Rapidly rising healthcare costs are an enormous challenge for most companies. Family premiums have increased an astounding 55 percent over the past decade, according to the Kaiser Family Foundation. Costs are particularly steep for firms with more than 200 employees.
Since mid-market companies are in fierce competition to attract and retain workers, the pressure to manage healthcare costs and remain competitive is especially intense. But mid-market businesses aren’t powerless in the face of relentlessly rising costs. Here are a few ideas for helping contain healthcare prices at your company.
Putting Employees in the Driver’s Seat
To reduce healthcare costs, companies are increasingly turning to consumer-directed health plans (CDHPs, also referred to as consumer-driven health plans), which are high-deductible plans combined with health savings accounts (HSAs) or other accounts for covering expenses. The attraction of CDHPs over other common employer-sponsored health plans is lower cost. United Benefit Advisors research found that these plans run about 5 percent less than other commonly offered plans.
CDHPs allow for a more proactive approach to health care than other types of plans. Employees are encouraged to shop around for a good deal on procedures and other medical needs, and often can take advantage of cost-comparison tools to support searches for a good price. Data from the Kaiser Family Foundation found that 28 percent of covered workers currently participate in a CDHP, up from 19 percent five years ago.
Another part of the appeal to employees is that money set aside to cover expenses — in an HSA or other account — is tax-deductible. Under CDHP rules, employers can also contribute to staff health accounts, which makes for an attractive perk.
Re-Evaluating Wellness Programs
The effectiveness of workplace wellness programs has been debated in recent years, but research suggests that they can pay off if they focus on the right areas. Some trademarks of successful wellness programs include:
• Employee choice. Survey employees to find out what wellness offerings are most appealing to them — for example, stress-management classes, discounted gym memberships or onsite health screenings. Providing choice can help to improve participation.
• Long-term commitment. Be willing to maintain your wellness efforts and regularly check in with employees to monitor their progress. Payoff from a wellness program will not be immediate.
• Careful use of incentives. A recent National Bureau of Economic Research study found that a $100 reward increased employee numbers, but higher amounts had no greater effect.
Cutting Out Insurance Companies
After proving effective in large companies, mid-market companies are increasingly operating their own plans. This might sound expensive, but some self-insured businesses are finding the math works. Since companies don’t pay premiums or file paperwork with insurance companies, administrative workload is reduced. Employers also have more flexibility in building plans to meet their workers’ needs.
Because covering employees’ healthcare claims comes with risks, self-funding organizations typically purchase stop-loss insurance to limit unexpected, expensive claims. To research the feasibility of a self-funded plan, talk to a benefits consultant to understand the details. Also speak with your accountant about cash-flow needs to cover employee claims.
Using creative solutions to thread the needle of cost containment and competitiveness is part of running a thriving company. Stay attuned to evolving employee needs so you can make adjustments that benefit your staff and your bottom line.