Managing Health Insurance Costs is a Team Sport
With health insurance costs rising and no end in sight, what can business leaders do to minimize cost? We recently surveyed 236 business leaders for our Think Tank report on the rising cost of health insurance. Here are some key findings from that report.
Susan Lang, CEO and Founder of HooPayz, which offers services to employers to help manage health care costs, says there are three important areas business owners can explore to identify opportunities for smarter management of spend and to control health insurance costs.
1. Benefits Plan Design
The first opportunity to manage and potentially reduce insurance costs is at the time a company’s benefits plan is being developed.
To reduce premiums, companies can consider self-funded insurance, which provides health benefits using a company’s funds rather than a fully insured plan where the company contracts with an insurance provider for coverage. There are risks to this, however, and it’s important that smaller companies considering this option are able to absorb the cost if something catastrophic happens to an employee.
Another option is to choose a “narrow network” insurance plan – an option that offers lower out-of-pocket costs and monthly premiums in exchange for a smaller provider network. This can mean that employees may not be able to see a doctor they’ve gone to for many years, and not all doctors accept these types of plans.
A High Deductible Health Plan, which lowers premiums by increasing deductibles over a traditional health plan, allows companies to offer employees a Health Savings Account (HSA). HSAs are medical savings accounts whereby the money put into the account is not subject to federal income tax and can be used to pay for qualified medical expenses without federal tax liability.
Nancy McCullough, the Founder and CEO at Kansas City-based entrepreneur to Enterprise (e2E), which provides financial, human resources and marketing services to growing businesses, says, “Our clients tend to have less than 50 employees. The cost of health insurance is a big pain point for them, and there aren’t many creative choices. It often comes down to either simply selecting an HSA paired with a high-deductible health plan or a more traditional plan with lower deductibles and individually rated premiums.”
2. Preventative Care Incentives
Programs focusing on employee wellness and preventative care first emerged in the 1980s as a way to create a better work environment and reduce health care costs by minimizing health care utilization and providing negotiating leverage for better benefits. The appetite for these programs has grown tremendously since that time, with several studies showing over 50% of American businesses offer some form of wellness program. These programs typically include things like getting checkups and biometric screenings, providing smoking-cessation programs and offering health education training programs.
That percentage is much lower, though, for small-business owners, who say that while employee well-being is critical to their bottom line, only 22% have wellness programs in place.
Van Trease says an emerging discipline known as health coaching is having an impact on the reduction of health care costs, according to data from the Medicare population.
“We are all likely going to experience a wellness issue at some point in our lives. When this happens, healthy habits can help to ‘stack the deck’ in our favor for lowering our risks and aiding recovery,” says Michelle H. Schmidt, Owner of PACE Nutrition Coaching LLC. “Employers have the ability, through a comprehensive health and wellness program, to contribute notably to their employees’ well-being.”
Empowering employees to take control of their own health situation through access to programs and education is a step in the right direction.
3. Understanding, Controlling and Managing Costs
Understanding what drives the cost of what your company pays for medical care is the third big opportunity to lower overall costs.
Research shows that one of the biggest drivers of health care expenses is the cost of prescription drugs. Yet, in our survey, only 16% of respondents selected “pharmacy coverage is more of an issue than health care coverage” as one of their top three concerns related to the cost of providing health insurance.
Another opportunity is educating employees about being good healthcare consumers, which means monitoring medical bills for errors and finding opportunities to negotiate discounts or conduct price comparisons when appropriate.
For example, a woman seeking OB-GYN services may not realize that the cost of care can differ depending on which hospital she uses – even within the same health care network. The difference can be thousands of dollars, HooPayz Founder Lang said.
“Health care really is a team sport,” says Mike Castellano, CEO of St. Louis-based physician group Esse Health. “Employers and employees who work together on wellness, combined with wise and judicial use of health care resources, could actually see lower annual increases and keep costs affordable for the whole team. Everybody wins.”
To read the full report and get more health insurance cost control tips from small and midsize business, download the full Think Tank report.