10 Tips For Reducing Health Insurance Business Expenses

10 reasons why your business health insurance plan will increase (and how to fix it)

Thursday, September 17, 2020
Blog

Let’s cover the top ten reasons why your business’s health insurance costs are one renewal away from skyrocketing, and how you can prevent it from happening.

Many businesses struggle with the rising cost of health insurance premiums. Over the past decade, health insurance costs have nearly doubled for many businesses, while the quality of employer-sponsored health care programs has continued to decrease. Not only does this help to push health insurance to be a top three budget line item for companies, but many health benefit programs only faintly resemble the program they once were.

Most of those who pay for health insurance (including their broker partners) place the blame on insurers, greedy hospitals, or pharmaceutical companies – and sometimes even a handful of high cost claimants.  These may certainly contribute to rising costs, but the true answer to why this is the case is more complicated.

We’ll cover ten of the main causes of rising employer sponsored health insurance premiums to help you gain additional perspective in how to avoid catastrophe, and even improve results by changing the way you buy health insurance.

10. Reliance on traditional health insurance purchase models.

The story typically starts the same. A business realizes that their health care costs are rising at an unsustainable rate, so they seek to control costs the only way they know how: finding a new health insurance agent or broker.

While this may make sense, especially since your broker is the chief strategist for your health plan, many businesses lose focus by issuing a Request for Proposal, or RFP.

The business is well-intentioned in its efforts, but there are typically several issues that arise in this process.  The primary issue is that the questions health insurance brokers are asked to respond to largely center around the services they will provide, as opposed to the solutions.  

On average, we see that the bulk of the traditional RFP asks for information like:

  • Detail the compliance services that you will provide our organization.
  • Describe how you will support us with benefits administration technology.
  • Explain the process by which you evaluate and implement wellness solutions.
  • Outline the support team, including legal, actuarial, underwriting, and service.
  • And more.

Instead, here are other questions you should be asking your health insurance advisor:

  • Detail several examples of how you personally (not your firm) supported clients to systematically reduce their actual health care expenditures.
  • Describe what you believe to be the largest threats to our health plan, and how you plan to address them.
  • Explain the process by which you evaluate our organization for more progressive health care solutions, and also please outline several that you would recommend we explore.
  • Outline the year-round process of how you plan to partner with our organization to achieve these goals.

In addition to asking better questions, here are several other tips for working more effectively with your health insurance broker:

  • Start with clearly defined objectives and goals. Many businesses enter an RFP process expecting to see something radically new or different, however they’re asking the same people the same questions they did ten years ago.
  • Stop making your RFP a one-way-transfer of information from the broker to you. Instead, share important information for a more productive dialogue.

Keep in mind that this is just the start. The similar iteration of the same process should be evaluated once you get to the point of actually examining your health plan. The fact of the matter is that some of the most failed strategies are simply disguised as “trends.”

  • Have you jumped back and forth between the same three to four insurers over the last decade only to see the same results?
  • Did you implement a wellness program years ago, and continue to see the same results?
  • Has the promise of “narrow networks” also failed you?
  • Are you spending more on pharmacy today than you were five years ago, despite your insurer now owning your PBM, and implementing various solutions to curb costs?
  • What about your consumer driven health plans – are you still seeing increases for these options?

And the list goes on.

If you’re buying your health benefits the same way you were a decade ago, you should be prepared for the same results.

Benefits Broker RFP Process

9. “Consumer Driven” Health Plans.

Consumer Driven Health Plans, or CDHP’s (aka High Deductible Health plans or HDHP’s) are generally considered plans that have a deductible of $1,000 or more. The initial goal of these options was to create higher cost liabilities for consumers, in order to encourage them to understand their treatment options, costs, and more.

Roughly half of Americans are now covered under what would be considered a CDHP, however the same challenges that existed at their onset still exist today – namely in the area of rising costs.

The goal is that participants will take a similar approach with health care purchases as they would with other items, however this is where the theory behind CDHP’s starts to erode. Most businesses that have pushed a CDHP, or moved exclusively to CDHP’s, have failed to provide members with the tools needed to:

  • Quickly and easily compare costs among various providers for the same service.
  • Understand treatment options and alternatives.
  • Gain insight into the quality of the physicians or facilities they’re considering for their services.

A key and very important to note is that for as much as deductibles have risen they still have not kept pace with the rise in total costs. How can a higher deductible, coinsurance, or out of pocket maximum help to control costs if the actual costs are rising much faster?

