Open enrollment season is just around the corner and with that will come frantic meetings and phone calls as businesses around the country scramble to close out their year-end while trying to renew their health insurance. In light of that, we would love to offer some suggestions before the proverbial stuff hits the fan that can help businesses get a better handle on their upcoming renewal as well as future renewals.
Most businesses think in the immediate term when it comes to their health insurance. “I was paying $1,000,000 last year and next year I will pay $1,100,000.” In the grand scheme of things, it doesn’t look that bad. That’s only a 10% increase, right? This is the pretty typical model we see most businesses making when it comes to their health insurance even in light of the continually skyrocketing costs of providing insurance to employees.
What we’d like to help businesses focus on is to not just look at this year but at the next 5-10 years. Let’s assume that you do pay $1,000,000 as referenced above. If you just continue to increase your expense at a trend of 8.5% (the national average) then in 5 years you will be paying $1,500,000 for health care and most likely your benefits will cover less than they did today. You will probably also charge your employees more for their share of the premium as well and so everyone loses in this scenario. Higher cost for employer, employee and less benefit for all. Looking at benefits this way helps you to see that some of the changes you can make today may help you control this cost not just in the immediate years, but in all future years as well.
Too often businesses take the short-term approach due to convenience and we often hear that there’s a cost associated with switching carriers. Honestly, as industry veterans we can say that this “cost” is very low if non-existent if done properly. It usually involves nothing more than paperwork as networks have basically come to mirror each other in size and scope.
So, as you come up on this renewal season we’d like to put together a few items for thought to help you come up with a better 5 year strategy instead of just taking the least expensive increase this year.
- Have you explored self-insurance? If not, now is the time to start looking. It’s an incredibly affordable option for most businesses and the risk is just not that high (for more, see our buyers guide). Most of the following options depend on being self-insured and are not available to small businesses that are fully insured. It’s definitely worth considering.
- Switch wellness for data. Many employers have wellness plans but few people understand their health care spend thoroughly enough to make their wellness count. Not all plans have a complete reporting package but if your plan does come with data, make sure you dive into it. Your consultant will be able to walk through your spend and help you make a more educated decision.
- Instead of focusing on plan design, focus on cost control. Many health plans do little to control the cost of healthcare or educate the employees as to where to make smarter health care decisions. A simple example is that MRI prices can vary widely at a hospital owned facility vs. a stand alone. Make sure you’re exploring options that can lower costs such as a health care concierge or putting out informational items on where employees can make smarter healthcare decisions.
- Focus on pharmacy. This is the highest cost center for most businesses and the easiest way to save on your expenses. A couple of items to mention would be to increase your generic usage as every 1% increase in generics equates to about a 2% decrease in overall cost. You could also look at an educational campaign around specialty medications which are usually overpriced medications with similar outcomes to other brands or generics. Simply taking someone off of Humira could save your plan $3000 or more per month if done properly.
We hope these 4 simple strategies allow you to have a more meaningful open enrollment season this year. Equinox is always available to discuss your options should you feel you need an additional look at these items with your renewal.