How to Control Healthcare Costs While Providing High-Quality Benefits to Your Employees
As healthcare costs continue to rise, employers face the challenge of managing expenses while providing their employees with high-quality benefits that are important for attracting and retaining top talent, enhancing employee satisfaction, and being competitive in the job market. In this blog, you will learn practical strategies to control healthcare costs without compromising the quality of benefits offered.
Overview of the Rising Healthcare Costs
Healthcare costs have been on an upward trajectory for years. This is driven by many different factors such as advances in medical technology that come at a high cost; an aging population, who have more health issues and use healthcare services more frequently, driving up costs; an increase in chronic conditions that often require ongoing medications, frequent doctor visits, and sometimes hospitalization, all of which contribute to the overall increase in healthcare expenditures; pharmaceutical costs, in particular, have seen sharp increases due to factors like patent protections and limited competition; complexity in the healthcare system itself leads to high administrative costs; traditional fee-for-service models, where providers are paid per service rendered, can lead to overutilization of services and higher costs.
Rising healthcare costs strain budgets, often creating challenges for employers who want to offer a competitive employee benefits package that is affordable for their employees. Common expenses that rise alongside overall healthcare costs such as premiums, deductibles, copayments, and out-of-pocket maximums trickle down to the employer and the employee. These impact both the employer’s bottom line and the employee’s financial well-being.
Assessing Your Current Healthcare Package
Taking the time to evaluate the quality and cost of your existing health insurance offering can help you identify opportunities for quality and cost improvement. A great place to start is to review your current plan designs and see if they are cost-efficient and meet the diverse needs of your employees. Be sure to review plan participation. If participation is low, it might be time to adjust your plan designs to make them more affordable for your employees. Evaluate your claims. If you have claims concentrated in areas that can be improved by healthier habits, perhaps it’s time to implement or revamp your wellness program? If you have claims stemming from out-of-network expenses, consider what you can do to encourage in-network use.
Once you identify potential areas for improvement or needed adjustments, you can consider implementing changes that deliver cost savings without sacrificing quality, and ultimately make informed decisions about where to invest resources.
Need help with this? Contact VSMG and we’ll assist you with your assessment.
Effective Strategies for Healthcare Cost Containment
There are numerous strategies you can implement to help you manage healthcare rising costs all while maintaining quality coverage. Here are some of the most effective cost-containment strategies to consider:
- Preventative Care: These programs not only support employee health but also reduce long-term healthcare costs by helping catch health issues early and in turn, reducing costly interventions later on. Try offering incentives like gift cards or entry into a raffle to encourage preventive care actions, such as vaccinations, annual check-ups, and screenings.
- Wellness: These programs leverage incentives to encourage employees to participate in health behaviors in areas such as physical activity, diet and nutrition, stress reduction, and sleep improvements, which naturally contribute to a reduction in healthcare costs.
- Plan Options: If you’re not offering a High Deductible Health Plan with a Health Savings Account, now is the time. These “consumer-driven” healthcare plans are typically lower in cost than PPO plans and offer employees the ability to contribute pre-tax earnings up to the IRS maximum into a triple-tax advantaged account that they own and use for healthcare expenses, promoting better financial management and encouraging responsible healthcare spending. They also offer employers the ability to contribute to their employees’ accounts on a pre-tax basis as well. It’s a win-win for all.
- Network Options: Consider offering employees the option of a lower-cost narrow network or a high-cost broad network, to reduce cost and in turn, promote participation.
- Provider Options: Encourage employees to use telemedicine for non-emergency medical consultations rather than in-person consultations. This can reduce costs by avoiding more expensive in-person visits and allowing employees to address health issues quickly and conveniently. Consider promoting the use of preferred or high-value providers within a tiered network, to reduce expenses for out-of-network care.
- Prescription Options: Specialty drugs are significant cost drivers. Ensure that your Pharmacy Benefit Manager has a cost-effective formulary that promotes the use of generic drugs or lower-cost alternatives when available and that you are receiving maximum rebates from pharmaceutical companies and transparent pricing models. You can also better manage the cost of these prescriptions by requiring prior authorizations, step therapy, or exploring lower-cost alternatives.
- Dependent Audits: Conduct audits to verify dependent eligibility to ensure that only eligible dependents are enrolled in the health plan. This can help eliminate unnecessary expenses associated with covering ineligible individuals.
- Carrier Negotiations: Don’t hesitate to have these discussions with your carriers to secure better pricing and terms. By establishing strong relationships with local providers, organizations can often negotiate favorable contracts that benefit both parties.
- Carrier Changes: If carrier negotiations are not going far, consider how long you’ve been with that carrier and if it might be time for a change. While switching carriers isn’t an easy process, it does have its benefits. Typically a change will include lower premiums, rate guarantees, performance guarantees, and value-add benefits.
Additional Benefits That Reduce Overall Cost
Providing high-quality healthcare coverage is essential for employee satisfaction and retention. It not only attracts skilled talent but also fosters a sense of security among employees. But there’s more to healthcare than just health insurance.
Incorporating wellness programs can further enhance employee well-being. These programs could include fitness challenges, nutritional counseling, or stress management, which can lead to healthier employees and, ultimately, lower healthcare costs.
Investing in mental health resources is important. Providing your employees with access to mental health services can improve employee productivity and job satisfaction which reduces overall operational costs.
Offering employee-paid voluntary benefits and access to a Health Savings Account can help employees bridge the gap of out-of-pocket expenses associated with choosing a high deductible cost plan option, thus reducing costs for both employees and employers.
How We Can Help
Controlling healthcare costs while maintaining high-quality benefits is an ongoing process that requires regular assessment and adjustment. At VSMG, we understand the importance of offering a high-quality, affordable benefits package that resonates with employees’ evolving needs. Whether you’re looking to reduce overall healthcare costs, enhance job satisfaction, or attract top talent with perks, our employee benefits expertise can help guide your organization to success. Contact us today to explore how we can help optimize your employee benefits package and boost the acquisition and retention of your top talent!
About VSMG
Built by and for Arizona public sector employers, VSMG is a leading employee benefits consultant dedicated exclusively to serving Arizona school districts, municipalities, and other public entities for over 19 years. With offices in Phoenix and Tucson, we are committed to delivering expert advice, best-in-class benefits, forward-thinking strategies, and cost-effective solutions to help our school district clients attract and retain their talent. Reach out to us today for more information.
