Employer’s Balancing Act: Part 2
In the previous installment of our Employee Benefits series, we explored the factors and trends pushing up healthcare benefit expenses for employers. In Part Two, we delve into an innovative and pragmatic four-step process that empowers employers to navigate rising costs while continuing to offer the most sought-after benefits to their employees. This series draws from our comprehensive 2023 Employee Benefits Mid-Year State of the Market, aggregating curated insights, research, and data.
Finding the perfect equilibrium between controlling healthcare benefit costs and delivering the essential benefits employees crave can seem like an ongoing challenge. Forward-thinking business leaders, however, recognize that offering comprehensive and competitive employee benefits is not just about attracting and retaining top talent but also about withstanding market challenges and flourishing in the long run.
Here are the common themes and steps that savvy employers employ to put this realization into action:
Step 1 – Discovery
Begin by scrutinizing employee data to identify trends:
- How do utilization rates, procedure frequencies, and prescription expenses stack up?
- Does your workforce represent multiple age groups?
- What diversity, equity & inclusion (DE&I) needs exist?
Use data to uncover issues within your employee demographics that may contribute to increased costs.
Keep a close eye on data points like rising utilization rates, procedure volumes, and prescription costs to gauge if these trends are likely to persist. For instance, if data shows a surge in diagnostic tests typically associated with cancer diagnosis, it signals potentially costly treatment on the horizon. Identifying such insights enables proactive health plan management.
Identify sharp spikes in data, such as recurring expensive care options when more cost-effective alternatives exist. If, for example, data reveals a growing preference for the emergency room over telemedicine or hospital visits over imaging centers, employers can intervene with communication strategies to remind employees of available options.
Examine workforce demographics and consider how they impact data trends during health plan renewals. A shift in workforce age or planned expansion can influence the risk profile and pricing during negotiations with insurers.
Step 2 – Planning
Tailor your benefits strategy by identifying required, expected, flexible, and additional benefits:
- Assess employee data, survey results, and feedback.
- Balance benefits costs against return on investment (ROI).
- Leverage benchmarking to inform contribution models.
- Align benefits with employees’ lifestyle needs.
- Ensure technology compatibility with existing systems.
Explore ways to broaden your range of benefits while accommodating employee preferences for flexibility. Consider categorizing benefits into four distinct groups to ensure your package covers not only essential and anticipated benefits but also offers a diverse mix of adaptable and additional options that align with modern employee needs and desires.
Conduct a comprehensive cost-benefit analysis to assess the financial implications of each benefit choice relative to the potential return on investment. Although some benefits may entail higher initial costs, they could yield long-term advantages by reducing turnover, enhancing productivity, or boosting employee morale.
Leverage workforce data analysis to gain valuable insights. This includes conducting surveys and gathering feedback from employees to identify their priorities and preferences regarding benefits. Employers should also research industry standards and regional norms to stay competitive. Benchmarking against similar companies in the same sector and location can help pinpoint commonly expected and appreciated benefits. Additionally, assessing participation rates in offered benefits can reveal which options have higher or lower adoption.
Determine the appropriate contribution model or monetary amount to cover, in conjunction with the premium amount for which employees are responsible. For example, if an employer covers 80% of a health plan’s cost, employees would be responsible for the remaining 20%. It’s noteworthy that last year, employers covered 80% of individual health plan costs and 67% of family coverage.
Utilize benchmarking to inform the selection of an appropriate contribution model for the organization. Understanding how similar-sized companies in the same industry and location distribute the cost of health insurance premiums among employees can establish a valuable reference point for developing an effective, long-term strategy.
Base decisions on available resources, taking into account internal factors like HR capacity and available cash flow. This ensures that the chosen benefits plan or funding arrangement aligns with the resources available for sustainable implementation and management over the long term.
Tailored Benefits
Consider customizing benefits to be more inclusive, particularly in response to prevailing workplace trends such as:
An increasingly diverse workforce spanning multiple generations. Recognize that each generation has unique life experiences that shape their preferences for benefits. For instance, older employees may prioritize benefits that help them build assets and generate income for retirement, while younger workers may seek flexible work arrangements to balance personal responsibilities with career advancement.
