As health care costs continue to rise, it is important to consider all aspects involved in managing health and welfare plans. There are many mechanisms to contemplate, and with knowledge, plan managers can make educated decisions instead of making decisions in a black box.
“Reinsurance, prescriptions, mental health and disease management programs are all potential and substantial cost-saving areas,” says Jim Powell, senior vice president, Hilb, Rogal & Hobbs, Tampa. “I have yet to find a plan that does not have one of these potential areas for improvement.”
Smart Business spoke with Powell about key information that helps plan managers improve their company’s health and wellness programs and identify areas to carve out benefit plans for cost savings.
Should companies simply raise plan benefit levels to save money?
Many companies initially focus on the benefit levels, including co-pays, deductibles, co-insurance and employee premium contributions, as the first mechanism to save plan dollars. A forensic approach can be more beneficial. Typically these plan changes are the last area to look at because they most directly impact the ultimate consumer of the plan your employees and their covered dependents. Looking at areas outside of benefit and contribution changes may identify areas of improvement and cost savings without negatively impacting the employee.
Should companies consider self-funding?
Many times, it is assumed that self-funding automatically saves money. The decision to self-fund a health and welfare plan is really one born from the desire to control the plan. Once the plan sponsor decides to self-fund, many new alternatives become available, like the ability to carve out the reinsurance, for example. Very few brokers and consultants, however, are real craftsmen in this area. It requires skill, expertise and market relationships to properly structure and manage a comprehensive reinsurance program. Overall, benefit design is more flexible in self-funded plans as the plan sponsor begins to move away from state-mandated insurance benefits and is subject to ERISA [Employee Retirement Income Security Act].
Can alternative prescriptions/Rx benefit programs lead to plan savings?
Pharmacy benefit managers (PBMs) have become more aggressive in their pricing and rebates, and this can be an important area of focus in reviewing potential plan costs and identifying areas for savings. It may not always be the most cost-effective solution for the plan to simply go with the Rx vendor recommended by the health insurance carrier. A full-service broker/consultant can analyze the pricing and services in this area, request and negotiate proposals from alternate vendors, and present a recommendation for the plan sponsor to consider. The resulting savings to the plan and to the employees can be significant.
What about insurance carrier service?
Companies deserve and should request a senior customer service representative from their insurance carriers. What a difference you experience when dealing with a seasoned professional. Additionally, companies that use outside consultants benefit greatly when their consultant discusses plan financials with senior sales representatives and senior underwriters in order to achieve the most advantageous outcome.
Should companies consider raising the plan deductible?
Finally, it is important to benchmark the plan provisions to ensure a competitive position in your recruitment and retainment efforts. With this data, a plan sponsor can make educated decisions about which benefit levels can possibly be modified for plan savings.
How are companies reinventing health plan funding?
There are many creative ideas to consider in the plan design area. One firm I worked with has tied their plan’s medical insurance deductible to salary the higher the salary, the higher the annual plan deductible. The more an employee makes, the more they share in the initial plan claims. Another firm developed a varying employee premium contribution schedule based on earnings, so the more you make, the more you pay in monthly premium contributions for health plan coverage. Other clients are considering varying premium contributions through participation in wellness, exercise and smoking cessation programs as a means to encourage healthy lifestyles and lowering medical plan costs. Health risk appraisals can also be used as a means to collect data and motivate individuals toward lifestyle changes, which ultimately lowers health plan cost.
JIM POWELL is senior vice president, Hilb, Rogal & Hobbs, Tampa. Reach him at (813) 261-7971 or firstname.lastname@example.org.