Financial stability in general is a top priority for employers in 2023 as the possibility of a recession grows. Troubling signs include two consecutive quarters of declining gross domestic product, record-high inflation, rising interest rates, a struggling stock market and cooling of the venture capital market.
Coupled with the general economic downturn, industry experts project an 11 to 12% increase in employers’ health care costs in 2023. So, it’s critical for employers to consider how best to prepare for and build a resilient, recession-proof organization, and that involves containing costs in as many areas as possible. Consider the following innovative tactics to combat rising health care costs.
Alternative Funding Mechanisms
To combat out-of-control benefits costs, more and more employers are turning to alternative funding mechanisms, such as:
- Self-Insurance: In a self-insurance arrangement, the employer funds the health plan entirely. This gives them greater control over plan design and the opportunity to make cost-effective choices, like establishing stop-loss limits.
- Level Funding: Level funding is a hybrid option that combines the benefits of being fully insured and self-insured. Like a fully insured plan, it provides cash-flow certainty. However, level funding also includes stop loss insurance to help protect employers against the impacts of large claims.
- Health Reimbursement Arrangement (HRAs): An HRA is an employer-funded group health plan wherein employees are reimbursed for qualified medical expenses, as determined by the employer. HRAs are provided and owned by the employer, granting them greater control over employees’ health care spending.
Health Care Captives
A captive is an alternative risk solution for mid-sized employer groups, and the right captive can lead to significant savings and an overall improved health care experience. Employers partner with other employers to increase buying power for stop-loss coverage and pool money for larger claims while self-funding their smaller claims. /span>
Some captives offer built-in cost-containment solutions to control variable claims costs as well as fixed stop-loss costs and may even provide more care solutions for members. Captives also offer networking opportunities to connect with like-minded employers and share insight on how to tackle rising health care costs.
Reference-Based Pricing (RBP)
Under RBP, the health plan determines a “reference price” — generally some percentage above Medicare reimbursement rates (usually 120 to 200% of Medicare rates in a geographic area) — for a given medical service, and the plan will cover medical expenses for that service up to that price.
If a patient receives care from a provider whose negotiated payment is above the reference price, the patient is responsible for paying all medical costs above that price, along with all other cost sharing.
Looking for more innovative cost-containment strategies? Download our 2023 State of Health Care Report today.