Treating Expensive Healthcare
Healthcare costs have risen approximately 2x faster than inflation & wage increases. Employee deductibles are rising, the cost of receiving care is more expensive, and the average employee is financially squeezed more than ever.
Without getting into the causes of heatlhcare cost inflation, it’s important to look at what you can do to mitigate your own personal costs, as employers and business owners.
Tactics That Fail
Managing healthcare costs in the 2010’s consists of one primary action: switching to a high deductible plan. The theory being that if the consumer has to pay more, they will be more cognizant of their expenses. This is great in theory, but it has one massive problem: it encourages people to forego the doctor and illnesses/sicknesses aren’t caught early. This is bad for the individual, for the employer, and for the insurer.
Another tactic that has been popular is inserting cost containment programs (i.e. disease management, telehealth) to create efficiencies. The problem being that they don’t get used and ROI isn’t easy to track. Sometimes an employer will open their own clinics, but only 4%-8% of claims are really impacted.
The last tactic that firms lean on is to bid the health plan out to each relevant carrier, each year. This encourages the carriers to bid on the business to win it for the (presumably) long-haul. The insurer is planning on you being there for a good few years, so they may give you a preferential rate for the first year. The problem with this is that you’ll have ot pay for it during the subsequent years.
Tactics That Succeed
So if these tactics don’t work, then what should a company do? Firstly, these tactics can work, if done correctly, and as a part of an overall strategy. Consider the following:
High Deductibles Can Work: Your HDHP can motivate employees to be better consumers, you just have to make sure that they know how to use their health plan, and that they have enough support to make decisions (like when to go to the doctor). A HDHP should ideally be paired with an HSA. This allows the individual to hedge their bets on the fact that they wont be sick every year, and can use that premium savings to actually save for the futre. This way, if they have a HDHP, they can afford the out of pocket maximum when they do hit their deductible.
Cost Containment Can Work: Most companies have at least a few vendors in their benefits package. This might be a telehealth service, or maybe an enrollment company. If you engage an active management strategy, these can really work to your advantage. You just have to maintain a system of checks and balances to ensure that the vendor is meeting their targets each month (i.e. how many people have they worked with? Do they have accurate contact information?)
Education, Education, Education: What’s included in your enrollment strategy? You probably have some sort of informational seminar or packet that goes out. This simply isn’t enough. Firstly, you should be educating your benefits year-round. Over 50% of employees can’t name all of their benefits. They simply can’t remember them, much less accurately select the correct ones during open enrollment. There’s more to this strategy, but simply being aware of a year-round education strategy is a good start.
Check out our blog on using social media to engage your employee benefits.