It’s no secret that group health insurance costs, and unfortunately, employee health insurance costs, are seeing significant increases.
And avoiding the rising rates feels nearly impossible, right?
Well, let’s step back and learn about why group health insurance costs are rising, and what your company can do to manage it better.
“What is causing my group health insurance costs to skyrocket?”
There are several factors that have led to a decade of unrelenting increases, which include the following:
- Expansion of health care providers
- Consolidation of managed care companies
- Political environment and government regulation
- Increased utilization and consumer demand
- New medical technology
- Weakening of managed care system
- Health care spending and medical cost inflation
- Increased prescription drug costs
In addition, there’s two factors that largely contribute to the current and projected group health insurance costs, which are an aging population and poor general health.
Because older workers are more prone to health problems, companies are seeing a rise in chronic conditions, costly medical issues and use of pharmaceuticals, as well as an increase in the amount and the frequency of catastrophic, high cost claims.
Poor General Health
Poorer health is also contributing to group health insurance cost increases.
Preventable risk factors like obesity and high blood pressure have led to increases in chronic health issues such as diabetes and heart disease - illnesses that are long-term and extremely expensive.
While unhealthy lifestyles can be addressed through wellness initiatives to help improve employee health and reduce costs, most savings are seen in the long-term.
To combat the continuing short-term increases, employers are passing more and more costs to employees through higher deductibles, copays and out-of-pocket maximum amounts.
In other words, it feels like there is no solution. It feels unavoidable.
Well, let’s work through this together.
Here’s 7 cost-containment strategies to help you drive down your group health insurance costs.
1. Use Group Health Plan Data to Drive Your Strategy- A Hewitt Associates Survey found that employers’ top cost-cutting strategy for group health insurance is to use their group health plan data to make strategic and informed decisions about their program. But the survey also goes beyond accessing data to understanding how to apply it when making decisions and implementing strategic changes.
2. Consider Consumer-Driven Plans - An increasingly popular option in the healthcare industry is the adoption of consumer driven health plans, typically involving a health reimbursement account (HRA) or health savings account (HSA). These plans offer cost-savings for the employer, but also benefit the employee. With proper education, employees can make smarter decisions about their health care, which can help save you and your employees money.
3.Promote Employee Health and Wellness - Health and wellness programs in the workplace have become a popular cost-containment strategy for group health insurance programs. As more companies realize that improving employee health can lower their group health insurance costs and increase productivity, many are creating comprehensive programs that target specific diseases and may even include their dependents in the initiative. But that’s not to say that passing out fitbits means you’re implementing a health and wellness program. Be strategic, understand the needs of your employees and educate / communicate with them regularly regarding your employee health and wellness initiatives.
4. Increase Employee Cost-Sharing- Many employers are choosing to pass more costs to employees or restructure their group health insurance to incentivize lower cost options. Here’s a few ways you can do this:
- Move from a fixed-dollar copayment to a coinsurance model where the employee pays a percentage of costs for each health care service
- Increase deductibles and out-of-pocket maximums
- Increase employee cost-sharing for out-of-network providers
- Increase employee cost-sharing for brand name prescription drugs to incentivize use of generics
- Offer consumer driven plans, either as an option along with a traditional plan or as a total replacement
5. Implement Dependent Management Strategies - Employers are finding huge cost-saving opportunities by changing the way we manage dependents. Dependent eligibility audits can cut significant costs. Studies show that, on average, 5 to 15 percent of dependents are actually not eligible to be on the health plan. Many companies are also shifting to a per-member premium structure, rather than just “individual” or “family.” Another emerging trend is requiring spouses to pay more in premiums or assessing a surcharge to encourage spouses to enroll in their own employers’ plans.
6. Evaluate Vendor Relationships - A recent movement involves companies aggressively evaluating their vendor relationships and replacing or eliminating vendors that do not produce measurable results. Employers are also looking for opportunities to consolidate vendor relationships to get the most of their money.
7. Seek Long-Term Solutions vs. Short-Term Fixes - Due to financial pressure, short-term tactics like employee cost-sharing are still prevalent. However, employers are exploring multi-year plans and longer-term initiatives to improve overall employee health and strategically manage costs in the future. Particularly in the wake of health care reform, many employers are becoming more concerned with developing strategies that are sustainable in keeping costs down.
Which solution is right for you?
Should you pass costs on to your employees?
Should you develop strategies around how you can access and analyze your data?
...Or should you try to manage costs using some of the other strategies in the list above?
Regardless, you know a change needs to happen for your business to continue to offer competitive group health insurance programs for your employees.
My name is Ty Reid, I’m the Director of Worksite Benefits here at The O’Neill Group, an insurance and risk management firm in Northeast Ohio - and I’d love to review your benefits program and help you identify the best approach for your company.
This article was adapted from Zywave. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.