Businesses these days are between a rock and a hard place. Right now, unemployment is at an all time low and the economy is booming. The labor market might be tighter than it has ever been so finding good talent to grow your business can be difficult. On top of that, you have healthcare costs now growing to be the second largest expense in most businesses. Healthcare costs are slated to rise 8.4% in 2018 and that’s been fairly average for the last few years. If that trend continues your health insurance costs could rise 50% every 5 years!
It’s rising expenses like this that have businesses wondering what they will have to cut or give up in order to stay afloat. But we feel businesses shouldn’t let this expense sideline their growth plans. Instead, companies must take a proactive approach to this problem. By implementing the proper plans, businesses will be able to lower their health care costs and improve their benefits. This will allow them to put their capital to work on recruitment and retention to meet the growth goals of the business, not plowing more and more cash into an inflated benefit cost.
Here are some key strategy points to focus on:
Many businesses shy away from this because they feel it’s too risky. The fact of the matter is that self-insurance has become increasingly affordable and the products on the market are minimizing this risk. The exposure for a small firm to a $1,000,000 is just not there due to stop loss insurance and other aspects of a self-insured plan. The upside to self-insurance is that you only pay for the care you use and for the majority of businesses the average year is well below what they would pay in the fully insured market. Of course, this can fluctuate but right now is a great time to explore this option even for businesses with as few as 20 employees covered on the plan.
Watch your claims
If you do decide to go to self-insurance it’s important to select the right partner to process your claims. Traditionally, businesses have relied on an insurance carrier to act as their TPA (Third Party Administrator), Pharmacy manager and Insurer (on the stop loss). However, we have seen that utilizing an independent TPA can greatly impact the performance of a self-insured plan. TPA’s offer many customized services that carriers do not and they allow you to pick and choose the services that fit your businesses so you can have the greatest bottom line impact.
Control your Pharmacy
Depending on which study you look at, pharmacy costs are expected to rise to 50% of a plans overall cost by 2020 (currently at 20%). The average business has little to no control over their pharmacy spend in a fully insured model (and most self-insured models). Taking control of this through a transparent model allows businesses to cut their cost by 10-20%. The easiest piece to implement is simply negotiating a pass through of the pharmacy rebates which can be as much as $90 per employee per month. From there, having the ability to customize copays, customize formulary and implement clinical management can help businesses maintain a flat pharmacy trend instead of absorbing the projected 30% increase over the next 3-5 years.
Treat Your Healthcare Like a Business Unit
Most importantly, it’s time for companies to look at their healthcare dollars and ask what they’re getting out of this. If you’re like most companies, your open enrollment time is simply a way to frustrate your employees and give them a reason to walk out the door. Why not? They probably have another opportunity available with the labor market being what it is. Because of this, you need to be in a position to analyze how your plan is performing with actual data and find areas of improvement. The traditional model of shopping the same plans at different carriers and hoping to only increase costs by 5% won’t cut it. Instead, businesses are now able to review detailed data on areas of possible improvement in their plan and implement strategies to drastically lower costs. One area would be finding which facilities under your plan which have preferential pricing and directing members to those sites at an improved copay or deductible level. But, until you take the steps mentioned above, this is simply not an option.
The Health Insurance landscape has drastically changed over the last 3-5 years but many businesses are still operating with the same strategy they were 10 years ago. The bottom line is businesses now have the tools available to lower their healthcare costs and manage it moving forward. It only takes a little change in how businesses approach this expense and can be done with great success. If you have questions on this we urge you to talk to your consultant or contact us for more information. Or, you can explore more options, particularly, our Beacon solution by visiting HERE.