7 Benefit Plan Changes Employers Will Make in 2018

In the coming weeks thousands of employers across the country will begin receiving their 2018 health insurance renewals, proposing increases of anywhere from 1% – to 50% or more, depending on various factors.

In determining how best to tackle that renewal increase it’s important to try and incorporate the 3 Cs into your cost-containment strategy:

Consumerism, Choice and Control

The following 7 tactics are examples of the considerable potential savings available to employers this renewal. Imagine if you combined a few of them in 2018! Read on to see how many your company has implemented already . . .

Consumerism

1 – Health Savings Accounts

Potential Savings: 10% – 35% on medical premiums

An HSA is a tax-exempt savings account established for the purpose of paying for qualified medical expenses of an individual and/or his or her spouse and tax dependents.

In addition to the significant tax benefits, HSA plans have grown in popularity because they offer potential healthcare cost savings to both employers and employees.

Employer Benefits:
Individuals covered under an HSA are more likely to seek preventive care, choose generic drugs, not misuse the emergency room, and use online tools to research healthcare providers. The result? Premiums for an HSA qualified plan can run as much as 35% less than a traditional copay plan benefitting both employer and employee.

2 – Telemedicine

Potential Savings: Up to 25% in medical claim dollars; up to 5% in medical premiums

Need to see a doctor? There’s an app for that! Telemedicine is the use of electronic communications to diagnose and treat a patient. It may involve phone calls, texting photos, specialized apps and other tools to communicate between a patient and a doctor.

Employer Benefits:
Telemedicine delivers care at a much lower cost than traditional healthcare. Patients save money on routine and specialist care because they don’t have to physically travel to see the doctor for routine, straightforward visits. The result for employers is less absenteeism and a reduction in health insurance premiums.

When you carve these expenses out of your traditional medical plans, the overall savings can be as much as 25% in money spent on claim dollars which directly impacts insurance premium costs.

Choice

3 – Voluntary Benefits

Potential Savings: Up to 10% reduction in medical premiums

Most voluntary benefit offerings will cost you little or nothing to offer while still providing great value to your employees. Employees can choose the options that best meet their own unique needs.

Employer Benefits:
Life, Disability, Dental and Vision insurance are just a few examples of the types of inexpensive benefits your employees may value enough to fund entirely on their own. For example, some employees may not be able to purchase Life Insurance on their own for health-related reasons. But when it’s made available to them on voluntary basis through the employer, that problem is solved.

In the end both employer and employee benefit from reduced group insurance rates, convenience of payroll deductions and the ease of having multiple options from which to choose all in one place.

Control

4 – Referenced Based Pricing (RBP)

Potential Savings: Up to 20% of total medical claim dollars

RBP uses the Medicare reimbursement rate as it’s reference when it comes to reimbursing providers for various medical procedures – hence the term “reference based pricing”. RBP works by setting spending limits on certain medical procedures or services—typically 150% – 200% of the Medicare reimbursement rate for that same procedure. Employers work with their broker and a highly specialized third-party vendor to establish the dollar limits on procedures.

Employer Benefits:
RBP is most effective when applied to procedures with fluctuating costs. For instance, colonoscopies may range from $400 to $6,000, depending on the physician. In this case, an employer using RBP will typically set the spending limit to the median price of the procedure, effectively capping at a much lower cost what the plan would have paid otherwise.

5 – Self-Funding

Potential Savings: 10-15% in annual premium increases; as much as 50% over 5 years

Increased utilization and the escalating cost of healthcare are only two of the many factors leading to your recent premium hikes. Partially self-funding your company’s health insurance continues to be an effective way to curb these expenses.

Employer Benefits:
Assuming partial claims risk was once a concept that was thought to only be viable for employers with more than 100 covered employees. However, safer contracts with smaller, more manageable risk assumption designed for small employers have made the concept of partial self-funding popular among employers with as few as 15 covered employees.

The result is increased cash flow for employers by way of annual claim dollar savings. If at the end of the year it’s determined that you paid more in premiums than the insurance company paid out in claims the surplus is paid out as a refund to the employer rather than as insurance company profit. This is just one of the many benefits offered through partial self-funded arrangements.

6 – Value-Based Care

Potential Savings: Up to 20% of total medical claim dollars; 10% -15% on medical premiums

Value-based care is emerging as a solution to address rising healthcare costs, clinical inefficiency and duplication of services, and to make it easier for people to get the care they need.

Employer Benefits:
In value-based models, doctors and hospitals are paid for helping keep people healthy and for improving the health of those who have chronic conditions to reduce the need for ongoing insurance claims. Value-based care is a departure from the traditional fee-for-service approach where doctors and hospitals are paid based on the number of health care services they deliver rather than the treatment outcome.

7 – Narrow Networks

Potential Savings: Up to 17% on total annual medical premium

There is huge variation in healthcare prices in the United States. A hip surgery at one hospital can cost $8,000, but at another hospital in the area it may cost $15,000.

Employer Benefits:
By narrowing the network available to employees and only signing contracts with select providers, employers can direct employees to providers in that $8,000 range, significantly reducing claim expenses.

Effective Communication Is Crucial

Underlying the successful execution of each tactic described above is a well-designed employee communication campaign that serves to educate employees and address any problems before they occur.

Unfortunately this is a step that costs employers relatively nothing but so often is overlooked. This is where a good employee benefits consultant is key. He or she should be doing the bulk of the heavy lifting when it comes to messaging and materials relative to your employee benefits. Remember, what and how you communicate to your employees about their benefits directly influences your ability to control both your costs and their expectations.

Preparing For Renewal

This article shares just a small sample of the many tactics available to employers in designing a cost-effective benefit plan.

If you are looking to explore other options this renewal or would like information about the valuable services we offer to assist employers with DOL compliance, HR and workflow technology, please email me at jmorrow@employerbenefitsandadvice.com to schedule an appointment or call me at 602-903-4047.