Managing Costs in Your Employee Benefits Package
The key to any organization’s success is the quality of its people. By employing the most qualified people, organizations ensure their employees are passionate about the work they do, understand their client base, and respond quickly to any needs that arise. One of the ways organizations attempt to attract and retain the most talented individuals is with a comprehensive employee benefits package.
Sadly, most employees find themselves financially exposed in terms of health insurance. Deductibles have risen so much that employees now pay for insurance they can’t use aside from illness and real emergencies where they have no choice such as cancer, heart attacks and stroke. With just 23% of Americans able to cover a $1,000 emergency expense with savings, many employees find a $1,500, $3,000, or $5,000 health care deductible simply insurmountable to accessing needed care. A joint study from Harvard Medical School and Harvard Law found that over half of bankruptcies in this country involve unpaid medical bills. Of those who filed bankruptcy over medical debt, 75% had health insurance when they became ill or injured. While the “status quo” practice is to shift more health care costs to employees, companies that take control of their second largest expense, health insurance, and manage the costs, can provide health care to their employees with lower or even zero out-of-pocket expenses. Imagine an organization’s competitive advantage in recruiting and retaining top shelf talent with low insurance premiums and “free health care.” What is the result of C-Suites managing their health care supply chain? More affordable and sustainable health care spending for the employer; much better benefits for the employees; and an ROI measurable in easier recruitment, higher retention and greater productivity.
The secret to making health care a controllable cost and lowering that cost is as simple as: treating your health care spend as a capital allocation, providing oversight of the health care spending by an Executive with P&L responsibility, moving to alternative funding to take control of your health care plan and spending, and managing your health care supply chain to reduce the frequency and severity of claims. This concept of managing health care costs is no different than how you manage the cost of raw materials or office supplies although the process is a bit more complex.
Why have major carriers failed to stem the growth of health care costs or even address the dysfunctional pricing in the system? It’s not that they are incapable of reducing the cost of health care; the carriers certainly know how to bring down health care costs. The two middlemen in health care, the insurance carriers and the insurance brokers, financially benefit from rising health care costs. Carrier revenue is largely the health insurance premium dollars paid by employers and individual policyholders. Rising health care costs force carriers to increase the premiums they charge to reflect the higher cost of goods and services. As medical trend drives premiums higher, the higher premiums boost carrier revenue exponentially. A carrier’s profit margin on a higher revenue number is…MORE PROFIT! Insurance brokers are compensated with a per member per month fee instead lacks aligned incentives with zero financial incentive to do the additional work necessary to control and reduce their client’s healthcare cost. Both of health care’s middlemen – carriers and brokers – have financial incentives misaligned with the employer that is paying the healthcare bills for its employees.
Inoventive Benefits Consulting is part of the largest Nationwide Partnership with benefit firms located across the United States. With a national footprint, we service employers across the nation with exemplary service that is second to none. Our team makes decisions that add value to your employee benefit and risk management programs with the result being outstanding customer service at a reasonable cost from talented people you can trust. We pride ourselves on delivering the highest quality, client-focused service which has led to creating a meaningful, positive employer/employee relationships. I welcome the opportunity to discuss your employee benefits package! Call Marcy at 678.821.3508!