You’re looking at your expenses and that health care cost is just glaring at you. If only you could chop that number.
In fact, many employers are. The economic downturn has caused 60 percent of employers to change their health plan or strategy, according to a National Business Group on Health/Watson Wyatt Worldwide study. With the median health care cost per employee estimated to reach $7,400 this year, many employers are transferring costs to their employees.
That may be an idea of your own, or a route you’ve already taken. But insurance providers and health care experts are cautioning you to think twice if you want true savings and you want to hang onto your employee base.
“Cutting health benefits does help to save money in the short term,” says Janet Moran, vice president of human resources, Lourdes Health System. “However, there is a good argument that it will repress employees’ willingness to get medical attention for themselves and their families in a timely manner. Sometimes that delay can mean worse health problems and big dollars in the long run.”
More than 75 percent of employers’ health care costs and productivity losses are linked to employee lifestyle choices, according to the Centers for Disease Control and Prevention.
Cutting or renegotiating your health benefits can save money. But until you understand what’s driving your costs — your employees’ bad habits — you’re not going to reach the root of the problem. The bottom line is, the more your employees use their insurance, the more you’re paying.
Understand what you’re paying for
To really control costs, you have to understand what they are.
Sit down with your broker or third-party administrator to discuss your claims. You need to understand the specifics of your employees and how they’re using their insurance, meaning what services they’re seeking, what medications they’re on and perhaps discern the top illnesses they suffer from.
Larger companies dedicate time every week or once a month to go line item by line item and chart trends, but for smaller companies, it may take months to paint a clear picture. The overall goal is to carve out a specific area that your employees are using a lot of and try to find a more efficient way of dealing with the health need. For example, finding out your employees use the emergency room as a physician’s office or pay three times the price of a generic drug for brand-name medication can empower you to seek cost-saving solutions for you and your employees.
Once you have a better understanding of where you’re spending money, don’t be afraid to look to your broker or health plan provider for advice on the next step. Much of your costs can be deterred by simply educating your employees, and most health insurance providers and local hospitals offer informative tools and programs as aids.
“It’s very difficult to educate on benefits,” Moran says. “A lot of folks just don’t know what they’re covered for; they don’t know how much money they’ll have to spend on it. It’s a very complicated topic, so to try to educate employees is a very difficult proposition. Sometimes it takes one-on-one education.
“Probably the most effective way people learn is by experiencing the benefits themselves, and unfortunately, that’s sometimes in a bad way.”
Understand what to educate your employees on
You don’t need to know the specifics, like the annual median cost increase for health care is estimated at 7 percent for 2009, to know costs are rising. And your employees probably notice the difference in their paychecks.
There’s no better time to proposition your employees with ideas that can better their health and save them money. Plus, emphasizing healthy living can quickly boost workplace morale and productivity, which can’t hurt in these uncertain times.
Employees will buy in to wellness plans when they see an economic benefit, says John A. George, president of InterGroup Services Corp.
In order to provide your employees with pertinent information, you have to understand what risks they face. Many employers are opting to screen their employees, hiring a local clinic or hospital to come to the office and perform body mass index tests. The anonymous results are later given to you as a snapshot of your employees’ health.
Costs for the screenings vary dramatically. But another option is having your employees fill out a health assessment, which may cost nothing and take little time. Most insurance providers offer online health assessments, which may even be an incentive connected to your health plan. If you opt for an assessment, the provider then takes the information and directly contacts your employee with wellness information and advice.
Either route you go, the group you seek out can help you devise techniques that will speak to your employees’ needs and interests.
“Really partner with them — they can really help you,” says Ninfa Saunders, chief operating officer and executive vice president for health services, Virtua Health. “For instance, AmeriHealth provides coaches for us. If you are diagnosed with a disease, say diabetes or congestive heart failure, they’re willing to provide a coach for you so you can navigate through the mirage of the system [and] understand the network of providers available to you. … That saves a lot in terms of helping the employees and their family with time and frustration.”
Step into action
Now you know the services your employees are using and the health risks that force them to seek care. However, you’re pinching pennies, and investing in a full-blown wellness program to support healthy living, which is estimated at the high end to cost $400 per employee, is the furthest thing on your mind.
But some food for thought: Wellness programs tend to see a 2-to-1 or sometimes even a 3-to-1 return on investment. And results usually can start to be seen in a year.
But money isn’t necessarily needed to see results.
Employee behavior can be directly affected at work with no added cost by changing vending machine options, starting a walking club or banning smoking. Ask your broker or a local health association to hold monthly seminars at your office. Ask your provider what free services it offers.
To really get employees to perform, the need for incentives still holds true. Companies have seen immediate savings in paying for employees’ medication if they buy generic. Another idea is linking an employee’s program participation to his or her health plan. If employees reach lower targets in weight and cholesterol, consider paying for their insurance. Their healthier lifestyle means less risk for chronic diseases and probably fewer medications and doctor visits.
“For instance, we provide generic medication for free,” Saunders says. “When we were looking at the free generic medication alone, that was able to save us about $500,000 a year in prescription drug costs.”
Research will tell you there’s room for creativity. But whichever route you take, you must see it as an investment in your employees.
“Health insurance is usually paid to get somebody well after they’ve been sick,” George says. “But we’ve done a terrible job at paying for benefits to keep people healthy.”