In 2018, companies throughout the U.S. spent almost $700 billion on employee healthcare benefits packages, and the cost continues to rise. Whatever the size of your company, employee benefits will be one of your biggest financial costs. For larger companies, it’s easier to control the cost of employee benefits by leveraging volume discounts. However, for small to medium-sized businesses, that is not an option.  

Strategies designed to rein in rising healthcare costs come in all shapes and sizes, but some will work better than others. As an HR professional, it’s important to know which strategies are best for your company and how to use them correctly to best benefit your employees.

Cutting Costs Without Cutting Benefits

Here are some tips for providing cost-effective benefits programs without having to reduce the quality of your employees’ healthcare benefits.

• Assess your company’s budget and benefit objectives: One of the most vital initial steps to creating an employee benefits program is to identify your company’s benefits objectives. This doesn’t simply mean drawing up a list of specific benefits that you intend to offer but developing an overview for offering benefits which are reflective of the company’s and the employees’ needs. This will help you choose the type of package you want to offer. Important factors to consider include:

• • Industry
  • Company size
  • Location
  • Collective bargaining agreements

You may choose to develop general benefits objectives, or you may prefer to incorporate the objectives into your total compensation strategy.

• Gain insight into your employees’ healthcare needs: If you have someone on your team who can gather data about your employees’ health care needs, you can restructure your healthcare benefits packages so that they offer the maximum benefits for your workers at the lowest cost for your company. You can also figure out if your packages are offering employees too much or too little insurance. Implementing solutions to highlight areas where your benefits packages fall short can also help you revise benefits to retain current employees and attract new talent.
• Create a benefits package: Once you have completed your benefit objectives analysis, matched this with your budget and gathered information about your employees’ healthcare needs, you are ready to use this information to design a plan. Start by placing specific benefit offerings in order of priority. Once that is done, you will be able to evaluate this list against your budget. This is quite a complex process and there are several questions you’ll need to answer:
  • What is the administrative cost of this package?
  • How you can make changes to the plan to create further savings?
  • Are you able to remove benefits that are not used or valued by employees?
  • How much will employees have to contribute?
  • Will resourced be administered within the company or will a third-party administrator be needed?
• Make a deal directly with a healthcare provider: By cutting out commercial insurers and dealing directly with healthcare providers, you can lower healthcare costs and obtain better quality healthcare for your employees. Benefits programs, such as bundled surgical care, can save your company big dollars and ensure your employees get quality healthcare so they can get back to their lives and their work as soon as possible. There are two main approaches to partnering effectively:  
• A centers of excellence (COE) approach: With this strategy, the employer joins a purchaser coalition. This assists them in finding the best providers in different classes of healthcare and helps them to create bundled-care packages.
• An accountable care organization (ACO) approach: With this strategy, an employer works alongside a provider to develop a healthcare package which pays an agreed amount per employee for a designated period of time. This type of approach also links reimbursement to the provider’s performance on coast and quality.

• Choosing a Provider: The process of choosing a provider begins with an evaluation of the quality and cost of selected providers. There are resources to help you with this process. These include CareChex and the Leapfrog Group; using them can speed up your selection by quickly narrowing down your options. You may also want to consider using healthcare providers which your employees already use, as long as they meet your objectives. Taking this route has two major benefits:

• • If employees can remain with their current healthcare provider, this minimizes disruption and will increase employee acceptance.
  • It can improve the company’s leverage during negotiations as the providers will want to hold onto their current users.

Once you’ve created a list of potential providers, you will need to talk to each group’s chief of service. It’s important to negotiate at this level to make the process easier when dealing with providers who may not have a great deal of experience with direct relationships.

• Develop a regular evaluation process: Once your healthcare benefits program is in place, it’s important to make a regular evaluation to see if it is meeting your objectives and your employees’ needs. Many factors can affect the success of your benefits package, including:

• • Changes in the economy
  • Changes within the business climate
  • Changes within your industry
  • Shifts in healthcare regulation
  • Workplace demographics

You should consider developing an evaluation strategy that takes these metrics into account, so that you can make any necessary adjustments to your benefits plan as time goes by.

Remember, the success and cost-effectiveness of your healthcare benefits program both depend on your employees embracing the program. If you are expecting employees to change to a different benefit plan, they will need strong incentives, such as reduced co-pays and deductibles. As a company leader, you will expect to see an obvious return on investment over time.