How alternate funding and tools can help control small group health plans

Today’s health care environment is riddled with complex plan designs and rigorous government regulations, leaving many employers to feel as though their hands are tied when it comes to finding unique, innovative and cost-saving solutions.

But a new concept is emerging that will enable small employers to identify current and future risk, influence behavior and control costs.

Smart Business spoke with Aaron Ochs, managing consultant at JRG Advisors, about strategic analysis and risk management in the small group health insurance market.

How is the small group health insurance market changing?

Typically, small employers have been unable to maximize the value of their medical benefits due to lack of claims utilization and analysis from their insurance company. In the typical buying arrangement, the small group market is a fully insured contract that does not offer the employer much control over the health plan. Self-funding works differently.

In addition to providing protection against excessive costs in years with high claims and the opportunity to keep the profits from favorable years, the availability of data, including claims utilization, is a significant advantage for the employer. Knowing the health and risk factors of the employee population helps the employer determine the appropriate benefits strategy.

Self-funding is not a new concept; but it is new to the smaller employer — with many insurance companies offering partially self-funded premium options to groups with as few as 10 insured employees.

With partial self-funding, the employer puts aside enough money to cover anticipated claim expenses and the monthly premium remains level for the entire plan year. If claims are less than the funded amount at the end of the year, a rebate or credit is issued. If claims exceed the funded amount, the employer is protected by stop loss.

How can employers use data as a tool to help?

The ability to anticipate or predict claims costs hasn’t been available in the small group market due to the absence of claims data from the insurance companies — until now.

This is where newly developed risk management and predictive modeling tools come into play, making it possible to take a much ‘deeper dive’ into the composition and risk of the smaller employer, proactively identifying members with markers for chronic illness to predict health risks and determine if self-funding is a viable solution.

The deeper dive begins with employee data that is captured through a custom access portal, scrubbed and reviewed. The portal is an insurance company-accepted, Affordable Care Act and HIPAA compliant online benefits application tool designed to reduce the amount of time, cost and paperwork for employers. Employees are asked to complete an online enrollment interview. The employer receives a confidential de-identified aggregate report with an overall analysis.

This expert analysis guides the business owner through the benefit decision process with the power of knowledge. Gaining insight into the composition and health status of the group means plan design decisions can be strategic rather than an annual game of ‘pinning the tail on the donkey’ to find a tolerable solution.

What kind of results can employers expect?

Often, the same portal technology can reduce or eliminate many administrative burdens by providing the added support of employee enrollment, communication and plan election/waivers. The solution is a faster and more efficient approach to benefits. This means employers can essentially build their own health plan, which can lead to generous cost savings, greater transparency and understanding, and better overall cost control.

Over half of an average employer’s health care budget is spent on members with preventable conditions. It’s time for small employers to take control of their health care plans. Talk to your advisor to learn how these funding arrangements and risk analysis tools can help with your strategic benefits planning needs.

Insights Employee Benefits is brought to you by JRG Advisors

Does it make sense to keep doing the same thing with health insurance?

Insurance in its purest form was designed to transfer unknown risk to another entity, the insurance carrier.

“But fully insured health insurance can be more accurately described as a payment plan for known or predictable expenses, which includes an element of insurance layered on top,” says Joe Roberts, area vice president of Health and Welfare Key Accounts at Arthur J. Gallagher & Co.

“A large number of frequently used medical services are predictable expenses,” Roberts says. “Consider your annual maintenance medication or a well child visit. Those are things that you can plan for or expect to pay. Funding predictable expenses through an insurance premium is essentially a payment schedule for a known expense and, therefore, like other financing mechanisms, financially inefficient.”

Smart Business spoke with Roberts and Ethan Hendrickx, an area vice president in Gallagher Benefit Services, about why it is important to understand the “financing” behind health insurance and how gaining this knowledge can lead to a more efficient and cost-effective benefits strategy.

What should employers understand about the financing of health insurance?

