Healthier Employees = Lower Costs. Could it Really be That Simple?
Every year, employers stress over the cost of health insurance for employees, but there are some tricks to controlling costs. You have to know what’s driving costs up in the first place – and then figure out how to reign them in.
Maybe your company hasn’t shopped around enough for insurance. In this highly competitive market, cost can be reduced by leveraging carriers against one another. However, the results are often short-lived and are outweighed by bounce-back increases, also known as the whiplash effect. Statistically, one in every five years will be a bad claims year, in which claims spike, leading to a larger increase in costs for the next renewal.
But what if you just focus on having healthier employees? Healthier people lead to lower claims, which lead to a lower loss ratio. That all leads to lower cost for renewals for the company.
Could it be that simple? With a little motivation by the employer, yes!
How to make your population healthier
Employers can urge employees to live a healthier lifestyle through incentive programs involving compensation and benefits. This could include smaller payroll deductions for health insurance, gift cards or a contribution to the employee’s HSA if employees complete wellness goals such as an annual physical, exercising or quitting smoking.
Employees not only feel better physically, but they can feel good about saving money on health insurance and facing an individual or team challenge. The company, in turn, has fewer insurance claims in the future.
For example, if an employee controls high blood pressure earlier because the issue was found during an annual physical, a future heart attack may be avoided. Heart attacks can turn into a six or seven digit claim that a company would absorb through higher premium payments, which could be avoided through medical maintenance. This is a way of controlling costs without relying on market conditions.
No company should go down this path alone and unprepared. Tap into your resources.
Health insurance carriers want a healthy bottom line, so it helps to have lower claims. While a fully insured company may absorb claims through future premium increases, the carriers need to front the bill, which can be expensive.
Most carriers have an arsenal of resources available to those under their coverage. In some cases, carrier mobile apps are built with artificial intelligence to give tips to users based on their health history, medical and prescription claims data. Additionally, in leu of premium reductions, many carriers offer wellness dollars for their clients to pay for wellness initiatives, such as a Fitbit, wellness vendors and wellness technology). All you need to do is ask.
It pays to know people
Brokers are the intermediary between the company and the carriers; an advocate for their clients. In addition to being able to obtain credits for wellness, many brokers have access to resources through broker/vendor relationships. Oswald has a longstanding relationship with PeopleOne Health, our primary wellness consultant group. At minimal cost, our teams will come onsite and perform wellness consultations, host wellness fairs, introduce wellness challenges and offer technology to track the status of employees’ wellness initiatives.
Weighing your options
Employers also must consider how insurance is funded. Should the company be fully insured or self-insured? The answer depends on how much risk you’re willing to assume up front and how much you want to gamble.
Fully insured is when the company pays the carrier higher premiums up front and, in return, the carrier offers access to their network, takes on full responsibility of the payment for claims, administration of claims and retention costs. Cost increases or decreases mainly come in the form of annual renewals, based on loss ratio.
Self-insuring is a little more complicated. This is when the company assumes responsibility of claims up to a specific dollar amount per person. It pays a third-party administrator to handle the claims, provides a maximum annual spend limit and pays a carrier for access to their network. The company is betting on itself by paying lower premiums but taking on the burden of claims payment. Typically, groups under 100 employees enrolled will not self-insure because the pool of employees is too small to justify taking on the risk of claims. A handful of high claimants can have too detrimental of an impact to the risk pool. As the group grows, self-insurance can become a more viable option.
In recent years, middle ground solutions have come to light. For instance, buying a higher-deductible, fully insured plan has the company cover a portion of the employee’s deductible through a Health Reimbursement Arrangement (HRA). This strategy offers the company another way to bet on itself somewhat by taking on part of the deductible liability, while still maintaining a fully insured plan and capping their risk. The higher deductible offers a lower premium option as well. So, if the company takes on more risk, upfront costs can go down. Of course, strategies to keep your employees healthy will certainly be a bonus. Level-funding or hybrid-funding is another way to share more of the risk with the carrier to try and reduce cost.
All these choices can be overwhelming to a company – but it doesn’t have to be. With our expertise in health insurance and employee benefits, Oswald works with our clients to help them make informed decisions. We make the process easier by backing it up with data, analysis, and market information. We serve over 2,000 clients nationally and are among the largest privately held, employee-owned and independent brokerages in the country.
For more information, please visit our Employee Benefits page or contact me directly:
Business Development Leader
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