Greater emphasis on diversity, equity, and inclusion (DE&I) efforts. Voluntary benefits can enhance inclusivity by covering gaps in group health insurance and supplementing traditional offerings at a discounted rate. These benefits, often paid for partially or in full by employees through payroll deductions, can cater to the diverse needs and desires of today’s workforce, including offerings like life insurance, pet insurance, vision and dental coverage. Employee satisfaction with DE&I policies is associated with higher retention rates.
Invest in behavioral incentives, such as providing credits toward reduced premiums or gift cards, to motivate employees to adopt healthier habits. Encouraging behaviors like regular exercise, improved nutrition, smoking cessation, health assessments, and selecting a primary care physician can help employees avoid costly medical conditions. This, in turn, leads to tangible benefits for employers, including reduced absenteeism, increased productivity, and improved morale—all of which positively impact overall healthcare costs.
Harness technology to evaluate your benefits administration platform and other tech tools to ensure they can:
- Handle a wide array of benefits, streamline processes, support diverse choices, and enhance efficiency in managing both employer-sponsored and voluntary benefits, ranging from insurance and financial wellness offerings to work-life balance perks and childcare services.
- Provide mobile access, recognizing the prevalence of remote work arrangements. Mobile accessibility can strengthen engagement with employees who no longer share a physical office space, allowing them to access benefit information, make changes, track activity, and receive answers to inquiries from anywhere.
- Integrate seamlessly with existing systems, maximizing investments in other enterprise systems such as payroll. This includes interfaces with automation tools used by employees to facilitate workflows, coordination with insurance companies and other benefits providers, electronic data transfers for various employee populations, and support for HR functions such as recruitment, compensation, performance tracking, time and attendance management, and compliance with employment regulations.
Consider technologies like Cure8 Mobile Health, a digital-first health management solution that leverages innovative technology to disrupt traditional healthcare service delivery and utilization. Cure8 offers a wide range of features, including access to health plans, virtual primary care appointments, referrals, health rewards, wellness challenges, mobile health applications, and prescription services, all accessible from smartphones or desktops. For further information, contact your BRP advisor.
Step 3 – Implementation
Achieve greater cost containment by exploring various plan options:
- Evaluate employee-driven health plans, such as High Deductible Health Plans (HDHPs).
- Consider the advantages of implementing a self-funded health plan.
- Enhance healthcare cost transparency by adopting a bundled payment approach.
- Provide flexibility in coverage through level-funded plans.
- Enhance cash flow by participating in a captive insurance program.
- Prioritize healthcare literacy and empower employees to make informed decisions.
- Leverage virtual care to reduce expenses and improve accessibility.
- Manage prescription drug costs effectively.
- Promote healthy habits through wellness programs.
- Empower employees to maximize their benefits.
Adopt different strategies that can help contain costs and manage expectations when care is needed.
Explore the benefits of alternative plan models for potential long-term solutions:
- Consumer-driven health plans: These include high-deductible health plans with Health Savings Account (HSA) and Health Reimbursement Arrangement (HRA) options, shifting more accountability for healthcare expenses to employees while offsetting reduced benefits and higher costs.
- Self-funding options: Employers pay employee healthcare claims from their own funds instead of purchasing insurance from a health insurer. This approach offers greater cost control, improved cash flow, access to claims data, and the ability to limit liability with stop-loss coverage.
- Bundled payment pricing: A self-funded health plan where members can visit any provider, with payments based on benchmark pricing. Employers can reduce healthcare expenses by up to 30%, gain transparency into healthcare pricing, and allow employees to choose providers based on cost and quality.
- Level-funded plans: Risk-bearing health plans where employers pay a set monthly amount for claims and administration, with potential refunds if claims are lower than expected. This approach provides cost predictability, coverage flexibility, and reduced financial risk compared to self-funded plans.
- Captives: Self-insurance models that enable employers to control insurance costs, offering lower renewal risks, tailored coverage, and the potential to cover various product lines beyond employee benefits. Captives also enhance cash flow by retaining premiums within the arrangement.