Paying premiums to an insurance company to fund predictable expenses is financially inefficient. Here is a simplified example. Let’s say you take a medication that costs $100 a month, but because your health insurance includes pharmacy copays, you only have to pay $20 to fill the $100 prescription. For the insurance company to collect enough premium to pay its $80 share of this prescription and cover the cost of doing business, it needs to charge $92-$96 in premium. Thus, you paid $116 for the $96 in premium plus a $20 copay.

Apply that scenario across all of the known or predictable expenses consumed each year by your employees and the numbers get very large.

Why is this important for employers to understand?

When purchasing a fully insured health insurance plan, there is a common misconception that insurance companies are going to pay your claims and lose money in the process without increasing premiums to make up for their losses. The reality is insurance companies formulate their premiums based on past claims experience and future risks.

Employers need to understand how health insurance works at the insurance carrier level in order to determine the best way to manage risk and fund the claims of their employees.

In many cases, employers are able to more efficiently manage their health benefit spend by purchasing an appropriate level of insurance for their business and then funding claims as their employees consume health care on a variable cost basis. This structure is commonly referred to as a partially self-funded plan.

How can employers save money with a partially self-funded arrangement?

There are five main areas from which savings can be derived in a self-funded arrangement:

  1. Insurance company profit.
  2. Administrative costs.
  3. Risk transfer costs.
  4. Fees/taxes.
  5. Pharmacy programs.

A self-funded arrangement may not be right for all employers; however, they should evaluate the feasibility of an alternative to a fully insured arrangement. In making this determination, there are several issues to consider, like risk tolerance, contract provisions and cash flow implications. It is important to find an adviser who understands the technical aspects of self-funded programs and has experience in structuring and managing those types of programs.

How large does an employer need to be in order to benefit from adopting a partially self-funded approach?

More and more small to midsize employers are converting to self-funding. There are organizations in Northeast Ohio with fewer than 50 employees on their plan that successfully self-fund their medical and pharmacy benefits. And a growing number of stop-loss insurance companies developing new products and contract features make it increasingly prudent for smaller employers to take advantage of self-funding.

Insights Employee Benefits is brought to you by Arthur J. Gallagher & Co.

How to avoid the plan administration pitfalls of employee benefits

There are numerous employee benefits laws requiring compliance. Staying on top of compliance can be daunting, and it’s easy for something to fall through the cracks.

As you gear up for the New Year, take some time to review the pitfalls of employee benefits plan administration.

Smart Business spoke with Frances Horn, Employee Benefits Compliance officer at JRG Advisors, about what to watch for with employee benefits compliance.

What’s the first step to compliance?

As employers gear up for 2018, they need to set some time aside to review their employee benefits plan administration. An employer may not be subject to every law, due to size or type of benefit offered, but no employer is not subject to any of the laws.

The major laws are the Employee Retirement Income Security Act of 1974 (ERISA), Consolidated Omnibus Budget Reconciliation Act (COBRA), Health Insurance Portability and Accountability Act of 1996 (HIPAA), Internal Revenue Code (IRC) Section 125, Family and Medical Leave Act of 1993, Medicare and the Affordable Care Act, with many having several compliance provisions.

How is failing to properly communicate with the plan participants a pitfall?

Under ERISA, plan administrators have disclosure and reporting requirements. Every plan may not be subject to these requirements, due to size or type of plan funding, but every plan subject to ERISA has disclosure or communicating requirements, such as distribution of a Summary Plan Description, Summary of Benefits and Coverage and numerous other notices.

Under COBRA, many administrators don’t recognize that there are several more notices required than just an election notice. These include, but are not limited to, an initial notice, notice of early termination and notice of unavailability of COBRA coverage.

Other communications that remain the plan administrator’s responsibility are the Medicare Part D notice, HIPAA Special Enrollment Rights, Women’s Health and Cancer Rights Act notice and the Children’s Health Insurance Program Reauthorization Act of 2009 notice.

