For all the difficulties with the rollout of the Affordable Care Act, there has been some good news: The rate of increase in health care spending has slowed to about 5.1 percent between 2012 and 2013 – which is more than inflation, but actually the slowest rate of growth posted in 15 years. Nevertheless, average employer is now shelling out over $9,000 per year in employee medical insurance costs.
Towers Watson, a global human resources consulting company, surveyed over 500 large employers about their health insurance and employee benefits offerings and strategies, and how they fit into what they call their EVP – their employee value proposition.
Towers Watson analysts then identified those companies who were most successful at controlling their employee benefit cost increases. Specifically, they took a closer look at those companies whose increases were half of the mean increase for other large employers or less – and identified the key measures these companies were taking to rein in costs.
Many of these companies had pools large enough they chose to self-insure. This isn’t an option for small employers, however. Of the cost-saving measures these successful companies were making, here are the ones most relevant to the small business owner who contracts with a health insurance carrier to provide medical insurance.
- The most successful companies at controlling costs also frequently consolidated health and productivity programs under a single vendor.
- They adopted “account-based” health plans such as health savings accounts that give employees additional flexibility and responsibility for their own health care costs.
- They contributed to HSAs on behalf of employees.
- They emphasized the tax and other benefits of HSAs in communications to their employees.
- They provided meaningful incentives to employees to lose weight or quit smoking – and involved spouses in the effort.
- They emphasized the transparency of health care costs by providing actual costs per service to employees.
- They invested in communication and educational resources for employees, to include leveraging social media such as blogs to bring information to workers.
- They expected employees to take more responsibility.
- They extended incentives for maintaining good health to spouses of employees as well.
- They leveraged corporate communication resources to create a “culture of health.”
- They offered telemedicine for some professional consultations.
- They retained a pharmacy benefit management (PBM) vendor, or took other steps to reign in increasing exposure to soaring pharmaceutical costs. A PBM vendor is a company that oversees pharmacy benefits within the organization. The PBM can arrange pharmacy networks, leverage volume for discounts, take advantage of cost savings by using mailed prescriptions and e-prescribing, and negotiate volume discounts with drug manufacturers. These can be separate companies or they can be operations set up within larger health insurance and health care organizations.
The keys to success in controlling your costs are going to be in understanding what your EVP to employees is, how your medical benefits fit in to your overall compensation package, and overall employee health profile.
That said, some companies are taking concrete steps to improve their employee health profile. For example, some companies no longer hire smokers at all, and some impose a cap on body mass index on new hires. The military has been actively releasing overweight servicemembers for generations with the express purpose of limiting later health care costs, particularly with regard to retirees.
The full 40-page Towers Watson report, the 2013 18th Annual Towers Watson/National Business Group on Health, Employer Survey on Purchasing Value in Health Care, is available here.
To learn more or discuss your options, please call ACBI at 203-259-7580 or visit our website.