6. Consolidate plan designs. Many employers, to give employees choice, offered multiple benefit plans. Now that cost has risen and price is a bigger concern than access, they are finding that if they consolidate those plans into two vendors instead of five or six, they can save 2 to 4 percent by getting additional leverage and consolidating their risk pool. Also, health plans cover larger geographic areas than they used to, so consolidation does not impact access for employees the way it would have 10 years ago.
7. Review physician and hospital discounts. The cost of health care varies by a range of approximately 10 percent across the country. So if you’re in Detroit, and you have employees in California and Florida, costs may differ in those areas. A lot of employers haven’t paid attention to the differences from city to city. Maybe you picked the vendor that had the best discounts in Detroit, but now that you have employees in Florida, it may not be the best. Look at the regional costs in each of your markets and reassess whether you should stay with one vendor that has the best discounts in all markets or use different vendors for each region.
8. Use claim audits, especially for catastrophic claims and Medicare Part B drugs. It’s an opportunity to audit very specific things — not for savings, but for reducing leakage or inappropriate payments. For example, some drugs paid under Medicare Part D should have been paid under Medicare Part B and they weren’t. For employers that offer medical coverage to retirees, that’s a good opportunity to recover funds.
9. Rebalance rate tiers for employee contributions. Many of the rate tiers were developed in the 1970s and don’t reflect the true cost of benefits. Today, employers are reassessing costs and reallocating the true cost of the tiers to the employees. But it’s only fair that if employees are going to pay that they pay the accurate number that reflects their cost. For example, the family rate might be 2.5 times the single rate. The true cost might be 3.5 times the cost of single but the employer never changed it. So your single people are subsidizing your family coverage. Many employers are implementing smoker surcharges, or dependent surcharges. As you increase costs to employees, you’re making sure their cost sharing has a correlation to the actual cost of medical tiers.
10. Reduce unnecessary commissions. A lot of benefit plans were set up when costs were low, with a percentage of the premium going to the agent or broker. As costs went up, so did the commission. The broker or agent is entitled to be paid for services, but the plan sponsor has a fiduciary responsibility to make sure the commissions paid are in line with the services provided.
Gary Cumpata is senior vice president and health & benefits practice leader for Aon Consulting. Reach him at (248) 936-5399 or [email protected].
