Health care costs continue to rise. According to a survey by HR.BLR.com and Compensation.BLR.com, 42 percent of employers expect their health care costs to rise at least 10 percent this year. South Florida has been hit by some of the highest health care costs in the nation, which has created numerous problems for those trying to afford medical care.
Employers are looking at all sorts of ways to control health care costs, including creating consumer-directed health plans, educating employees about their health plans and encouraging them to ask questions to make sure they are getting the best medical care for their money.
“Employers are picking up the mantra now of, ‘How can we get avoidance in health care costs and make employees feel a part of the solution, rather than being identified as the problem?’” says Ed Hannum, president and chief operating officer of AvMed Health Plans.
Smart Business spoke with Hannum about how to control health care costs and how businesses can make sure their carriers are providing flexibility so they can make it through this economy.
How can businesses control health care costs in this tough economy?
One way is by designing your own benefits plan, such as looking at consumer-directed health plans or lower-cost alternatives. You can put in deductibles, add co-insurance, and, when appropriate, put in health savings accounts or health reimbursement accounts. You can let employees take ownership over their account. It’s their money; let them use it for their own services. If the employee has ownership, he or she will take better care of the money and how it is spent.
You need to educate your employees about the appropriate care settings, such as urgent care centers. You can even have employees receive information on a particular procedure or test to determine if it is the best route to take. Ask questions to ensure that you are getting the best medical care that you can for your money. A more informed consumer is a better consumer. It makes a difference if you can sit down with your employees and tell them that you’re all in this together. Costs are accelerating, which comes back to you in premium rates, and you’re only able to fund so much. So it’s in the best interest of both of you to make sure you are prudent users of health care. You have to make sure your health insurance dollars go to their maximum benefits.
Why is the stress of the economy more evident in small groups?
The margins are thin, so small groups, mostly 50 employees or less, are more vulnerable. They don’t have the huge war chests that large, national companies have. In Florida, there are a lot of companies in the five- to 20-employee range. Those small groups have really felt the ripple effect from the economy. When business goes south or dries up on a global stage, it comes back and hurts them, so you’re seeing more people laid off in the small groups. We’re also seeing fewer employers who can actually afford health insurance.
These smaller groups have a lot to juggle, and health insurance represents a much larger piece of the benefits line. They know they want to provide it, because they want to make sure their employees and families are taken care of, but they’re just not in the best position due to the economy.
How can businesses make sure their carriers are providing the flexibility needed to weather the storm?
You need to focus on cost avoidance. You need to ask your carrier numerous questions, such as, ‘Do you offer wellness programs or information? How can you partner with me in terms of health fairs and other ways to educate my employees? Can you increase awareness among my work force and their families, in terms of making the right choices lifestyle-wise — eating right, exercising, getting preventative tests, etc.?’ Along with that, carriers can accommodate, through an adequate product portfolio, a range of choices for employees to meet their budgetary needs.
There also needs to be an awareness of costs. You need to understand the cost difference of alternative places for services, such as emergency room versus urgent care center or seeing your primary physician as opposed to an on call doctor in the ER. For example, if a doctor tells one of your employees that he or she needs an MRI, you need to provide information to that employee that maybe going to an urgent care center for the procedure will have a better outcome in terms of wait time and care, instead of sitting in an ER for six to eight hours. Maybe the employee even needs to go back and ask the doctor a few questions to see if an MRI is the right test — maybe a CAT scan would work better.
It’s an exciting time in the country and industry because it’s truly becoming consumer-centered. The winners are going to be those carriers that become a trusted source or adviser to the consumer and employer. The information they give the employer will be believable and credible, and is going to help both the employers and employees. Even with this big storm, there are huge opportunities for the industry, and that sets the framework for the industry over the next 50 years.
ED HANNUM is president and COO of AvMed Health Plans. Reach him at Ed.Hannum@avmed.org.