Best Practices for Employers to Manage Health Care Costs
According to a 2017 Health and Workplace Benefits Survey which involved 1,518 U.S. workers between the ages of 21 and 64, 83% of employees said that health benefits are very important in the decision to remain in or change jobs. However, only 53% of those surveyed said that they fully understood the health benefits that their employers were offering.
Most business owners understand by now that offering the right health benefits will increase the company’s growth. When staff members have access to health benefits they value, it has the following advantages:
- Improved recruitment and retention: Health benefits are a key factor in retaining your most talented workers and recruiting the best employees in the market. Your compensation package should take into account competition in your industry as well as the demographics of your employees.
- Increased employee wellness: Health care coverage keeps employees at work. You can expect to see a reduction in absenteeism and an increase in employee health and happiness, thanks to preventative care and health care they can afford.
- Available tax advantages: With many health plans, such as group plans or defined contribution plans, your employees get tax advantages. These add to the value of your overall compensation package.
How to Cut Costs Without Impacting Employees Negatively
It’s only natural that as an employer, you’re looking to manage health care costs effectively, but this can be tricky, especially if you don’t want to compromise employee satisfaction. For this reason, you need to tread carefully when you’re structuring health benefits packages. The safest way to minimize costs is to consider the type of medical plan you are going to offer.
Here are some of the most popular options for keeping health care costs to a minimum.
Health Maintenance Organization (HMO) Medical Coverage
Many large companies offer this time-of-health package. An HMO gives workers access to a range of hospitals and doctors within its network. The network is comprised of health care providers who agree to offer lowered rates to members of the HMO plan. Care is only covered if an employee sees a provider within the network. If an employee sees a provider outside of the network, he or she will have to pay out-of-pocket. There may also be additional restrictions, such as a limited number of visits, tests, and treatments per year.
Preferred Provider Organization (PPO) Medical Coverage
PPO insurance plans offer a little more flexibility than HMO plans. They, too, are comprised of a provider network, but they generally have fewer restrictions. Sometimes, a PPO provider will also pay if employees choose to see a provider outside the network.
High Deductible Health Plans (HDHPs)
HDHPs lower the cost of the medical premium by increasing the deductibles. This type of health package can be quite complicated because out-of-pocket expenses work differently than with HMOs or PPOs. While an HDHP can be more affordable than other plans in terms of the monthly premium, deductibles are much higher than HMOs or PPOs.
However, once the annual deductible is reached, the employee is completely covered for the rest of that year. This type of plan is not suitable for all employees. Those with chronic conditions such as diabetes or high blood pressure can end up paying more in the long run, as could employees who experience a medical emergency.
Pharmacy Plan Design (PPD)
Prescription medications are integral to the treatment of chronic and severe health conditions. PPDs are designed by pharmacy benefit managers and brokers who reduce costs by adjusting the formulation of certain medications. Preferred generic medications are clinically the same as brand name medications, but they are much less expensive. This helps employees have better access to the medications they need at a lower cost.
Switching Health Care Providers
Employers also have the option to shop around for the most competitive coverage each year by means of a bidding process. While this can be a good strategy if a current provider is offering a higher or unreasonable quote, it shouldn’t be done too often.
Switching providers can have several disadvantages. For example, most health care benefit plans work best when they have been running for several years. Changing too soon can have a negative impact on the plan’s future value.
While voluntary health benefits may not be the most popular option when it comes to employee choice, they can be useful for small business owners. Voluntary benefits can add value to an employee health care package without kicking up the employer’s share of the cost. This is due to the fact that voluntary benefits are paid for entirely by the employee.
The employer’s sole role is to connect the provider to the workforce. Voluntary benefits can offer a good solution for shoring up health plans with high deductibles, which can help appease employees who are disgruntled about having to sign up for HDHPs. Voluntary benefits can also benefit employees who opted for an HDHP and also want to add supplemental healthcare.
Employee Wellness Programs
When it comes to employee wellness programs, there are many options to choose from, and employers can generally design one that best suits their employees and their budget. Some programs can be more expensive than others – those which involve behavior modification aspects such as quitting smoking and losing weight, for example.
But in the long term, such programs do have an upside. For example, a subscription to a well-structured wellness program may help to prevent large health insurance claims down the road. The most cost-effective employee wellness programs are those that focus on prevention and early detection. These wellness programs offer immunizations and screenings that are age appropriate. They also focus on treatment and care for chronic conditions. Along with modifying unhealthy behaviors, employee wellness programs also strive to reward employees who maintain healthy lifestyles. While employers may not see immediate savings from wellness programs, the ROI will be noticeable over time.
It’s important for your company to implement the most cost-effective benefits program for your employees, but it should also be a program that offers them the maximum benefits. If you cut costs without putting the money in your employees’ pockets, your employees are likely to lose their loyalty, which may lead to declines in both their engagement and productivity. It’s also crucial when you are implementing a health care program that it is fully explained to your employees in a way they can understand. This is important for new hires and existing staff members. When your employees suffer, your business suffers. Ultimately, it pays to think carefully when you’re managing your health care costs.