Where else do employers go wrong with plan administration?

Understanding who is actually the plan administrator can be another pitfall. With most laws governing employee benefits plans, the responsibility for compliance rests with the plan administrator, which is the person usually designated in the plan documents. If no such designation exists, the administrator role defaults to the plan sponsor, i.e. the employer.

While the plan administrator is responsible for disclosures to participants, plan document preparation and penalties for any noncompliance, many employers incorrectly feel these requirements fall with either the insurer or the insurance broker. Even for a self-insured plan, the third party administrator rarely agrees to be the plan administrator, but may assist with an employer’s documentation responsibility.

The pre-taxing of an employee’s premium contribution share is another pitfall. Many employers require that employees pay a portion of the premiums, particularly medical, dental and vision insurance coverage. To assist employees with these contributions, an employer will take the premium out of an employee’s compensation before applying taxes, thus the term pre-tax. An employee’s taxable wages for the Federal Insurance Contributions Act, federal withholding and state withholding are then reduced. This practice is often referred to as being a tax-favored treatment for employees.

The capability to pre-tax benefits comes under Section 125 of the IRC. The code requires that an employer establish its pre-tax plan, often referred to as a cafeteria plan, Section 125 plan or a premium-only-plan, in writing. Not meeting this requirement means a Section 125 plan doesn’t exist and that the employer is more than likely improperly taxing its employees’ benefits.

Numerous laws govern employee benefit plans. Ultimately the employer is responsible for complying with these laws and can be subject to costly penalties for noncompliance. As the year draws to a close, employers should review the governance of their benefits plans and determine if they need assistance to climb out of any pitfalls.

Insights Employee Benefits is brought to you by JRG Advisors

How to increase engagement in your health care benefit programs

Many people think communication is the key to driving engagement. In the employee benefits space, employers push more communication to get employees to use different tools (i.e. transparency, telemedicine), programs and other resources in their benefit ecosystem. But mass communication isn’t the answer.

“You have to step into the shoes of the employees to understand their needs. Engagement is connecting with employees throughout their health care journey and meeting them wherever they are with the expertise and ability to deliver exactly what they need in the moment they need it,” says Kara Trott, founder and CEO of Quantum Health.

Today, communication and information are available through multiple channels. People sort out what doesn’t matter to them at that moment. More communication isn’t effective because the relevance is random.

Smart Business spoke with Trott about how to better engage employees.

Why is it important to increase engagement?

Employers typically spend more than $13,000 per employee per year on health insurance — and that is expected to rise. The top cost drivers are specialty pharmacy, high-cost claimants and specific diseases/conditions. To help with cost, employers are adding tools and resources to create competitive benefit package options for their employees. The problem lies with connecting the tools and resources to the person, family member or provider, when they need them.

A person who has been given a life-threatening diagnosis is thrust into an un-chosen health care journey. According to Quantum’s research, on average, that journey takes 11 months, involves five to seven doctors, 50 or more claims and more than 40 decisions. Certain tools only have value at specific points along the way, like when an employee needs an MRI and uses a transparency tool; the tool needs to be connected to the employee at the most relevant time.

Almost all health plan programs suffer from low engagement. It is typical for many solutions to get less than 5 percent utilization.

What steps are employers taking to increase engagement in their benefit plan programs?

Employers are providing a high-touch option to their benefit plans to help people use the health care system. It’s known as navigation and care coordination.

When employees are given a diagnosis or want to figure out a claims issue, they don’t think about the flyer in the company bathroom or the last corporate email. They typically reach for their insurance card.

Often, engagement occurs when someone has a discrete question or a provider inquires on eligibility. When people initially reach out, it’s best to have someone work with them in a broader way. Increasing the capabilities in navigation support with care coordination adds to the effectiveness.

Many health care solutions provide employees with a portal, website or application. However, when a health problem occurs many people haven’t downloaded the app, or don’t remember where to go. Employers, in return, don’t get the engagement they expect.

Does everyone want the same engagement?

