To many of us, the fall means a change in seasons that brings football, children heading back to school, cooler weather, and pumpkin-flavored everything. However, for many employers, the fall is the time of the year that group medical insurance renewals are reluctantly received with the expectation of another premium increase. Internal discussions begin, and questions such as “How bad are we getting hit this year?” and “How can we contain costs?” arise. Health insurance is viewed by many groups as an inevitable requirement to attract and retain employees, and, let’s face it, managing cost with what a multigenerational workforce expects is not an easy task. The purpose of this article is to provide a few considerations to spark internal conversation and get back in control of your insurance program.
If you are considering making any changes to your program, the first step is crucial and often overlooked: Find out what is most important to your employees. The best way to get this information, try asking them! Just be prepared that there can be expectations that certain benefits will be offered if they are brought up in a survey. Benchmarking data can be provided to show how you stack up versus your competition, but keep in mind what might be important to a competitor might not be what is important to your most valued asset. Millennials are now the largest generation in the workforce, and what is important to them is very different from what Gen X and Baby Boomers value. For example, time off and flexibility of work hours might be more important than what you have in mind for your staff. Before leadership can put in place a long-term strategy, identifying what is most important to your workforce should be reviewed. Are your employees motivated by cost or the desire for a comprehensive plan? Identify what is important to your employees to make sure that any changes made will be the ones with the greatest impact.
If changes to your benefits program are being considered, this does not always mean additional costs. For example, wellness programs can often be introduced for free or at a minimal cost. In fact, many studies report a return on investment of up to three to one if administered properly. Employers are embracing employee wellness now more than ever for many reasons, including cost savings through reduction in claims, fewer sick days, and increased worker productivity. A reduction in longevity and severity in workers compensation claims can even be tied to successful wellness programs. Regardless if your claims are connected to your medical renewal, discussing wellness goals should be on your list. Offering these types of programs can have a direct correlation between the well-being of your employees and the bottom line. Wellness programs can be administered internally, through an insurance carrier, or through a stand-alone wellness vendor. External support will probably be needed to properly identify the goals, timeline, and metrics. The variety of programs available is endless and can be customized to your workforce as long as you keep in mind communication and setting incremental goals are important. Walk before you run, and having internal champions in all departments is crucial. Top-down support is also important to the success of the program. Have any of your employees asked you about a standing desk yet? If not, get ready.
Regardless of your company size, employee demographic, risk tolerance, or financials, there are cost-containment solutions available. Self-insurance is coming down market as a way to contain cost by removing some of the additional fees and revenue that is built into a fully insured plan. This may be a viable solution for some, but do your research prior to determine what the true risks and rewards are for this type of arrangement. In a self-funded arrangement, you are the insurance carrier paying out claims, which can be unpredictable, especially if you are a smaller employer. Specialty medications are now outpacing medical trend and are expected to continue with the amount of new medications entering the market. Stop-loss is available to protect against an individual or group claim above a set threshold, but even when stop-loss is in place, a poor performing group can set itself up for worse returns compared to remaining fully insured. New trends growing in the self-funded arena include adding a domestic network, on-site physician, medical tourism, telemedicine, introduction of a new Rx tier, group purchasing PBM, and stop-loss solutions that provide deeper discounts, financially incentivizing consumerism, reference-based pricing, among many others. If you are considering self-funding, make sure you have done your due diligence prior to making the transition. If you are currently self-funded, make sure you are taking advantage of all of the new opportunities. There can be more flexibility and risk, but with this risk there can also be greater reward. You have to understand your risk tolerance to know if you have the characteristics for self-funding.
Health insurance captives are becoming a popular consideration for employers that are too small to self-fund on their own but want to take on additional risk to try to control costs for the long term. This is done by pooling together with other companies. Stop-loss is still in place, and the general idea is if you have a bad year in claims, the other members in the captive lessen the impact. However, these should be approached with caution, as there are multiple captive managers available, some being more profitable than others. These arrangements can vary significantly. For example, one captive might be formed for a specific industry and require certain criteria, such as a wellness program or pricing transparency, whereas another could be much more loose with what is required to participate. Others have not performed as well, due to poor management and guidance. This type of arrangement should be approached with caution, but can still be viewed as a potential solution. There are other group purchasing programs that are fully insured that, if available, should be considered as a cost containment strategy. In any situation, certain criteria will need to be met in order to be eligible.
Alternative risk sharing arrangements may be one of the more overlooked or underutilized solutions to control costs for groups that do not have the size or risk tolerance to self-insure, but feel that they are overpaying at the 100% fully insured rate. Carriers typically offer a solution that is fully insured with a lower premium on the front end or a reimbursement on the back end, based on the group’s performance during the plan year. These types of arrangements can provide minimal additional risk while allowing additional savings that would otherwise not been realized. This can also be viewed as the first step to potential self-funding down the road and a way to test the waters without fully committing.
Reviewing the current plan design and contribution structure may be viewed as a “been there, done that” option, but should not be overlooked. In the spring issue of Confero, defined contribution was discussed in regards to executive compensation. Employers are now starting to mimic this with contribution structure for employees’ insurance. In this approach, employees can be classed out, which disconnects the employer from the renewal percentage, and allows employees to decide what plan is best for their needs, similar to the cafeteria model seen decades ago. Employers are now looking to offer benefits beyond the traditional offerings, and employees are expecting and embracing policies such as EAP’s and identity theft, legal, and pet insurance, among many others listed in this publication. Offering plans that support your medical insurance, such as a hospitalization program, are also being welcomed as ways to contain cost while still protecting your employee in case of high-cost claims.
With the amount of options available, partnering with external support is crucial to ensure you are maximizing your potential. Find someone who is an expert in the industry and utilize him/her for everything s/he is worth. Your company should be focused on whatever service you provide, not on the ins and outs of insurance. Brokers and insurance carriers may appear to be all the same, but in reality provide very different service models, resources, and expertise. From my experience, the best advisors should constantly be bringing new solutions for your consideration and providing a long-term strategic approach. Try getting away from the standard transactional annual renewal meeting. When was the last time you interviewed alternative brokers? There may be an opportunity you are missing out on.
Before making any changes this renewal season, try to keep a few things in mind: What do our employees want? What are our company goals? What is the long-term strategy to put our company on the best path for success? There are almost always ways to contain costs, simplify administrative responsibilities, and improve the overall employee experience. Identifying a clear strategy and how to accomplish it is a good place to start. Make this renewal season a positive, strategic, and outcome-based approach that you can look forward to and celebrate. Enjoy the fall season, whether it’s with a regular cup of joe or a pumpkin-spiced latte.