communicated? Do you have an employee benefits education and communication strategy? These are all questions that your HR team should be asking on a regular basis.
Uninformed shoppers are more likely to make the wrong benefit choices, which can drive up costs for both employees and the employer.
A recent survey indicates that 83.2% of employers believe that communication, employee education and engagement are integral to overall benefits delivery, and 65% of organizations believe that educating employees about their benefits is a high priority. And this lack of education shows.
Over 60% of employees report that making sense of benefits is ‘too complicated’, and nearly 75% report that there is some part of their current coverage that they do not understand (via Jellyvision).
Despite this gap in employee education, less than 25% of companies are using technology for non-payroll HR functions, like benefits education and communication. This is especially surprising since many HCM and benefits administration platforms have these handy tools baked right into the system! It’s time to get back to the basics with better benefits education.
employees say that making health insurance decisions is ‘always very stressful’
employees feel that the open enrollment process is ‘extremely confusing’
employees say they would like help from their employers when choosing a health plan
Bad benefits decisions aren’t just bad for employees. Over-covered or underinsured employees can cost your company big bucks in the long run.
So, how can you empower employees to make better, more informed benefits choices? Enter decision support.
Investing in decision support tools will not only help employees better understand their benefits choices and make more informed decisions but can also help save your organization money by helping employees select the most appropriate level of coverage.
9.) Dependent Verification
Is every person on your benefits plan actually eligible to receive coverage?
Are you sure?
Research has shown that 6%-8% of a company’s health plan pool is actually not eligible… Whoops.
Performing annual dependent verification audits is less of a luxury and more of a business best practice to keep costs and compliance in check.
New to dependent verification? Check out this blog on dependent audit essentials to get started.
Curious about how big of an impact a dependent audit could have on your bottom line? Check out our dependent verification calculator to see estimated savings.
Ready To Save?
If you’re ready to invest in a system that can handle complex benefits configurations that involve surcharges, voluntary perks, employee comms and more—you’ve come to the right place. Begin your health care cost diet with a free test drive on PlanSource. We’ll show you the ins-and-outs of our system and evaluate how we can save your team valuable time and money.