Whether baby boomer or millennial, when something goes wrong with their health, people want personal support. For example, a recent survey by Oliver Wyman, in collaboration with FORTUNE Knowledge Group, found that millennials don’t want today’s health care delivered through an iPhone screen. They see technology as a way to deliver convenience, but they also seek guidance when going through a health issue.

When employees are truly engaged, what will employers see?

Employers will see employees feel better about the overall benefit plan. Navigation and care coordination leads to higher satisfaction scores from plan members. In just six months, the net promoter score, which gauges the loyalty of customer relationships, can go from a negative number, less than 20, to the low 70s.

When navigation and care coordination are coupled together, the impact is noticeable. Together they can create a better overall health care experience that saves both the employee and the employer money while continuing to flatten claim trends.

Insights Employee Benefits is brought to you by Quantum Health

Add value to your employee benefits with life and disability

Accident and tragedy are two things no employer wants to see for employees.

“Disability products and life insurance give employees peace of mind, knowing they have financial support in the event of unforeseen circumstances,” says Chuck Whitford, consultant at JRG Advisors. “They also give employers peace of mind in knowing that they help protect their employees. Ancillary benefits can even help businesses recruit and retain the best employees.”

Smart Business spoke with Whitford about how life insurance and disability coverages benefit employers and their employees.

Why should employers consider getting a disability plan?

According to the Council for Disability Awareness, every 7 seconds someone in the U.S. suffers an illness, injury or accident that will keep them out of work for more than one month. For individuals out of work for three months or more, the average time off of work due to a disability averages 2.6 years. That’s 136 weeks without a paycheck.

The cost of implementing a long-term disability plan is relatively small. For most business owners, the problem escalates as the owner tries to satisfy the current work demand and take care of the disabled employee. Providing long-term disability coverage is also valuable to employees — buying coverage on their own can cost as much as an entire group account because of stringent underwriting. Plus, the program can be structured so that the premiums are deducted as a business expense, but benefits can be received on an income tax-free basis.

What’s the difference between short-term and long-term disability?

Short-term disability fills the gap between day one of disability and when the long-term benefits kick in. Typically, a short-term disability contract covers the first 13 or 26 weeks of disability. Unfortunately, many people live paycheck to paycheck. Short-term disability can benefit those lacking sufficient savings.

Long-term disability is usually fully insured, with the exception of extremely large employers that self-fund the benefit. For most employers, the cost is determined by employee demographics and industry classification. Claims experience isn’t a significant factor. Long-term disability pays a portion of the disabled employee’s income after he or she runs out of both sick leave and short-term disability benefits, typically after 90 to 180 days. Depending on the plan design and how the policy defines disability, it may pay a monthly benefit for a specific number of years, such as two years or until normal retirement age under Social Security.

However, an employer shouldn’t administer its short-term disability program. Most employers aren’t equipped to assess when an employee is unable to perform his or her own job or when he or she is able to return, and employers are estimated to pay out 30 percent more in benefits than if the plan was managed by a claims professional. It is possible to outsource the claim adjudication process to a qualified third party, often referred to as ‘advise to pay.’

How has life insurance changed and why is this coverage important?

A recent study found nearly 70 percent of U.S. workers, across all generations, believe having a life insurance benefit available at work is important. This importance has grown over the past five years, an increase of 22 percent. For many, it is the only life insurance they own. Group life insurance can fill gaps in coverage and the purchasing power of a large group helps keep the coverage affordable for the employer.

Sixty-five percent of employees with group life coverage believe they need more life insurance beyond what their employer provides. Depending on the plan design and type and amount of coverage elected, employees may be able to buy additional life insurance without answering health questions. Some plans allow employees to purchase coverage on a spouse and/or dependent children. Buying life insurance at work is convenient because premiums can be paid through payroll deduction. When they leave the employer, people typically can choose to maintain coverage, paying premiums to the insurance company.

