Revenue is down, the budget has been hacked away and now you’re edging toward reducing employee health care coverage — or even eliminating it outright. Before taking action, take into account the short-term benefits and long-term effects of your options.
A knee-jerk reaction may be to shift the benefit burden to employees. But those who have been down that road, say there are ways to take a strategic approach to generate value from a shrunken budget and employee pool. The most successful organizations over the long-term will be the ones that cut costs now, while improving the health of their employee populations.
Utilize existing resources to find out how you can save money, starting with your health insurance provider.
“Get engaged; understand how to use a health insurance and wellness plan together,” says Scott Evelyn, president and general manager of CIGNA HealthCare of Florida. “Put an aggressive carrot out there to boost employee compliance with having better health and understanding of their benefits.”
Awareness of the claims filed by your employees will allow you to determine the best health plan move that will work for their needs and devise a health promotion program that will be most appealing to them. While moving to a lower-cost plan may be a necessity, it is a temporary fix and should be complemented with an emphasis on health that will have a more lasting impact.
A 2009 Watson Wyatt report shows that 67 percent of employer respondents to an Annual National Business Group on Health survey say the top challenge to maintaining affordable benefits coverage is employees’ poor health habits. Only by managing these habits can you truly get your costs under control.
Work with your provider
Work with your health insurance provider to decide what the best options to your budget will be. Negotiating rates with insurers isn’t usually effective, as insurers aren’t offering massive discounts because of the economic downturn. The option you usually have is a different plan with reduced coverage.
One option is cost shifting to save the company money while increasing the cost to employees. But altering plans and shifting costs to employees isn’t solving the problem of high premiums. A Hewitt Associates LLC executives’ survey shows that participants found cost shifting didn’t bring out desired behavior changes in employees and that an emphasis on health at the workplace is needed.
Another money-saving health care option is risk sharing.
“Many health insurance plans can be designed to let the employer be in control of employees’ rates,” Evelyn says. “If the employee has better health, they get a better rate.”
A third option is a health savings account, which takes money out of an employee’s check pretax and the employer has the option of adding money to the account, as well. If the employee switches jobs, he or she will take this health savings plan to the new position and the employer will retract its contribution from the fund.
“Just like with auto insurance, if you change your health insurance deductible to be higher, you’ll get an instant reduction in your rate,” Evelyn says. “But if you don’t change your driving habits, you won’t reduce long-term costs — so you have to change your habits to get the best rates.”
While health promotion — or wellness — programs aren’t usually at the top of the list when contemplating short-term health insurance savings, a program will have positive results in the short term with the best outcomes in one to three years. Companies that effectively promote health see immediate savings in premiums of 10 to 13 percent with the potential of reducing future medical costs. The investment has a $3 to $6 payback on the dollar.
Your best bet to cut costs will be a two-prong approach. Change your health plan for instant budget relief and initiate a health promotion plan.
“Just about every health topic has a free Web site full of information,” says Ray Kendrick, chief human resources officer of Memorial Healthcare System. “Talk to your insurance provider to see what educational materials they can give you and what discounts are available when you initiate a wellness program.”
Design your health awareness plan with consideration of the number of employees that will be participating. A smaller company of 50 employees or less shouldn’t invest more than $25 per employee initially, but should focus on raising awareness by providing educational material that emphasizes preventive care, proper nutrition and health-related Web sites.
A midsized company of 300 or more employees should invest about $90 per person. Providing educational tools, focusing on the population’s main areas of concern and taking a competitive, fun approach is effective. A large company with a willingness to invest about $240 per employee can have a comprehensive program that includes education, financial incentives, the inclusion of spouses and perks like gym memberships.
Your insurance provider may have free online health risk assessment surveys. By surveying your employees you can determine ways to meet the company’s and employees’ financial needs. Ask questions about physical activity, stress management, tobacco use and general disease risk factors.
“Good primary care helps weed out bad outcomes down the road,” Kendrick says. “Bring to employees’ attention issues that are most common, like smoke cessation programs, and ask them what they’d like to see offered.”
Discussing what your insurance company provides to you at no cost or at reduced rates is a great first step. Many employers are unaware of fringe benefits included in their plans. If the insurance provider doesn’t offer what you need for free, it should be able to direct you to an organization or local hospital program that does.
After you’ve determined a health awareness focus for your employee population, you can create a plan of action.
“Everyone wants to start a wellness program and have it fixed in a month,” Kendrick says. “But it doesn’t work that way. You must consider what outcome you expect from insurance plan changes and wellness programs. If employees participate in wellness programs, the company benefits.”
You also need to make an assessment of your workplace wellness environment. Identify strengths and areas that need improvement. Enforce no smoking on the campus; provide healthy choices in vending machines and the cafeteria.
“Make sure employees know any private health information you get from them will be received in aggregate and you will not know their specific personal information,” Evelyn says. “You can also give them an incentive of money back toward their deductible if they report good health. This can also be done confidentially through the insurer.”
Provide health tips, programs, discounts to gyms and other information through multiple delivery sources. Some employees are more receptive to e-mails or newsletters — or they just need to hear the same message multiple times to get motivated into action.
“Insurers are aggressively working with employers to predict future claims,” Evelyn says. “Engaging in wellness will help those discussions and considering you need to convince only 5 percent of the population to make a financial difference, trying a wellness program is worth it.”