This is the second in a series of four articles targeted to human resource, benefits, and financial professionals responsible for the management of the health & welfare plans for their organization.
As health insurance costs continue to rise, many employers typically pass along these increases by raising deductibles, copayments, and employee premiums. All of these solutions are created within a structure based on the conventional wisdom that a primary goal of an employer’s health care plan is to continue providing coverage at high, fully insured rates as a trade off for the stability of a 12-month cost structure. This may be the case sometimes, but we propose that there are also innovative funding and design solutions for the organization willing to understand the full spectrum of options available.
The current view for many employers is that the fully insured system favors large employers who have access to data, customized plan design and cost management programs leaving small employers to design and cost management programs that are “one size fits all”. It is also increasingly difficult to find health insurance products that can provide a desired level of coverage and the tools to create a culture of health within their population. A particularly critical issue is that alternative funding options, if not mindfully designed, can leave an employer with an inappropriately high level of risk.
In order to identify and optimize the options available, every employer should start by creating a framework for decision-making on types of healthcare cost management interventions that should be undertaken. We believe there are three priorities for these options:
- Create a “culture of health” for covered employees as an ounce of prevention is literally worth millions on the cure for employers.
- Select networks in which plan participants will find the highest quality providers and whose providers will deliver the best possible outcomes at the most reasonable cost.
- Determine how your plan design should cost share with employees. Cost sharing comes in two forms, based on premiums and based upon utilization. Premium increases affect all plan participants without regard to utilization, ultimately affecting the ability of participants to be able to afford coverage. Increases to copayments, etc. affect the users of the plan. It is necessary to be aware and strike the correct balance for your organization.
Opportunities for Impact
Our framework proposes a three-prong cost management design strategy:
- Personal Responsibility – Employers concerned with managing costs begin with helping their employees make proactive and informed choices regarding both how they can be better healthcare consumers as the situation arises and provide employees with the tools to do so. Current wellness and EAP programs provide a start but have been shown to have limited participation and consequently limited effectiveness. Helping employees focus on overall well-being rather than simply wellness is critical to improving the overall health of your employees.
- Plan Design – Employers are attentive to how benefits are delivered, what pricing and cost sharing strategies are used, and what funding decisions need to be made to maximize the benefits provided at the most appropriate intersection of cost and risk for the organization.
- Selecting the optimal partners – Employers work to create effective partnerships with vendors at all points in the process who will deliver best-in-class results, provide access to detailed data and analysis and understand how to align these with the strategic goals of the organization.
There are opportunities for employers of all sizes to avail themselves of the numerous options in the marketplace that will help effectively manage their healthcare costs now and into the future. Taking the time to develop the right strategy, aligning with best-in-class partners and fully understanding the risk/reward trade-offs are all central to building a culture of health within an organization.
The next article will be focused on a providing a better understanding of self-insurance, which is becoming a more viable option for many employers since the beginning of the Affordable Care Act. Employers may well find that there are some immediate savings while also allowing time for more effective health management initiatives to solidify. If you would like to discuss some of these options and their applicability please contact us today at consult@ubf.consulting.
Allan Phillips is a Managing Principal at UBF and has over 25 years experience as a senior health care and pension consultant. He has worked with Fortune 50, 500 and mid-size companies to assess, develop, and implement integrated benefits programs for global organizations.