Insurance brokerage firm Marsh has identified three steps to make sure businesses can protect their most valuable asset without breaking the bank.
The ongoing coronavirus pandemic has highlighted how critical employee health is for business success. But mounting costs mean organisations must increasingly balance cost control with managing people risks.
The cost of health and benefits plans is increasing rapidly and while the pandemic saw costs dip slightly, research by Marsh shows that, on average, medical costs outpace general inflation by almost three times.
As we emerge from the pandemic, it is anticipated that businesses will face a sharp rise in costs as the cancellation of many elective procedures and a fall in preventive and emergency treatment has led to worsening health conditions in the immediate and long term.
Unsurprisingly, businesses are urgently seeking ways to economise and improve efficiencies in their health-related plans and employers are looking to take quick action to modernise; optimising value to ensure programs remain cost-effective but still encourage and improve overall employee health.
Marsh has identified three steps to make sure businesses can protect their most valuable asset without breaking the bank.
1. Dealing with poor plan design (design for value)
Misdiagnoses, complications, and hospital-borne infections can frequently be a consequence of poor initial care and can add unnecessary cost and degrade the patient experience and outcomes. Employers face paying for medical wastage, disability, and absence, and employees are left worse off, with some experiencing a decrease in quality or even length of life.
A well-designed employee medical plan is crucial in containing costs as it guides employees toward quality, cost-effective providers, ensuring medical spend is focused on quality solutions so no one loses out.
Firms should consider introducing cost-sharing techniques like deductibles and co-payments; ideally tiered in a way that encourages best practice, cost-effective care. Establishing defined contribution approaches allow costs to be shared with employees while broadening choice. Similarly, employers should look at pre-authorisation for specialist visits or pre-approval and paying providers for treatment packages as an alternative to an a la carte approach to ensure they have the incentive to manage complications.
2. Creating a data-driven approach that promotes a healthy workforce (manage health risk)
Circulatory, gastrointestinal, and respiratory conditions are largely related to lifestyle choices, and continue to drive the cost and frequency of claims.
All good risk management plans should contain strategies to eliminate intrinsic threats, and healthcare should be no different. Understanding the risk profile of your employees and their dependents — and managing these through data-driven initiatives – will have a significant long-term impact on costs.
Firms are encouraged to consider embracing health promotion wherever possible, establishing a health culture, that includes education, vaccinations, illness, and injury prevention initiatives. Such a proactive approach should look to provide support for people at risk of illness due to lifestyle, family history, or their working environment. Similarly, additional support for those employees with medical conditions can help to halt or stem the progression of disease. By managing high-cost claimants - optimising care and, where possible, getting them back into productive work – an employer can deliver empathy and economic benefits simultaneously. The first step is to put your current health profile and management measures under the microscope so you determine the gaps and inefficiencies in your existing program.
3. Eliminating inefficiencies through smart financing and placement (drive efficiencies)
Firms should look to eliminate redundant or duplicate benefits by consolidating and harmonising existing plans. At the same time, managing wastage is a critical component of cost containment, as plans can involve significant frictional costs such as administration, profit, and risk charges. A loyalty-based approach that provides price concessions in return for longer contract terms or obtaining competitive pricing through volume discount should be considered.
Other solutions include more technical alternative risk transfer approaches, such as centralised underwriting, and use of captives that your insurance broker can advise on. Similarly, the use of adjudication and case-management protocols can minimise fraud, ensure expenses are medically necessary, and any claims paid are reasonable. The introduction of simplified and automated administration service level agreements and audits, can also often identify sources of fraud and provide opportunities for refunds.
Julio Gracia-Villalon said, “The COVID-19 pandemic is pushing cost management up the corporate agenda, but achieving this means challenging the status quo of simply questioning prices at renewal, which will only control costs in the short term.
“Employers that are serious about managing expenditures need a long-term multifaceted approach that targets the three core levers for cost containment: Designing for value, managing health risks, and driving efficiencies. Only then can you create cost-effective benefits plans that truly benefit employees.”