Healthcare and benefits costs are continuing their unsustainable climb into the new decade. Over the last 13 years, the cost of healthcare has increased by 75%, and it is now considered to be the second largest operating expense for most companies. According to the Kaiser 2019 Employer Survey, premiums for family coverage average $20,576 per year. To mitigate these costs, small and medium business turn to insurance consultants or brokers to help them control their costs. This takes place through a combination of bidding out the insurance (with hopes to find a lower rate) and by identifying where risk/costs can be reduced (like purchasing a telemedicine product). The results of those efforts have been a 51% increase over the past decade alone.
While it can seem like there is no option but to keep going down this path, there are a number of ways that you can design your benefits and manage them to get better outcomes. Want to learn more? Read on.
Benefits Package – What You Have Today
There is no doubt you are aware of the term “benefits package”. This is most likely what you have today: a series of benefits or products offered to your employees. These are things like your health insurance, disability insurance, retirement plans and even wages. Recently, those offerings have expanded to include things like telemedicine services, HSA/HRA/FSA, wellness programs or even second opinion services.
These programs have been used to accomplish 2 main things:
- Attract and retain talent
- Reduce operating costs (reduce care costs & increase productivity)
While 63% of employees say that benefits play a major role in selecting a job, there is little evidence to suggest that the benefits have a positive impact on reducing the cost of healthcare. Employers face a trend averaging 6% per year, and while that may not seem like a lot, remember that average family coverage costs $20,576 per year. That’s an annual increase of over $1,200 per family. Why aren’t the independent vendors and services having a larger impact? The following drivers of benefit cost are exactly why costs continue to rise so aggressively:
- Benefit costs are managed through a bid-out process
- Claims are not properly managed throughout the year
- Vendors are supposed to reduce claims, yet work independently of one another with little or no coordination
- There is a lack of understanding, utilization and accountability when it comes to employee engagement
Number/types of vendors in a benefit package
6% average medical increase
Each vendor working independently
Lack of Accountability
Goal setting and reporting
Current benefits packages are made up of independent parts and are insufficiently communicated. This makes getting value out of the benefits a real challenge. Often there are many vendors to manage, each with different levels of service, usage and effectiveness. For employees, there is little awareness of the services offered which are communicated during a brief enrollment period each year.
Benefits Ecosystem – What You Should Have
A Benefit Ecosystem is a community of interacting products, solutions and vendors, designed with the employee and employer’s needs in mind. Approaching your benefits as an Ecosystem offers a few key benefits. Instead of separate independent solutions, an ecosystem is actively managed to increase awareness and use of programs. Vendors are held accountable for their results, work together when possible and a process is implemented to meet the needs of the employer and their employees throughout the year. Moving to an Ecosystem approach requires collaboration and frequent communication between the employer, employees, vendors and insurance consultants.
Each successful ecosystem has 2 key components:
- An efficient design – comprised of vendors that fulfill a true need, these vendors are carefully selected on the basis that they can prove not only their ROI but also key benchmarks along the way (i.e. how many people they’ve worked with per quarter). They must also be willing to work with other vendors and
- Activated members – Everybody in the ecosystem needs to play their part, from vendors to company leadership to employees. Activating these members involves sufficient communication and engagement across all levels as well as specific target goals.
Ecosystem Design – Building Your Ecosystem
To build your ecosystem, you must have a comprehensive understanding of your current needs and how to evaluate which vendors can truly meet those needs. Your benefits consultant can provide you with an understanding of what products were utilized over previous years and what that impact was. Furthermore, you should be comfortable with your claims data. If your employees have high medication costs, then you know that a prescription management service would be a good fit. The following section outlines how you can design your ecosystem.
Identify Your Needs
What programs do your employees want and need? Do you need to attract talent in a competitive labor market? What is your benefit budget? Weighing your employees wants with your organizations needs and budget will shape what programs you include. Your population and demographics will also play a role in the services you offer. If you have a high number of young families, then a telemedicine service may be a cost saving tool and desirable service. If your population is older with chronic conditions or surgical needs, then a second opinion service may be a way to ensure your population is being diagnosed and treated most effectively. Each service in your ecosystem must:
Solve a Need
Get rid of waste. Underused and underperforming services need to be evaluated. If a service is not being used, find out why. Is it a communication and awareness issue or is it simply not a good service or fit?
Work Within the Ecosystem Environment
Is the program willing and able to coordinate with your other services, consultants and staff or is it a one size fits all program?
Results, results, results. Is the program meeting your goals and expectations? Do your employees use and value the service? If not, it may be time to look for another program
Once you decide on what to offer, choosing the right vendors is critical. Asking the right questions will help you make your decision.
Points to consider during vendor section:
- What type of companies do they work with?
- Have they had past successes with companies like yours?
- Should you choose on price, value or quality?
- Is there a launch process or communication campaign, or is it left to you to inform your employees?
- How do they compare to their competitors?
- What do they consider successful utilization?
Check out our Guide on Evaluating Healthcare Benefits Platforms for more details on selecting your vendors.
Your ecosystem isn’t comprised of just your vendors but also the people that make up your plan. This means your employees, and also company leadership. Each have an important role to play but need considerable management and guidance.
Each vendor in your ecosystem (think telehealth provider or claims analyzation service) is likely good at performing their job, but are they able to effectively communicate with your employees? Can they pass along information to your other vendors when necessary? In order to drive engagement, or what we call activation, you need to manage each vendor on an ongoing basis. Establish benchmarks that they are responsible for meeting, and understand why they don’t meet them—even if your benchmark was set too low. For example, if your disease manager is only meeting with 65% of their target employees, perhaps they don’t have the right contact info or can’t connect of them. Make sure to meet with them monthly and understand what problems or successes they are having.
Activating Human Resources
Human resource teams are vital for any successful benefits ecosystem as they are the direct connection between employees and the organization. Making sure your HR team understands the company’s objectives for their benefits ecosystem and is empowered to deliver that message to the employees is key.
Is your HR team trained, so they can help employees navigate between their medical insurance coverage, tax advantaged savings accounts and how they work together? Is your HR staff aware of the carrier programs available to help an employee find a disease management program to help them manage a chronic condition? Has your HR team been empowered to really help your employees when they need it? Use your HR team to create an internal structure to educate, communicate and engage your entire population when it comes to healthcare and benefits.
For employees to appreciate their benefits, they must first be aware of them. Communicating these services year-round will improve the utilization and effectiveness of these services.
What percent of your population could answer questions about their medical deductible or what their HSA can be used for? Would they know where to look for the best price on their medications or what their short-term disability plan covers? An honest answer is that a very small number would be able to do so.
Employees need to be educated on these services and vendors. They also need year-round communication to increase their awareness and understanding of the programs so they can effectively use them when their need arises. There also needs to be efforts made to communicate and educate dependent spouses—especially if the spouse is involved in the election decision making process.
If you don’t already, consider collecting email and phone numbers for employees and spouses during the enrollment process. Create a feedback loop by asking and surveying employees on what improvements and changes they would like to see included in the benefits ecosystem. This allows them to feel heard even if their suggestions aren’t implemented.
Managing benefits’ cost is not about the ability to seek competitive insurance bids each year. It is about managing claims and risks. This is best achieved by developing a collaborative benefits ecosystem with the right stakeholders who solve the right needs and all are held accountable in doing their job. It will require active participation from the employees, support of the employer to champion the initiative and vendors that are committed to helping your employees to be more effective users of healthcare and benefits programs.