If You Don't Have a Meaningful Answer to this Question From Your CEO, Update Your Resume...
October 31, 2007
My latest article is up at Workforce.com, entitled "7 Ways to Reduce Benefit Costs Without Decreasing Coverage", so go out and take a look if you have a chance. Here's the intro:
"By now you’ve read the latest yin and yang of benefits news. Health care premium increases rose at their lowest rate in eight years. But the increase is still more than 6 percent, and that’s still more than twice the rate of inflation. It far exceeds the average annual increase (3.6 percent) for employees in the U.S.
With that data in mind, the reality remains the same. Your benefit cost structure is increasing, and it remains difficult to shift some, much less all, of the increasing costs to employees. The crunch continues, and you’re in the middle. Your CEO is looking to you, the HR pro, to squeeze dollars out of the overall plan structure without causing a riot. So much so that she walks into your office and asks the following question:
"You follow these things: What can we do to reduce our benefit costs without dropping coverage levels significantly or increasing employee contributions?"
Yikes! That’s a credibility call for HR—an opportunity to be at the table. Or to clean the table after the meeting if you don’t have a meaningful response."
Click over to get my cliff notes for the top seven strategies to drop benefit costs without decreasing coverage. Let me know ideas I've missed as well...
You've hit on most of the ideas floating around the benefits water cooler. Some have suggested accepting premium increases and having the company absorb the brunt of the increase. Others have suggested cutting benefits or increasing deductibles and copays for employees.
I suggest a multi-step approach in the renewal process. First, analyze the data (if possible). You need to know where the utilization lies with your population. Next, analyze the changes you can make to actually affect the behavior of those covered. This is the biggest challenge - getting your employees to understand their options and make the connection between healthier living, preventitve care and exercise and good eating habits. It seems like most employees just want to have the coverage so when their body breaks down, they can let a doctor or hospital fix them (this usually carries the highest costs for any health plan).
Lastly, you can utilize a broker (or do it yourself) to see what cost effect making slight changes and adding a little more responsibility to your population will do (for example, if your employees are going to the ER for flu-like symptoms, up the ER copay by a hundred bucks and educate them on using an Urgent Care facility or provide flu shots).
There are many ways to go about managing your benefits costs (from self-insured to fully-insured, from HRAs to HSAs, from wellness programs to penalties for smoking/obesity,etc). All have positive as well as negative side effects. Beginning with understanding your covered population and getting them to be more proactive and accountable is a good starting point towards managing your benefits costs. Hopefully, by doing so, you'll never be in a situation where your CEO walks into your office and expects you to pull a 10-story rabbit out of your hat.
Posted by: Alan | October 31, 2007 at 10:45 AM
Great summary of some of the strategies for dealing with health plan costs. A couple of thoughts.
On the issue of verifying spouses’ and dependents’ coverage, some states recognize common law marriages and this can be a challenge to determine if employees are legally married. Keep in mind that there is also no common law divorce, so those married at common law need to go to court to dissolve the marriage. Second, kicking ineligibles off the plan has plenty of legal implications like CORBA, benefit recoupment and insurance fraud.
As to other cost savings issues, many companies are facing the painful process of migrating to a high deductible health plan. The associated cost shifting is a real challenge to HR. Sorting out the funding vehicles (HSAs, MSAs, FSAs and HRAs) to bridge the gap created by the high deductible requires careful planning. Once a vehicle is selected, employee education is critical.
Wellness programs are growing in popularity, but there significant HIPAA limitations on both the carrot and the stick mentioned in your article. The result is that employers may only be able to influence behavior for marginally “unhealthy” lifestyles.
Posted by: Michael Moore | October 31, 2007 at 11:33 AM