Benefits breaking the bank?

I recently had a colleague in the industry send me an article from KSL.com that highlighted the rising cost of healthcare in the US.? The article noted that the cost of family insurance was nearly $24,000 this year.? While this is staggering – it is only up 7% over the prior year according to an annual employer health benefits survey by KFF.?

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It is open enrollment season, and employers in a tight job market want to remain competitive.? For most, that means paying more and more each year for benefits - that employees may not even like. But what if I told you that there is a better way?? Let's explore this together.

Reasons for higher healthcare costs

There are lots of reasons for high healthcare costs.? Sadly, employers can't do much to fix some of those reasons.? For example, fear of malpractice lawsuits is a driver – and Doctors will sometimes prescribe unnecessary procedures or tests out of fear of facing a lawsuit.?

There are plenty of articles that highlight reasons for higher costs in the healthcare space. If interested, this one here covers several reasons.?

As a mentor told me once - focus on what you can control. So, let's focus for a minute on 3 reasons for higher costs that business owners can control. Let's list them first, and then I will share how employers can take back control and reduce costs.

Unhealthy Employees

This one may seem obvious to some. According to the CDC, 90% of all U.S. healthcare costs—roughly $3.7 trillion annually—are for treating chronic illnesses and mental health conditions. Data suggests that almost 1 in 3 adults in the US are obese, the numbers are even higher when considering those who are overweight. This leads to chronic diseases and inflated health spending—especially if these individuals delay medical care for a condition that could be easier and cheaper to treat early on.

Many Americans don’t choose their own healthcare plan.

About 159 million American workers get their health insurance through their employer. In my experience, some small employers may consult employees - but employers typically don’t consult their employees when choosing their group health plan. Employers often decide their health insurance policy based on a key influencer, ACA compliance, budget, and administrative burden.?

That’s roughly half of all US employees who do not get to choose their healthcare, or the cost of their insurance because their employer has already determined it.? Most employers do not know there are other options.?

Beyond the nearly 2k a month for family premium coverage in 2024, each plan has an annual deductible, coinsurance, copayments, and other expenses that further increase these costs.?

Organizations receive incentives via tax penalty avoidance to offer these plans.? However, they may leave employees in a pickle financially.?

Hospitals and providers are well-positioned to demand higher prices

Mergers and partnerships between medical providers and private insurers have been a trend for some time.? This broadens networks and expands offerings – but also creates near monopolies where price increases can continue.?

As this article points out, “Consolidated private insurance companies can secure lower prices from healthcare providers because they have more bargaining power. But even so, studies have found that lower provider prices don’t necessarily translate to lower premium prices for consumers.”?

But why am I listing this here- aren’t we talking about things companies can control?? Yes, we are.? Read on for ways your company can combat these higher prices.?

What can be done to address these drivers of higher costs?

Level-funded plans

Employers can pick level-funded plans.? A level-funded plan is a type of self-funded plan in which the employer contributes a steady monthly payment to cover costs for administration, claims payments, and stop-loss insurance. ??These are plans that set a limit or stop-loss coverage on the cost the employer may face by assuming the financial risk.? Employers will want to understand how this works – Ask about whether or not you are on the hook for anything over a certain threshold that stop loss may not cover. ?

Cost-Effective Wellness Programs

Employers should consider Introducing wellness programs as a key component of employee benefits.? This is not required but helps lean into the health issues we discussed above.? Healthier employees are happier and more productive.? This reduces medical expenses and may help reduce future medical premiums tied to your groups renewal.?

Access to Telehealth Services

At this point, all plans in a post-COVID world should have Telehealth built into them. Some still charge extra for this.

There are plenty of reliable sources, including this one that speaks to telehealth savings.? According to this article, “The use of telehealth was associated with an average cost savings of?between $147 and $186 per visit?for patients”.? Given that most patients have multiple uses per year, you can see how this can go a long way in reducing costs.

Reference Based Pricing (RBP) Plans

There are plenty of articles about RBP, and how this can save money for benefit providers and individuals.?

This writer highlights “By basing reimbursement on a reference price rather than negotiated rates, employers can negotiate directly with healthcare providers and potentially achieve significant discounts.”? For individuals, RBP plans can reduce out-of-pocket costs quite dramatically – sometimes by as much as half or more.? Many plans sold by Planstin leverage RBP.? This helps address the higher costs at hospitals mentioned above. ?

Choices

As discussed above, choice is important for employees.? In my experience, many employers often say they don’t want to offer more choices because they worry about costs.? However, giving employees the choice is powerful and can enhance how employees feel about their employer - often with little or no cost to the employer.? Employers can be the hero often by just providing options – even if the employer is not paying for them (notable exception around employer shared responsibility payments).?

But what if I told you that most employers miss the most obvious choice that will reduce costs??

We are seeing large companies offer both a traditional option for insurance paired with non-traditional products such as a Minimum Essential Coverage (MEC) plan paired with a HealthShare. The MEC covers basic and preventive needs, Prescriptions, and telehealth while the HealthShare covers emergency needs, maternity, surgery, etc.? Most employees love the option of the low $1000 IUA (Initial Unsharable Amount) for their emergency expenses.? Pairing a MEC and HealthShare together saves big on medical costs.? Some of this is because HealthShares can leverage pricing such as cash pay rates to reduce costs even lower than RBP.?

When employers offer both choices to employees (Traditional insurance + non-traditional) many are shocked to see that 70% or more of employees go with the non-traditional options.? This saves companies about 30-40%– while keeping them compliant for any ACA compliance requirements. ??This is a powerful example of how choices can really save money for companies and employees.?

Conclusion

Employers do not need to suffer or wilt at the thought of $24,000 a year for medical benefits for employees. Employees can have choices to select whats best for them. The right benefit guide can help employers set all of this up for employees in just a few minutes by adhering to the principles above.