Employers that don’t have group life or group disability should meet with their insurance consultant. They most likely will be surprised by the relative low cost involved in establishing a program that can provide additional value to their employees.

Insights Employee Benefits is brought to you by JRG Advisors

Culture is key to creating a destination workplace

If you had to name only one thing that drives your organization’s success, chances are it would be your workforce. And when you think about what it takes to become a destination employer, the answer is quite simple. Focus on your most valuable asset — your employees. If employees are key to your success, it only makes sense to put them at the center of your total rewards strategies, including how you communicate. However, getting started on this path can be a daunting challenge.

To become a destination employer, executives have to be invested in the idea of a thriving culture and employee engagement.

“Culture is an inherent part of your organization that’s either defined by you or by other influences. There’s no short-term fix for improving it,” says Cindi Morris, Ohio wellbeing and engagement consulting leader at Arthur J. Gallagher & Co.

“What’s important is to ask yourself what defines your culture in the eyes of your employees, and whether that perception will help you compete at the highest level. If the answer is no, then you have some work to do to effectively bridge the gap,” says Joe Roberts, area vice president of Health and Welfare Key Accounts at Arthur J. Gallagher & Co.

Smart Business spoke with Morris and Roberts about how employers can improve their culture and employee engagement to start competing as a destination employer.

What kind of results do organizations see when their employees are engaged?

There are abundant opportunities for positive results when employees are engaged, from improved production to better talent attraction and retention, to name a few. When your employees are engaged, they have the ability to impact the way your business is run. Annual benefits costs may decline, turnover may be reduced and people may take fewer days off and perform at higher levels, which sparks competitive strength and success. Employees may even become brand advocates for your organization, helping to position it as a place where people want to work.

How can companies measure and improve their employee engagement level?

While most organizations have a set of core values, engagement hinges on earning employees’ trust by living up to those beliefs. Many employers use engagement surveys to gain feedback directly from their employees to better understand their unique needs and preferences. But when management conducts a survey, it’s imperative to transparently share the results with the workforce, along with plans to address issues and opportunities that were identified. Once employees know management is listening, executives can start to create effective programs that tie back to the core values of the organization.

A workforce evaluation tool to help organizations assess specific workforce dynamics can be a helpful starting point when developing a strategy to impact employee engagement. For example, when you know your employees may need a different level of benefits and prefer different communication channels depending on where they are in life — early career, mid-career, pre-retiree, etc. — you can tailor a program with those considerations in mind. You’re able to positively engage employees differently.

What else can strengthen culture and employee engagement?

A strong culture requires commitment beyond your HR department. It starts at the top. When executives demonstrate that culture matters, not only through their words, but more importantly through their actions, your organization begins to earn employees’ trust. An employee’s journey isn’t linear — it’s cyclical. Their experiences at each stage of the cycle can have major impacts on your business.

As a takeaway, what are the key elements of an effective destination-workplace strategy?

Organizations can develop a culture-centric approach by creating a cohesive, engaging and productive work environment based on a shared purpose, and a well-defined set of company values and norms. Being thoughtful, intentional and purposeful in defining your values, and communicating them consistently through words and actions will set the stage for success.

Insights Employee Benefits is brought to you by Arthur J. Gallagher & Co.

How benefits brokers put people first

What gets you up every morning? OK, besides the dreaded buzz of the alarm clock or smell of fresh brewed coffee. Is it simply to “wake up and repeat,” like Bill Murray in the movie “Groundhog Day”? Or, perhaps you want to check one more thing off your to-do list?

It’s easy to fall into the trap of complacency and routine when it comes to our daily tasks, says Jessica Galardini, president and COO at JRG Advisors. We go through the motions day-to-day and forget about the real purpose behind what we do.

“For benefits brokers, that purpose, drive and passion should be simple — helping people,” Galardini says. “By putting the focus on people and relationships instead of the sale, a benefits broker can make meaningful connections that result in loyal clients, and of course, referrals. Insurance professionals in today’s world of health care benefits need to develop a unique perspective to be successful.”

