For many employees, the pandemic brought home the importance of health insurance. But employers are facing challenges with their plans, including rising costs.
“It’s gotten to a point where the CFOs and directors of finance in any size organization have to pay attention to the total health spend, which can rank among companies’ most significant costs,” says Vince Giacalone, Area Vice President, Central Ohio, at Gallagher. “So they’re looking for strategies to control it now and in the coming years in order to get out of what is currently a reactionary position.”
Also, the struggle to find labor, even with the recruitment opportunity that remote work presents, has made a robust benefit program critical. Too often, though, there’s a value disconnect between the hard and soft dollars that are being spent on health insurance. That’s left companies struggling to show plan value to the end user.
Smart Business spoke with Giacalone about the challenges companies are facing with their health insurance plans, and the strategies to proactively address them.
What effect has the pandemic had on employer-based health care benefits?
Insurance carriers are still trying to grasp all of the long-term repercussions of this pandemic. That led to a wait-and-see approach this past renewal season. A lot of the carriers, both in a fully insured atmosphere and from a self-insured stop-loss perspective, made a lot of rate passes this year to buy time and get more certainty.
And while that’s happening, employers have tended to scrutinize their health care plans, one of their largest spends, to try to immediately control and save money. They also considered the broader picture and began to question whether they’re prepared for the next event. That caused many employers to look inward and evaluate their partners, especially as it relates to their health insurance program. That’s important in part because health and wellness benefits are being used from a recruitment and retention perspective. With many employers struggling to fill open positions, there’s a need to offer a robust, cost-effective plan to recruit employees. It’s also created an opportunity to align hard and soft dollar savings with that employee recruitment and retention piece.
How has remote work affected health care coverage?
When companies hire out-of-state employees, employers need to consider the proximity of that employee in terms of their network and the hospital system to determine if they’re aligned with a plan that has parity across the U.S. There’s also the compliance piece. Each state can have its own set of rules and regulations regarding health insurance and health care. And so understanding each state’s ERISA laws is paramount to avoid falling out of compliance with the Department of Labor.
But employers should also consider the opportunity. The employee benefit plan can be a way to bind remote employees to the company culture. If done correctly, it can create a unified message about employee health and welfare.
Why are benchmarking and financial modeling important now?
Companies’ health plan brokers and related strategic partners should have been updating them through the pandemic on how to respond to furloughs and changes in head count as they happened. As companies experienced changes to their workforce, the opportunity that arose out of the challenge was finding a way to build the health care plan back up as the company rebuilt itself. That’s where the importance of benchmarking and modeling against the competitive industry landscape comes in.
It’s also a chance to explore a company’s financial funding model to see if it’s a better opportunity for the business and its specific risk profile to self-insure health insurance or to go fully insured and transfer all risk to a carrier. A self-funded feasibility study can further explore that specific risk by evaluating a company’s data and then preparing a guided assessment that helps the company decide.
Companies should seize the opportunity to introduce cost control in their health plan and set up strategies that affect the whole organization for the years to come. There’s a chance now to stop reacting and instead become proactive.
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