- Emphasize healthcare literacy to help employees understand their healthcare options, make informed decisions, save money, and improve overall well-being. Educate employees about practical cost management techniques, such as when to use emergency rooms vs. urgent care, understanding coinsurance vs. deductibles, and how to compare prices for healthcare services.
- Leverage virtual healthcare, such as telemedicine, to reduce healthcare utilization while providing convenient and timely medical attention for non-emergencies. This approach enhances cost control, reduces absenteeism, and increases access to healthcare data.
- Effectively manage prescription drug costs by unbundling pharmacy benefits, demanding coverage for cost-effective biosimilars, excluding expensive or nonessential medications from drug formularies, and educating employees about generic alternatives and manufacturer discounts.
- Implement wellness programs to encourage healthy habits, reduce chronic illnesses, alleviate stress, lower absenteeism, and increase engagement among employees, ultimately leading to lower healthcare costs and a more productive workforce.
- Empower employees to make the most of their benefits by encouraging open communication among coworkers and HR teams, promoting preventive care services, maximizing the use of Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs), and emphasizing the importance of taking time off to avoid burnout and stress.
Step 4 – Evaluation
Gather feedback from employees to refine your approach:
- Conduct anonymous surveys after open enrollment.
- Analyze relevant quantitative data to track progress.
- Evaluate mental health offerings.
- Maintain transparent communication with your workforce.
To keep your benefits program on track, it’s important to gather feedback from your employees. Here are some suggested guidelines:
- Choose a survey tool that offers a variety of templates, easy export, and analysis tools.
- Time your survey right after open enrollment, when benefits are top of mind and employees are more likely to share their thoughts.
- Give employees a heads-up that the survey is coming, and emphasize its importance and purpose.
- Keep the survey anonymous to encourage honesty.
- Limit the survey to a few short questions to keep employees focused.
Using Relevant Data: It’s also important to examine relevant, quantitative data to track progress and identify areas for improvement. Here are some examples:
- Analyze employee health utilization data to identify patterns and trends in usage rates for different types of health services. This can help you design benefit packages that meet your employees’ specific needs.
- Review absenteeism and turnover rates to see if there is a correlation between benefits usage and these measures.
- Analyze demographic data to see if certain employee groups are underutilizing certain benefits programs.
Evaluating Mental Health Offerings: Mental health is an increasingly important aspect of employee wellbeing. To evaluate your mental health offerings and employee assistance programs, consider the following:
- Free counseling sessions for employees and their families.
- Unlimited phone or virtual access to telehealth services, like mental health screenings.
- Education and training sessions provided both in-person and online.
- Counselors and specialists to treat substance use disorder – with referrals to rehab centers.
- Personal financial coaches.
- Educational workshops or webinars about prevalent mental health issues.
- Virtual access to meditation exercises or mobile apps.
- Medication prescribing and monitoring.
- Suicide risk assessment and treatment support.
- 24/7 crisis counseling.
Partnering with a Benefits Expert: Working with a benefits expert can provide insights, guidance, and actionable steps about how to best structure and deliver health-related benefits to employees. By following a disciplined process of discovery, planning, implementation, and evaluation, you can offer cost-effective healthcare benefits while demonstrating a commitment to your employees’ well-being.
Next in our series
In the next part of our Employee Benefits series, we’ll delve into the important role experienced benefits advisors play in this process. The upcoming article will cover how they can be a strong advocate in helping employers contain the rising cost of providing healthcare benefits to employees. In the meantime, dive deeper into the trends and data about today’s challenging Employee Benefits market in our 2023 Employee Benefits Mid-Year State of the Market.
1 Center for American Progress, “Health Insurance Costs Are Squeezing Workers and Employers,” November 29, 2022
2 MetLife, “The Rise of the Whole Employee: 20 Years of Change in Employer-Employee Dynamics,” 2022
3 Healthjoy, “Incentives: The Key to Healthcare Cost-Containment,” February 26, 2020, Claire Wiseman Imber
4 Global Newswire, “Telehealth Market to Hit Enormous Growth of 24.13% By 2032,” April 24, 2023
5 Managed Health Executive, “The Rise in Formulary Exclusions,” May 2021
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