Smart Business spoke with Galardini about the traits that employers should look for in the most successful benefits brokers.

How has employee benefits changed?

Almost any benefits broker would agree that operating in the health care benefits industry over the past 10 years has been difficult. Building a successful business and client base while responding to the numerous, ever-changing outcomes of the Affordable Care Act (ACA) has created many challenges for reducing uncertainties and the painful impact to employers and employees.

While it’s human nature to resist change, a benefits broker should think outside of the box and look for unique, innovative ways to do his or her job, which is to solve problems. It’s an opportunity to minimize the angst people feel with the ACA — to explain the changes, minimize the concern and worry, and sort through polarizing politics.

People want good health care, provider access and convenience at a better price. This is a challenging, but not impossible, task and should be what motivates any benefits broker. Health care, now more than ever, is an important area for brokers to help their clients and showcase their expertise.

How do successful benefits brokers approach this uncertain environment?

The uncertainty around the law seems to build every day, with the ACA’s future wavering on Senate votes. Even with the uncertainty, benefits brokers can’t forget the people caught in the crossfire of the ACA and politics. With rising costs, many employers are feeling stuck with what they have, or that the only cost containment strategy is to push more cost toward their workforce. A good approach starts with C-level dialogue to identify, consider and understand requirements within coverage, network, workforce and budget.

There are products and services to achieve objectives, once they’re clearly identified and considered on a scale of importance to overall strategy. Some solutions include specific data analytics to identify emerging health risk factors so a care strategy can be developed, confidentially and individually within the workforce. Technology options also can provide a deeper-dive population comparison, even for employers without historical claims data. Online transparency tools give employees real-time information by zip code, service type and facility so they can make smart choices for services like blood work and MRIs, which can range from affordable to astronomical in cost with no difference in quality outcomes.

These solutions empower employers through dialogue, information and motivating employees with the ‘carrot’ rather than the ‘stick’ — moving the needle toward knowledge-based decision-making, defined affordability and people satisfaction.

What else would you like to share?

There is a lot of information out there when it comes to health insurance. Benefits brokers should look for unique ways to continuously educate their clients and connect with them on a more interactive level, such as through educational webinars and seminars. This can be a proactive approach to solving the clients’ problems before they arise and addressing real issues.

Strong benefits brokers consider the people they’re helping in order to bring fresh and creative problem-solving ideas to the table. By keeping people in mind and maintaining a unique perspective, they’re inspired and employers are happy — a winning formula for success.

Insights Employee Benefits is brought to you by JRG Advisors

How to control the cost of health care through price transparency

As the cost of health care continues to rise, it is crucial for consumers to better understand the actual cost of health care and the need for greater price transparency.

“After all, we practice consumerism when it comes to shopping at the grocery store, buying clothes and other products and services. We shop for sales, compare prices, brands and research online with one goal in mind — to find the lowest price and save money,” says Ron Smuch, insurance and benefits analyst at JRG Advisors.

Smart Business spoke with Smuch about how employers can encourage price transparency in their health plans.

Why isn’t the consumerism that comes so naturally in other areas of our lives used in health care?

Understanding the true price of health care can be mind-boggling. Rates and costs can fluctuate depending on your insurance plan and where services are provided. Often, as a patient, we have no idea the total amount we will pay for a test or procedure until we receive the bill from the insurance company. We rely on the assumption that we simply ‘have insurance’ with no consideration or research as to the actual cost of a procedure.

Greater price transparency allows consumers to clearly see the price of treatment and determine their out-of-pocket costs before receiving care. The importance of transparency is such that there are several provisions in the Affordable Care Act addressing the issue. Although there are requirements for health plans as to transparency and reporting, there has yet to be full implementation of the law.

How else can price transparency lower health care costs?

