Cost containment strategies that can control your health care costs

Despite the distractions the Affordable Care Act has caused, employers of all sizes haven’t lost sight of the fact that rising health care costs remain a significant issue that needs to be constantly addressed.

“Employers continue to seek comprehensive medical benefits at a competitive price. Being prepared for your annual renewal means knowing what alternatives exist and selecting the best plan for your company and your employees,” says Craig Pritts, senior sales executive at JRG Advisors.

Smart Business spoke with Pritts about a variety of available solutions that may be implemented alone or in conjunction with other programs to control or reduce costs.

What are some benefit trends that are being used to contain costs?

A survey conducted by the National Business Group on Health indicates full replacement Consumer-Directed Health Plans (CDHP) as the primary cost containment strategy being implemented by employers. A CDHP integrates a high deductible health plan with a health savings vehicle.

Replacing all other plans with a CDHP is a big step for many employers, and requires employee education and understanding in order to reap the full rewards of this type of plan design.

Another benefit trend that is expected to gain momentum is defined contribution strategy. With this approach, the employer contributes a set amount of premium for employees to spend on benefits.

The defined contribution strategy is often combined with two additional trends:

  • Voluntary benefits offer employees the ability to fill gaps in coverage from high deductibles and also offer additional benefits the employer may not offer, such as disability, accident coverage, cancer insurance, pet insurance, etc. Voluntary benefits are most often paid on a pretax basis through the convenience of payroll deduction.
  • Private Exchanges, developed as a result of the changing health care marketplace, act as the vehicle for the defined contribution strategy. They provide ‘one stop shopping’ for employees to purchase plans from a full menu of insurance and non-insurance options.

How does self-funding fit into the cost containment strategies of employers?

There was a time when only the largest of businesses would consider self-funding their health insurance plan, but today employers of all sizes are benefiting from a self-insurance model.

The willingness of an insurance company to administer a self-funded plan to smaller size companies, along with stop-loss insurance options, make this option one that should be discussed.

What other strategies are organizations implementing?

Adding or expanding wellness programs is becoming another popular strategy for employers. Nearly 75 percent of all health care costs are preventable, because they are a direct result of individual choices. These costs can be reduced when employees take more responsibility to manage their own health.

Incentives or disincentives are integrated with employee premium contributions and directly related to participation in wellness initiatives, often including biometric screenings.

An additional cost containment strategy is reducing spousal subsidies or implementing spousal surcharges. Studies indicate that in 2016, 29 percent of employers will have a surcharge in place for spouses who can obtain coverage through their own employers, with an additional 3 percent completely excluding spouses if their employer offers coverage.

What do these trends say about the health care environment today?

All of the trends identified share the underlying theme of helping employees become better health care consumers. Educational support on the part of the employer is critical when implementing any of these strategies.

Also, it is very important to have conversations with your advisor throughout the year about all of the options available so you can be prepared. A good strategy can help a business control costs in the current year and beyond.

Insights Employee Benefits is brought to you by JRG Advisors