With the daily news of healthcare costs sky rocketing, many employers and their employees don’t see health insurance as a great benefit/perk that their company offers anymore. If anything, they see healthcare benefits as a confusing, hard to understand, time-sucking nuisance that takes far too much money out of their pocket. I have seen studies where some employees say they would prefer to have a root canal over dealing with their annual open enrollment. With costs out of control and employees frustrated at the entire healthcare experience, you might ask yourself these questions:
- What can I do to make the healthcare benefits process better for me and my employees?
- Do my current employee benefit plans attract and retain the best people possible?
- What is my minimum and maximum costs goal per employee?
I’ve given these questions a great deal of thought. Given the complexity of choosing and administering employee benefits, there is no single solution, but I do believe there are clear steps you can take to start lowering costs.
Analyze Where the Money is Going
How much time do you, your friends or even your employees spend looking for a new car, TV or computer? Now, consider your last open enrollment for health benefits. How much time did you spend personally evaluating the options for your own benefits? As a business owner, what about the last renewal for your company? Most employees simply renew what they currently have and never reassess their personal lifestyle to compare what they had when they originally enrolled as a new hire.
As for employers, the vast majority here in Florida are still fully insured. They are advised that level/self-funding is too “risky” and decide to not investigate other options. Instead, they opt for the increase the carrier sets – which is most always at max. Then by some miracle, you get a slightly lowered rate after the broker “negotiated” with the carrier to find just enough flexibility for better rates. The broker will even go as far as convincing you, as the employer, how hard they worked to lower your costs. However, in all actuality, premium adjustments were made by taking points (commissions) from the broker.
The right employee benefits advisor isn’t afraid to go the extra mile to do what is in the employer’s best interest first. They will also not be subjected to specific carrier tactics or potential bonuses that can cause a direct conflict of interest. Ask for transparency from your advisors, brokers and vendors. Isn’t transparency expected in nearly every other purchase we make? Why not healthcare?
Get Out of ACA Plans
When ACA was introduced, I remember an ACA-supportive Louisiana senator telling a room full of insurance agents that this isn’t what we wanted. We wanted a single-payer system. Now with the Trump administration not getting a full repeal, we have a multi-layered problem with no hope of correction anytime soon. Carriers are looking at 2019 rate filings now, and with all of the uncertainty that exists, you can bet that they are going for the maximum amount possible. Just like a Vegas casino, you can bet that 99% of the time, the house never loses. Unfortunately, the employers and employees will be the losers in the current and future ACA plans.
Level/self-funding provides different rules that allow employers to avoid some of the negative language that govern ACA plans. Some association plans still exist that allow underwriting, so your risk can be rated to your specific group, however If you have a healthier group, you can save big. Future legislation may help increase these options. At the very least, when you are risk-rated, you should have motivation to educate employees, lower costs for you and them, and potentially get healthier for long-term savings, profitability and productivity. Be ready… because if you are stuck in an ACA plan(s), you need to brace yourself for 2019 renewals now.
Get Aggressive on the Right Costs
I’ve see many hidden costs and some self-funding clients ask for lower pricing on items such as Third-Party Administrators (TPAs), reinsurance and other administrative costs. In the big picture, those items represent less than fifteen percent of the overall plan expense. Studies show a large amount of the actual plan costs, on average, are incurred from claims on a small percentage of the employees.
Looking for lower administrative costs will matter, but never as much as the claims will. First, focus on the claims volume and costs, then look at how you can improve the majority of “high-utilization employees”. Eventually, this will have a much bigger impact on the plan overall. Realizing and addressing hidden costs due to lack of transparency can also lower your spend. For example, a TPA who insists on having a specific Pharmacy Benefit Manager (PBM) can be a big red flag. Ask your TPA if they are benefiting from bonuses or rebates. The rebates can be significant, so make sure you understand how the TPA is compensated. They might lower fees if the rebates are more lucrative, and some never disclose the rebates at all. In my view, those rebates should go back to you, the client.
Don’t Assume Just Because It Hasn’t Been Done, That It Can’t Be Done
The current costs of healthcare benefits are so overwhelming that forward-thinking advisors are working hard to change the current mindset of employers, CFO’s and employees alike. Remember, plans can and will change frequently. Level-funding may be a good option now, where it wasn’t a year ago. The right advisor won’t be happy with the status quo, and neither should an employer. If your advisor isn’t asking you or helping you control your claims spend, or finding evidence-based solutions, find one who will.
Ask more from your broker. Don’t “settle” for a side-by-side spreadsheet comparison on what they think is best. Furthermore, determine if the types of products and plans they are suggesting are good for your specific company, and then ask why.
Help Employees Understand Where to Go for the Best Treatment
I hate to tell you, but not everyone in a white lab coat is looking out for your best interest. Unfortunately, many are motivated to steer you toward treatments that result in higher profit for themselves and/or easier administration for their staff. Consumers need to find the best treatment in their area. Obviously, everyone wants to receive the best treatment, especially if they are the one going under the knife. Do you how to determine who is the best? Do you understand the associated cost? Better-than-ever tools exist if you really want to get to a granular level in answering these questions.
Some simple free apps and websites have basic information portals that anyone can access. Personally, I use Good RX or Health Grades for basic info. Good Rx provides information on various pharmacies that have the lowest prices on the market. I find, on many occasions, there can be large differences in pricing just within a square mile of each other. Health Grades provides facility ratings and helps locate nearby treatment centers. The point is that transparency is key, and you will find that most of the time, the best surgical outcomes are also the lowest priced due to volume. Take a moment to verify what your doctor is telling you and where he is referring you to by doing your research and asking more questions.
When it comes to evaluating and managing employee healthcare benefits, it is always smart to follow the money. Great solutions, hospitals, doctors and advisors do exist. In our current environment, you should understand that employers are at a disadvantage because not all hospitals, doctors and advisors are motivated to help the client. They’re often more aligned with the carrier’s best interest rather than the client’s. Due to the ACA Medical Loss Ratio legislation (known as MLR), since 2010, hospitals and carriers are no longer incentivized. In fact, they are disincentivized to lower fraudulent or inaccurate claims. There are only two types of players that are looking out for the client. One is the client themselves, and the second is a small group of well-intentioned advisors. Some, including myself, see the long-term value in helping the industry, the client(s) and ultimately, the country overall.