Health care costs have risen to the level
that employers are forced to closely
examine their benefits offerings.
Unfortunately, their concerns are not limited to just costs.
“Employers describe different areas of frustration, from administration and legal compliance to overall complexity,” says Joseph
McGinty, employee benefits consultant with
The Graham Company “Additionally, employers question whether their employee
benefits program has remained competitive
and can continue to be an effective employee
attraction and retention tool.”
Smart Business spoke with McGinty about
the concerns that business owners face
when managing benefits programs.
What are some of the main employee benefits issues facing employers?
The primary issues are cost and complexity. At most companies, employee benefits
programs look very different from how they
did five years ago. Even if the plan offerings
have not changed, employee cost sharing is
most likely different, administration is probably more complex and insurance carriers
may have changed. Every year, as employers
react to increasing costs and complexity,
somewhere along the line, the benefits program can drift from its original intent.
How do rising health care costs affect
employee benefit programs today?
Health care costs have risen almost 10 percent annually since 1998. Employers cannot
afford the rising costs and employees cannot
take much more cost shifting. Some companies have been forced to cut other benefit
plans or reduce costs in other areas of the
company. Proactive companies are scrutinizing health care costs in the same manner they
scrutinize any other business expense. They
are being strategic in their offerings and
demanding employee accountability within
the health care cost equation.
How can employers adjust?
The best way to adjust is to engage employees in the health care equation and offer a variety of plan choices based on employee
needs. By forcing employees to choose the
proper health plan for their needs based on
the structure of the plan design and corresponding employee contributions, employees have an incentive to examine their health
care needs and priorities.
Consumer-directed health care takes this
idea a step further. These plans have high
deductibles and are associated with a Health
Savings Account (HSA) or a Health
Reimbursement Account (HRA). Employees
typically receive a portion of the deductible
funded by the employer through an HSA or
HRA so they have a real incentive to manage
their health care utilization and stretch their
HSA or HRA dollars. For employers, the premium for these plans can be 25 to 30 percent
less than traditional health care plans, so
employers can fund a portion of the
deductible and still realize savings.
Health management programs are another
interesting way to engage employees. The
overall goal of these programs is to reduce
health care costs by keeping employees
healthy, or at least ensuring they are taking
the necessary steps to manage any chronic
conditions. Keeping employees healthy goes
beyond impacting health care costs. Healthy
employees also have better attendance and
are more productive.
Besides being strategic in the structure of
the plan offerings and design, employers
need to ensure they have the most innovative
and cost-effective components that make up
their plan offerings. Employers have a lot to
consider, with specialized prescription drug
carve-outs, health management programs
and even new entrants into the health insurance marketplace. Additionally, employers of
all sizes now have quite a few alternative
funding mechanisms available that range
from self-insurance to fully insured with
many variations in between. It is important
that employers stay informed of the latest
programs and initiatives.
Is the administrative burden of managing
benefits a real issue for employers?
Yes. Administration really has two levels.
Internal administration involves employee
enrollment processing, transferring eligibility
to insurance carriers, producing reports and
reconciling costs. Fortunately, comprehensive administration solutions are available for
employers of all sizes.
The next level of administration is employee-related. These are employee claim issues
and coverage questions that inundate a
human resources staff. A broker should take
these issues away from a human resources
team and bring them to a quick resolution.
How can companies choose the best solution?
In general terms, it’s important to understand what you’re dealing with. We start an
engagement with prospective clients with an
assessment of their entire benefits program
by analyzing policies, costs, plan offerings,
plan designs, funding mechanisms, discount
networks and competitive benchmarks.
Once key areas of concern are identified, we
then develop and implement solutions. We
find solutions are the most effective when
time is invested in learning about all aspects
of the employee benefits program in order to
anticipate difficulties and eliminate surprises.
JOSEPH MCGINTY is an employee benefits consultant with
The Graham Company. Reach him at [email protected] or
(215) 701-5292.
