September 17, 2018

6 Innovative approaches employers can take to control health plan costs

Facing unique financial pressures, organizations must have HR departments that operate efficiently and at a high level. The biggest challenge identified by U.S. employers is the need to control benefits costs while also attracting and retaining a competitive workforce. That’s the challenge for HR leaders—they are at a crossroads. Changes in the business climate, the economy, the regulatory environment and workforce demographics all create dynamics that affect benefits offerings. View our annual employee benefits benchmark report to learn more.

Because of the long-term trend of rising health care costs and slow economic growth, organizations are reassessing and redefining their roles as providers and subsidizers of their employees’ health care benefits, adjusting their ways of sponsoring benefits plans and becoming more innovative with their approach.

Here are six benefits cost containment strategies employers should consider:

  1. Promoting health care consumerism

Employers’ efforts to manage their health care costs should be focused on getting employees to become better health care consumers. Health care consumerism refers to efforts to educate employees to make healthful choices in daily living and providing tools and education to help ensure that when employees use health care, they are aware of its costs and have an incentive to reduce those costs when possible.

In many ways, efforts to move employees toward greater health care consumerism are similar to the efforts employers have made to persuade employees to save for retirement by using 401(k) and other defined-contribution plans. In health care as in retirement planning, more responsibility has been shifted to employees, and employers are using incentives to reward desired behavior.

  1. Self-funding the health plan

Concerns that implementation of the Affordable Care Act (ACA) would drive up employers' health insurance costs prompted greater interest in self-funding. In a fully insured plan, an insurance company assumes the risk, controls the plan's administration, establishes reserve capital levels and manages other major decisions concerning the health care coverage provided to employees and dependents. Self-funded plans are most prevalent among large organizations; however, new and creative strategies are making self-funding more accessible for smaller companies.

  1. Implementing effective employee communication

Effective communication to employees is critical for success when rolling out health care cost-control measures. In communicating about health care benefits, employers should consider the following recommendations: Communicate early and repeat the message often, communicate in a variety of media, utilize customized educational pieces, provide employees with innovative tools to help them make cost-effective benefits choices and encourage employees to evaluate how their family used health care in the previous 12 months.

According to our latest Employee Benefits Benchmark Report, increasing and enhancing employee communications is a top cost-management measure for organizations. See what other health plan cost-management tactics employers currently employ and plan to employ, here.

  1. Leveraging technology and data analytics

Employers can use technology to provide employees and their health plan dependents with information and tools to manage their health and health care costs. Technology can also help employers understand the vast amount of data in their health plans, which can enable them to pinpoint potential areas of escalating health costs and identify opportunities to control those costs. A health plan's data holds vast potential. Organizations can use aggregate data to help design plans, improve employees' health and drive down health care costs.

  1. Developing a robust employee wellbeing program

As employers continue to look for ways to manage rising health care costs, many are turning to workplace wellbeing programs to improve employees’ wellbeing and to help manage or prevent chronic conditions. According to a recent study from Health Affairs, a health care policy journal, for every dollar spent on wellbeing, medical costs drop an average of $3.27 and absenteeism costs fall by $2.73. If developed and implemented effectively, your company could achieve a similar return on investment (ROI) on your wellbeing initiatives.

  1. Staying compliant and mitigating risk

Many of the approaches that employers can take in managing health coverage costs are subject to various requirements of major employment laws. Employers should be familiar with the general purposes of laws such as ACA, HIPAA and COBRA, to name a few. Before implementing a new plan or making changes to an existing one, employers should consult with benefits experts and legal counsel to avoid breaching laws and regulations regarding the equitable treatment of employees.

For instance, the ACA presents some of the most extensive challenges for higher education institutions in managing health care costs. It is directly and indirectly increasing the cost of employer-provided health care through a number of its provisions. Not complying with the ACA can put your institution at risk of penalties on the order of hundreds of dollars per employee per incident.


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