“What goes up, must come down.” Clearly Isaac Newton didn’t have medical costs in mind.
While it’s true that they are expected to have the same 6.5% growth rate as in 2016, according to a PwC Health Research Institute report, that percentage still outstrips the general price inflation.
As for companies looking for a reduction in healthcare insurance costs, it’s more likely that they’ll still have to deal with a 4% increase, according to a Fortune magazine article.
So where does that leave employers trying to improve the bottom line? For the most part, exploring a variety of strategies that will reduce costs without negatively affecting their employees’ health—or morale.
Here are three options to consider.
Reconsider automatic increase in deductibles
The concept of offering a high-deductible plan is a popular one for about 84% of employers, according to a Kaiser Health News article, citing statistics from a National Business Group on Health (NBGH) survey. The idea is that employees “share the pain” by having to pay potentially thousands of dollars out of pocket before the insurance takes over.
While high-deductible options can be a cheaper option for employers than traditional PPOs or HMOs, noted a Crain’s Chicago Business article, the flaw in the plan is that many employees can’t afford those deductibles. A study by Commonwealth Fund found that “Employee contributions to premiums and deductibles amounted to 10.1 percent of U.S. median income in 2015, compared to 6.5 percent in 2006. These costs are higher relative to income in many southeastern and southern states, where incomes are below the national average.”
Focus on centers of excellence and high-performance networks
According to findings from a study by Willis Towers Watson, employers are offering incentives to encourage employees to use Centers of Excellence with proven quality outcomes. NBGH estimates that the use of these types of centers will increase from 79% to 85% in 2017, with bariatric surgery, transplants and fertility treatments at the top of the list.
Another option is to focus on high performance networks or HPNs, which, noted the American Academy of Actuaries, provide high quality care at potentially a lower cost. According to a 2016 PwC study, 43% of employers were considering HPNs, an increase from 37% in 2015. However, there’s a trade-off, since HPNs generally come with a narrower provider list, making it imperative that employees fully understand the cost-benefit aspect.
Evaluate dependent coverage
An employee. Plus a spouse. Plus a child. Or two. Or three. Providing coverage to employees and their family members can be an expensive perk. With that in mind, employers seeking to reduce their costs should first determine if everyone on the plan should be on the plan.
An audit of all the spouses and dependents of employees currently enrolled on the plan may turn up instances of erroneous coverage. And once is definitely not enough—at least as far as audits are concerned—since changes in the employee’s home life can also impact the coverage dependents may or may not be entitled to.
With statistics showing that 40% of dependents initially identified as ineligible are re-enrolled during the next open enrollment, and 80% of these individuals are still not qualifying as legal dependents, ongoing dependent verification may be an initial cost but it can translate to long-term savings.
What about surcharges for spouse and dependents? According to a PwC survey, 19% of employees have implemented spousal surcharges, with another 2% adding dependent surcharges to the cost. NBGH reports that those surcharges are leveling off, with just 33% of employers having them in place for working spouses.
Healthcare costs can be challenging and at times confusing road to navigate. Business would be well-advised to seek expert information and take advantage of webinars, such as those offered by Modern Healthcare and the SBA, to stay abreast of changes and updates that can impact the bottom line.