In addition to educating consumers, price transparency in health care can also lower costs for claims payments and common medical services. When consumers are aware of the price for tests, procedures or medications, they pay more attention to treatment options, provider options and the actual need for a given test and whether there is a more affordable option available. Ultimately, known pricing creates smart shopping. Health care cost transparency creates competition, which lowers costs.

A 2014 study published in the Journal of the American Medical Association found that allowing patients to access price information for several medical procedures before obtaining health care services could lead to lower health care costs. The study targeted medical claims paid by employers on behalf of their employees after a price transparency tool was made available to them. The costs for employees who utilized the price transparency tool were lowered by 14 percent for lab tests, 13 percent for imaging procedures and 1 percent for office visits, in comparison to employees who didn’t use the tool. The actual dollar savings for those using the transparency tool for imaging procedures equated to a per incident savings of $124.74, $3.45 for lab testing and $1.18 for office visits.

What tools are available to help promote price transparency?

Price transparency has slowly evolved through the continued popularity of health savings accounts and high-deductible health plans in an effort for consumers to lower their health care spending. A person with a high deductible is more likely to be more conscious and concerned about price, which results in their curiosity to inquire about how much things cost. This will likely force medical providers to be more transparent with their pricing.

The on-going demand and attention to price transparency in health care has resulted in the development of medical cost savings companies offering price transparency tools that allow a consumer to ‘shop’ the price for medical services in their surrounding area often by zip code and before the time of service. These tools and capabilities are useful to consumers who want to compare prices in order to make more informed decisions about their health care.

Price transparency can have a tremendous impact, educating consumers about health care costs and their understanding that more expensive doesn’t always mean better. Furthermore, transparency can lead to a more efficient health care delivery system and curb rising costs.

Insights Employee Benefits is brought to you by JRG Advisors

How to help your employees be better consumers of their health care

Helping employees think differently about their health care choices and responsibilities as consumers is a growing trend with employers.

“There is a significant opportunity to help plan members be better consumers,” says Joe Roberts, area vice president in Arthur J. Gallagher & Co.’s Health & Welfare practice. “Why wouldn’t you put as much thought into buying a $2,500 MRI as you would when you buy an $800 television set?”

Teaching employees to ask their health care provider about the cost of services or less expensive alternatives can drive down cost for both employees and employer-sponsored health plans.

Smart Business spoke with Roberts about educating employees to take control of their health care.

What do employers need to know about this?

The biggest opportunity to impact cost and overall organizational success comes from a holistic assessment of an employer’s benefits strategy, reviewing how all aspects align with workplace culture and the organization’s unique demographics. A number of different cost-saving strategies could be considered, like switching insurance carriers, alternative funding, narrow networks, prescription management and well-being programs.

One trend is consumer-driven health care plans, or CDHP, designed to get employees engaged in their health care buying decisions. This task can be challenging and often requires the right partner to help tailor communications. For example, helping people feel more confident in their ability to question physicians about treatment plans can improve their level of consumerism.

Employees who actively engage in their health care can affect an employer’s ability to sustain the plan. If employees are educated and engaged, the employer and employee may save in the short- and long-term.

Why is boosting consumerism important?

Employees empowered to be better consumers are more likely to advocate for themselves. They tend to research procedures and facilities and ask their doctors the right questions. This approach often leads to more informed decisions about the quality and cost of care.

Taking time to do research can amount to significant savings. The cost of health care for similar procedures can vary greatly depending on where the procedure is performed. According to, an estimated $18 billion could be saved per year if non-emergent medical issues were treated in doctors’ offices and urgent care facilities.

What best practices do you see from companies that educate their employees?

Here are some best practices to consider:

  • Establish a consistent communication plan addressing topics such as benefit plan basics, hot topics within health care, changes to benefit plans and/or networks, and tips for increasing physical, mental and emotional well-being.
  • Provide employees with access to health care transparency tools. These tools, which are simple to use, give the ability to research quality of care among providers as well as the cost of procedures between providers and facilities. Ask employees to consider the amount of research they put into purchasing a new vehicle or household appliance, and help them apply that toward their health care decisions.
  • Provide alternative ways of obtaining care. A great example is telemedicine and virtual medicine programs that allow employees and their family members to consult with a physician over the phone or through video conferencing (often using smartphones and tablets). In addition to convenience, a virtual visit may cost one-third of an office visit — saving the employee and the health plan money.

