Evaluating strategies to help manage costs is not a new topic for employers. It’s something we’ve been doing for years and will continue to do.
One area that causes major cost concerns for employers is health care. And although health care costs are expected to continue to increase in 2012, many experts predict that those increases will be smaller than they have been in recent years.
However, any cost increase places a burden on businesses, which leads employers to adopt a variety of strategies to manage and mitigate their costs, says Michael Galardini, sales executive at JRG Advisors, the management company of ChamberChoice.
“There are a number of factors that contribute to the rising costs of health care, including an increase in the number and cost of catastrophic claims, the aging work force and poorer health among the general population,” says Galardini. “In an effort to reduce those benefit costs, many employers are implementing cost containment strategies.”
Smart Business spoke with Galardini about steps employers can take to reduce their costs associated with health care.
What can employers do to help reduce their costs?
For one, employers can implement wellness programs and reward employees for improving and maintaining good health. Offering financial incentives for employees who have healthy lifestyle habits and who participate in workplace wellness programs is a common reward system.
Also, partner with your medical insurer to learn what it offers in terms of health risk assessments and chronic condition management, and then incorporate these into company wellness initiatives. By doing an assessment, employees will have a better understanding of how their behaviors impact their health and the steps they can take to improve it.
Some employers go as far as offering lower employee contributions toward benefit premiums for those who participate in wellness programs and maintain good health. The key to a successful wellness program is supporting employees in reaching their goals and making them aware of the programs available to help them succeed.
Employers should also encourage employees to take advantage of preventive care benefits, many of which are available to them through the plan at no cost. Using the generic form of medications employees are taking is another easy cost containment strategy. Generic formulas are identical to those used in brand name prescriptions, but the cost of generics is often significantly lower, saving both the employer and the employee money.
In addition, offering a high-deductible health plan promotes educated employees and reduces costs. HDHPs are paired with health savings accounts to pay the deductibles. These are similar to a 401(k) plan in that employees — and their employers, if they so choose — can deposit money into the accounts on a tax-free basis to pay for medical costs up to the deductible amount. However, unlike a 401(k) plan, the money can also be withdrawn tax-free provided it is used for an IRS-approved medical expense. The goal of a high-deductible plan is to encourage people to become smarter consumers of health care and to use their resources wisely.
Employers can also provide online tools for employees on a variety of health-related topics and other educational resources to help them become better-educated consumers.
What else can employers do to rein in costs?
Be sure to monitor spouse and dependent benefit enrollments by conducting eligibility audits. Some companies require employees to pay higher premiums to cover a spouse if the spouse can obtain health coverage through his or her own employer.
By conducting eligibility audits, employers can identify dependents who should no longer be covered under their health plan, or who should never have been covered in the first place. Inappropriate enrollees can end up costing everyone more money in the form of higher premiums. As a result, make sure that your plan covers only those who are eligible.
Employers may also want to offer an amnesty period to encourage those who have ineligible dependents on the plan to come forward. In return, employers can waive potential disciplinary action or agree not to pursue the recovery of premiums and claims that were paid on behalf of the ineligible enrollee.
How can voluntary benefits work to an employer’s advantage?
Many employers offer voluntary benefit and insurance options that meet personal and family needs, such as life insurance, homeowners, auto, accident coverage, disability and so on. Worksite voluntary benefits do not add costs to the employer’s bottom line because employees are choosing the coverage they want and are paying the premiums themselves.
This allows the employer to give employees the opportunity to purchase additional coverages based on their unique individual needs, often at a lower premium than if they purchased coverage individually. Premiums are typically paid by employees’ pre-tax dollars via the company payroll.
Many employers are choosing to re-evaluate their overall benefits strategy in light of health care reform and other developments. Take the time to ensure that you are making the right choices in plan design and benefit offerings. Implementing some of these strategies and more can help reduce costs and promote a healthier work force.
Michael Galardini is a sales executive with JRG Advisors, the management company of ChamberChoice. Reach him at (412) 456-7235 or [email protected].