It starts to become extremely obvious that moving to a CDHP is more like squeezing one end of a balloon. The same amount of air is still there, it just gets pushed to the other side.

The side effect, or unintended consequence, is that employees are less likely to seek health care as a result of fear over costs. 

Bankrate reported that prior to COVID-19, one in four Americans reported skipping or delaying care due to this fear, however these numbers jumped considerably to one in three during the Coronavirus Pandemic.

Even better, nearly four in ten Americans would borrow money to cover a $1,000 emergency expense – whether that’s a car repair bill, or a health care bill.  

These reasons combined should illustrate to an employer the potential crash course they’re on with Consumer Driven Health Plans.

Consumer business health plans rising costs diagram

 

 

 

 

How to reduce employer-sponsored health care plan costs diagram

8. Pinning your hopes on wellness programs.

First of all, “hope” isn’t a strategy.

Ever since the first employer decided to correlate the health of their population to the cost of their health insurance program, wellness programs began to spread in popularity among employers.  The sad conclusion for many is that they simply don’t work as intended in these cases.

In fact, the Journal of the American Medical Association (JAMA) released an 18-month study to address the potential impact that wellness programs have on health outcomes, spending, and even employment.  Their conclusion was that “there were no significant effects on clinical measures of health, health care spending and utilization, or employment outcomes after 18 months.”  

This is following a similar 12-month study conducted in 2018, which yielded similar results, that “we do not find significant causal effects of treatment on total medical expenditures, health behaviors, employee productivity, or self-reported health status in the first year.”

The point is that by the time most businesses realize health care costs are an issue, wellness is too little too late.  Added evidence would actually indicate that between the cost of managing the program, the incentives provided to promote engagement, and the subsequent perils of the health system, wellness may actually help to increase costs.  

If you’d like to know more, we’d recommend following Al Lewis, who is an outspoken skeptic on this topic.  If you’re a skeptic of these results, you should challenge Al Lewis, as he’s willing to pay a $3M reward in the event that anyone is successful in doing so.

7. Focusing on metrics vs results.

Modern businesses rely on real-time data to drive real-time decisions. Most health plans and insurance brokers provide data that largely lacks the ability to use it toward anything positive.

A favorite among many businesses is benchmarking data. Benchmarks can be a useful tool for determining a reference point, but have nothing to do with driving results in your business health plan.

  • Benchmarks are non-empirical data (often self-reported) to help show how other businesses are designing their plans, and fairing as far as their costs. Very few, if any, have the same sample of respondents each year, thus some items may occur to be a “trend” but in reality could be a different sample. Similarly, since they’re a combination of averages, we consider them “average advice.”

Nearly all claims reports are rearward facing. This allows you to learn from these issues, and perhaps prevent the same mistake happening twice, but often the lag doesn’t allow for real-time influence.

  • Insurers will often utilize their own benchmarks to show how a client compares against their book of business.  For example, they may show how the client compares for age, gender ratios, spending in key areas, and more. Many of these are simply a distraction. Does it matter that your group is 15% older if you consistently drive less claims than their average group?

The same is true for annual reports on health care cost projections. Each year, many companies release their projections for health care costs over the next 12 months, such as PwC’s annual report, which projects a range from 4% to 10% for 2021.

  • The problem with these reports is they’re only a projection, and seldom tracked to show where they actually landed.

Would you rather know what people think you may pay, or how you compared to what others actually paid? Unfortunately, this is often overlooked in most studies.

The fact of the matter is that very few businesses benchmark other areas of their business in the way they benchmark their benefits program – however they do typically focus on results. You should apply this same logic to your business health care plan.

To tag onto the conversation of “metrics,” businesses should focus on turning their data into actionable data if they want to reduce their health insurance expenses and premiums in the future.

For example, is it more valuable to know what you spent on your diabetic population last year, or is it more valuable to understand how your diabetic population is performing when it comes to managing their condition?

6. Too little actionable data.

Forward-looking solutions can help provide this sort of data so that employers can begin to take action. By understanding where your organization is facing gaps in care, nonadherence, and more, you can start to take control.

With the implementation of Artificial Intelligence, employers are able to understand not only where the problem areas exist, but also what they may cost so they can better respond, or budget for these costs.

Average annual worker and employer contributions to health insurance premiums 1999-2019 graph

5. Lack of health literacy.

Most businesses commit 60 minutes per year to help their employees to become a more health literate workforce. This is often referred to as “Open Enrollment,” where they’re asked to pick a health plan based on the benefits it provides.

