BENEFITS | HR | COMPLIANCE
The cost of healthcare in America is an all-time high and by all indications it's only going to get more expensive. In 2018, the average annual premium for single coverage was $6,896, up 3%.
The average premium for family coverage was $19,616 per year, up 5%, according to the KFF. If that’s not alarming enough, the Centers for Medicare & Medicaid Services Office reported that the U.S. spent $3.6 trillion on healthcare in 2018. For those keeping score at home, one trillion is a thousand billion. To put that into perspective, the amount Americans spent on healthcare last year is close to the Germany’s Nominal GDP – the fourth largest national economy in the world. That same report also projects that by 2027 the amount spent annually will reach $6 trillion. With the cost of healthcare continuing to skyrocket employers might want to consider some of these alternative ways to manage their own healthcare costs.
Offer an HSA compatible plan.
Known as high-deductible health insurance plans (HDHP), these plans have a higher annual deductible which means they have a lower premium rate. When coupled with a health savings account (HSA) employees can save money on medical expenses and contributions are pre-tax/tax-deductible, the account grows tax-free and the money can be dispersed tax free for qualifying expenses. Not only that but unlike Flex Spending Accounts, HSAs roll over year to year and unlike HRAs they are owned by the individual and can even be used to save for retirement.
Eliminate/Surcharge Dependent Coverage.
With the amount of money insurance prices are costing employers these days it shouldn’t be that surprising that some companies have decided to enact dependent surcharges or even eliminate dependent coverage all together for employees with spouses that have availability to healthcare through the spouse’s employer. If one partner works for Company A that charges a surcharge or does not offer dependent coverage, but the other partner’s employer Company B does, the couple or family will elect coverage with Company B that covers dependent coverage. In this scenario, not only is Company A saving money on family coverage, but they’re likely saving money on their own employee waiving benefits as well.
Go from Fully Funded to Self-Funded
Now to be clear, this option is not for every company. Unlike the traditional fully funded plans where companies pay an insurance carrier a premium and the carrier handles everything, a self-funded plan the company finances their own employee’s healthcare costs. There’s a reason why insurance carriers see annual revenue in the billions, because the premiums they charge companies and individuals are designed to be more than the actual cost of the healthcare so that they make a profit. The thought behind self-funded plans is to eliminate the “profit” of what carriers make from fully funded plans. Typically only larger companies with higher cash flows can go self-funded, and there’s certainly a lot more risk involved, but if done so efficiently employers can save a lot of money.
Wellness Programs and Preventative Care
It's pretty simple, being unhealthy leads to more health issues and chronic diseases which in turn leads to higher health care costs. There’s compelling data that companies who spend money on employee wellness and preventative care programs can see an average return on investment of 150%. The Center of Disease Control and Prevention even estimates that most of the chronic diseases that account for over 75% of the US’ healthcare costs can be avoided with preventative measures.
Whether your parents used it as a tactic on you as a kid, or you use it to train your dog with treats, there’s no denying that “bribes” are an effective method to entice someone to do something. In the corporate world we call them incentives and they can be very effective in persuading employees to live a healthier lifestyle. Perhaps the most cost saving rewards program is incentivizing non-smokers. Smokers have significantly higher health costs then nonsmokers, so it would only make sense as an investment to reward employees that do not smoke and offer smoking cessation assistance for those that do.
There’s a dirty secret in the health care industry most employers aren’t aware of: most carriers don’t notify plan admins when a dependent becomes ineligible for benefits. That means your company could be spending thousands of dollars on premiums for dependent that should have aged of a plan years ago. It happens all the time. It’s important that companies audit their own dependent lists because they certainly can’t rely on the carriers to do it for them.
Shop Plans Every Renewal
You’d be surprised how many companies renew their benefits with the carriers they already use without shopping around for cheaper alternatives. A third of the companies that do shop other options end up switching carriers. Perhaps the best way to go about this would be to hire a broker to do your company’s biding for you and request that they present all the best options available.
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