Five Ways Employers Can Save on Health Care Costs

In recent years, many companies have been dealing with rising health care costs largely by transferring more of the expense and risk on to their employees (shifting cost).  But some employers have found more creative ways to limit health costs without further burdening valued employees. Here are some of those solutions:

1. Pharmacy benefit managers. Pharmacy benefit managers are independent third-party administrators who work with pharmacists, employers and workers to reduce costs and inefficiencies. For example, they may help workers migrate from expensive brand name drugs to equally effective generics for a fraction of the cost. Or they may be able to migrate workers from bricks-and-mortar pharmacies to mail order. They also assist employers with contract negotiations.
2. Telemedicine. Some companies are contracting with doctors to provide health services online, via a video feed. It’s no substitute for an in-person examination, but workers can get consultations and routine assessments done and get a prescription for a fraction of the cost of an in-person visit. Furthermore, the worker doesn’t have to take time off work for an appointment. It can be done from the office.  A typical insurance billing for a basic medical appointment can run as high as $150. But a telemedicine visit can cost about a third of that amount, according to reporting from U.S. News.
3. Real Wellness programs. Healthy employees cost much less than sick ones over time. It goes without saying that unhealthy employees generate much more frequent and higher medical claims than healthy employees.  Employers are fighting back by offering access to smoking cessation and weight loss programs, as well as additional programs for the management of common conditions such as high blood pressure, diabetes and asthma. But it is important to offer programs that are evidence-based and not one size fits all.  Customization and integration with your culture and claims are critical for success.
4. Consumer-directed health plans. Employers are also giving employees greater control over their spending decisions. They are doing this via high-deductible health plans, which come with access to health savings accounts. These allow either an employee or an employer to contribute pre-tax dollars to an HSA. Withdrawals from an HSA to pay for qualified health care expenses are tax-free. These plans are less expensive for employers than comparable traditional insurance plans, and can work very well for employees in good health. Some employers choose to contribute to HSAs on their workers’ behalf.
5. Transparency tools. Cost-transparency tools make the cost of every medical procedure or service visible to employers and patients alike.  A claims analysis from United Health Care found that those who used the company’s transparency tools spent an average of 36% less on health services. When consumers used price-transparency tools, researchers found an average savings of $173 for employees and $409 for employers per procedure.
6. Alternate funding.  If your firm is only looking at fully insured options, then there is more to be considered.  Alternate funding and ultimately partially self-funding your health plan will automatically save money in fewer taxes and allow the employer to better manage the risk of insuring the population.  Insurance carriers will always come out ahead in fully insured programs, so it behooves employers to consider alternate funding programs as a long term means of managing health insurance costs.

Alan Wang
Alan Wang is the President of UBF and serves as the lead consultant. He has delivered the UBF solution set throughout the world and is highly regarded for his areas of expertise. You can follow him on Twitter @UBFconsulting.