Where do employers make mistakes with this? What can they do to avoid them?

The biggest mistake employers can make is to do nothing. It’s challenging to tackle these issues alone, so employers should work closely with their benefits consulting firm. Ideally, the firm should provide services and expertise in areas like employee communication and engagement. Improving communication and education is a great start, but those strategies alone won’t move the needle. Employers need to find creative ways to get employees engaged.

Insights Employee Benefits is brought to you by Arthur J. Gallagher & Co.

Reduce employer expense, increase take-home pay with FSA, HRA or HSA

Acrucial health benefits decision an employer must make when it comes to an employee benefits program is the employee contribution strategy.

“The contribution strategy should be carefully considered because employees rate their contribution (payroll deduction) more importantly than the benefit level and often more than the network providers,” says Ron Carmassi, sales executive at JRG Advisors. “A skilled, experienced benefits professional working in tandem with the company’s HR can save an employer time and money.”

Smart Business spoke with Carmassi about employee contribution strategies — the second of two articles on health insurance cost reduction.

What types of employee contribution strategies should employers consider?

The consumer-driven health care approach and plan coupled with the correct contribution strategy can lower monthly premiums while engaging your employee population to manage more of their health care and make smarter decisions. The main accounts utilized in consumer-driven health plans are Health Savings Accounts (HSA), Flexible Spending Accounts (FSA) and Health Reimbursement Accounts (HRA). All three are designed to get employees more engaged with health care decisions.

How can an HSA drive down costs?

An HSA is only available to individuals enrolled in a qualified high-deductible health plan that is approved by and meets the standards set by the IRS. This type of account can reduce employer costs because, typically, high-deductible health plan premiums are lower than traditional plans.

Individuals, employees and employers can contribute to the account. The insured’s funds, deposited pre-tax, can be used to cover qualified medical expenses. Withdrawals for qualified expenses or post-retirement care, contributions, and gains or investment are also tax-free.

The IRS will allow a single insured person to deposit up to $3,400 in 2017, and anyone enrolled with a spouse or dependent up to $6,750 in 2017.

How does an FSA differ?

These accounts are similar to HSAs in that an employee can use pre-tax dollars to pay for qualified medical expenses. There are even options to use the account for certain dependent care and transportation expenses. But this account is employer-established and only funded by the employee or the employer. An employee may choose how much to deposit in the account pre-tax from their paycheck and what qualified items to use the money for.

For 2017, the maximum that may be deposited in an FSA account is $2,600 and only up to $500 may be carried over. So, consider what the FSA will be used for to avoid overfunding and losing money. These accounts don’t offer investment options and don’t earn interest, but they do allow a person to use pre-tax dollars for medical and non-medical items and services. It is important to verify items approved by the IRS for purchase with an FSA.

What is an HRA? How does it work?

With HRAs, an employer selects a plan with a higher deductible and a lower monthly premium. This account is employer-funded and the savings generated by the lower premium can be used to reimburse the employee for some portion of the deductible and out-of-pocket costs. These reimbursements are tax deductible for the employer and tax-free to the employee. This type is owned by the employer and typically administered by an insurance company or a third party administrator.

There are more restrictions on HRAs due to the Affordable Care Act. There may be limits on how much the employer may contribute. When considering an HRA, employers should work closely with an experienced benefits advisor to be sure to remain in compliance.

How should employers choose between the three options?

These reimbursement options should be studied and reviewed carefully to determine which type is best to help reduce your employee benefit program costs without lessening benefits. By better managing benefit costs, your employee benefits package can have even greater depth and flexibility, while also promoting employee wellness and healthy lifestyle alternatives.

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