Spend Matters welcomes a guest post from Jim Kiser, of GEP.
The cost impact of employee health care benefits has now escalated to a tipping point for employers, both public and private, across the US. For numbers sake, the average annual premiums in 2012 are $5,615 for single coverage and $15,745 for family coverage. Average premiums increased 3% for single coverage and 4% for family coverage in the last year. Consistent with recent years, average family premiums for small firms (3-199 workers) ($15,253) are significantly lower than average family premiums for larger firms (200 or more workers) ($15,980).*
What are some reasons behind this mind-numbing, budget-sapping trend?
Executives and their internal HR management should consider a number of factors, including the Federal Government’s Affordable Care Act mandate that starts full force in 2014, premium costs, an aging population, prominent US health issues, and expensive medical technology which in and of itself adds 7-10% cost increases year-on-year.
Here are some considerations that can help organizations begin to manage the cost of employee health care benefits, while ensuring a healthy employee:
- Modify the benefit level provided. Modify how many, what type, and who the plan provides to.
- Direct participants to specific provider choices. Direct or even limit health plan participants’ choices to lower-cost providers.
- Involve employees in cost sharing. Structure benefit plans so that employees pay for part of the costs.
- Reduce or eliminate non-beneficial healthcare services. Understand the economics and actual need for certain services.
- Rationalize health benefit services. Use the right combination of outsourced service providers and providers within a network to deliver health benefits.
- Drive greater value received for the healthcare dollar. Rather than just minimizing costs, consider the benefit received per dollar spent on health benefits. Challenge your broker, consultant or third party administrator on their administrative and commission structure while setting an expectation that they will help find ways to lower your cost through innovative plan design with competitive providers
- Understand the new federal Affordable Care Act. How will the policies on areas such as exchanges, risk pooling, and penalties for non-market competitive premiums potentially affect your organization?
So what plan design changes can positively impact a company’s bottom line?
- Shared premium contributions. Employees contribute as a percentage of the total premium or a flat employer contribution and employees pick up the remaining.
- High-deductible health plan and (FSA) health savings account. Introduce a consumer-usage mentality to employee health care in order to control excess usage.
- Wellness program. Allow for a proactive approach to improving employee health and, thus, reduce the need for additional costly health care interventions.
- Self-insurance. Control the risk associated with health premiums, as well as the profit.
- Cooperative purchasing. Pool with other employers to leverage purchasing power.
For more interesting thinking on procurement, visit the GEP Knowledge Portal.
*"Employer Health Benefits 2012 Annual Survey - Kaiser Family Foundation." Employer Health Benefits 2012 Annual Survey - Kaiser Family Foundation. N.p., n.d. Web. 26 Mar. 2013