Instead, employers should take more of a year-round approach in order to help employees understand not just what they may pay when they utilize their plan, but how they can pay less.

By helping employees understand the following principles, an employer stands a greater chance of curbing their health costs:

  • The cost of health care services varies from facility to facility, and doctor to doctor.
  • The cost of prescriptions varies from pharmacy to pharmacy.
  • Not all hospitals have the same outcomes.
  • Having services performed outside of a hospital can result in paying a fraction of the cost.
  • Pill skipping or non-adherence has consequences.
  • It’s often easier (and less costly) to prevent disease than it is to cure it.

And more.

The sad truth is that while health care expenses are a fact of life, Americans do not gain life skills in this area during any aspect of a formal education. However, employers who sponsor a health program for employees should have a vested interest in helping.

4. Settling for your health insurance broker’s work.

If you think back to #10 on our list regarding the RFP process, part of how a business chooses its health insurance consultant or broker is based on the volume of work they perform.

The reason why this earns a place on our list is due to several simple truths:

  • No one knows your population the same way that you do.
  • No one is as invested in your long-term success as you are.
  • No one should trust an outside party more than they should trust their employer.

Too often, the extent to which an employer is willing to go in order to achieve results for their health plan is as far as their broker is willing to take them.

Instead employers should focus on additional high-touch efforts to drive outcomes through an aggregation of marginal gains. Employers should be the cheerleader for these efforts, however this doesn’t mean they can’t request advice, input, or resources from their health insurance agent.

If you’re looking for inspiration on this topic, you can download our guide on Employee Engagement in Health Care at this link.

3. Reactionary approach to health care.

If you were to go on an extended camping trip, how would you prepare?

When it comes to health plan design, many businesses are embarking on a 12 month camping trip, while only packing a month’s worth supplies. This can often leave an employer short-handed – often when they need it the most.

Often throughout the year a shock claim can arise that an employer (and their health plan) isn’t equipped to handle.

For example: one month into the plan year an employee starts to take a $50,000 per month medication. Assuming $600,000 per year in pharmacy expenses can be a black swan event for many health plans, what could you have done to prepare?

Today, many solutions exist to curb the cost of high dollar prescription medications – sometimes even sourcing this same medication for $0. By having a solution in place, but also the process to support it, many businesses can avoid such challenges before they happen.

Part of the problem is that not only the health plan, but also the solutions within it, have become commoditized.

If we can accept that not all automobiles, homes, or businesses are created equally, then we should also be able to accept that this same rule applies to nearly every aspect of your health plan.

2. Short-term thinking for health insurance plans.

Most businesses sign a 12 month contract for their health plan, and pour an immense amount of thought into these decisions by reviewing for the plan for three to six months before signing on the dotted line.

Instead of thinking one year ahead, employers should begin to take a multi-year approach to ensure the health care plan is aligned with the goals of their business.

Here’s what you should consider when taking a multi-year approach to your employer-sponsored health care plan:

  • Where is your business headed over the next three to five years?
  • What challenges may this create for your health insurance program?
  • How is your health care supply chain keeping pace with your business?
  • Are there issues that you would like to address, or goals you would like to achieve with your health plan?
  • Define them with KPI’s.
  • What would you like your health benefits program to look like in five years? How will you get there?

Businesses tend to have a solid plan around revenue, so why not apply the same logic to expenses? Not doing so can very well correlate to treading water.

1. Preservation of the status quo.

The business of health care is a business. Nearly every party involved has a vested interest in keeping things the same, and this applies to some health insurance agents.

Nearly every item mentioned on this list is a contributing factor to preserving the status quo. Until a business is willing to challenge themselves, and the industry, it will remain this way.

A reason why businesses are afraid to do so is due to the perceived fear of disruption. Instead, a business should look at the actions they’ve taken, and the results they have seen, in order to decide if the path they’ve been on hasn’t been disruptive.

The Verdict

If you’re a business owner, consider these ten tips as a resource to help you and your business find the path toward better results. By changing the way you buy health insurance and work with your health insurance consultant, you can prevent your employer-sponsored health care plan from increasing massively in price year after year.

If you need assistance finding the right health insurance broker, get in touch with us at Distilled Concepts. We offer expert health care advisory services that can help you transform your approach to your current health insurance or benefits program, and get the results you’re looking for.

Contact us today at ask@distilled-concepts.com.

See also:

American's lack of health literacy

 

 

 

 

 

 

 

 

 

Tips for reducing health insurance business expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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