Healthcare coverage, along with wages and other benefits, remains an important tool for attracting and retaining talent. But this has become more of a challenge in recent years as the costs of health insurance continue to rise. According to the Kaiser Family Foundation (KFF), the average premium for employer-sponsored health insurance increased at a rate of 54% over the previous 10 years. That’s reaching $20,576 for a family of four or $7,188 for an individual.
In addition, the situation has been worsened by the COVID-19 pandemic. America’s Health Insurance Plans estimates the pandemic could cost the U.S. healthcare system between $56 billion and $556 billion over the next two years. Such costs could lead to further upward pressure on the costs of insurance premiums.
As a result, containing costs while providing your employees with the coverage they need has become more difficult than ever. So, it’s important to find ways to strike a balance between these two conflicting goals. Here are seven strategies that can help you do this.
1| Pay a fixed amount to an employee’s total premium
This strategy allows you to control healthcare costs as you make the same contribution to your employee’s premium regardless of the type of health plan they choose. You can either decide to pay a flat-dollar amount or a fixed percentage. The advantage of paying a defined amount towards a premium is that it protects you from upward trends in medical costs. It is also easy to administer and allows you to forecast future health costs.
2| Offer narrow network health plans
Under narrow network health insurance plans, employees can only receive care and services from providers within the plan’s network. Participants receive little or no coverage for services they use from out-of-network providers. This option allows you to control costs as expensive out-of-network claims are minimized or even eliminated. This means narrow network plans can charge lower premiums and employees can have access to affordable healthcare.
There are two main types of narrow network plans: Health Maintenance Organization (HMO) plans and Preferred Provider Organization (PPOs) plans. Participants of HMOs are restricted to using providers within the network, except for emergency care while PPOs provide some cover for out-of-network claims. For a full discussion on the differences between HMOs and PPOs see How to Choose Between Health Plans – HMO Versus PPO.
3| Promote wellness programs
Wellness programs are initiatives that encourage employees to make positive lifestyle choices to improve their overall health. Examples include stress reduction programs, nutrition programs, exercise programs and activities, and health screenings. The emphasis here is on prevention. This way, you reduce the need for expensive medical care in the future. More importantly, wellness programs can also boost employee morale, loyalty and productivity, and reduce absenteeism.
4| Offer virtual care
Thanks to the development of digital and wireless technologies, virtual care services, such as telemedicine has seen tremendous growth. Offering telemedicine as part of your benefits package can lead to substantial cost-savings as it allows your employees to quickly and conveniently access healthcare professionals. Access is typically 24/7 and may help avoid costly trips to urgent care facilities and emergency rooms.
5| Empower employees to make informed health plan choices
You can do this by providing them with access to online platforms and tools that disect various plan options and identify the ones that best suit their circumstances. Offering these tools allows your employees greater flexibility to only buy the coverage they need. This reduces costs as it enables you to avoid a costly ‘one-size-fits-all’ approach where you offer broader health benefits for all employees. Adopting a personalized approach to health benefits has become more important than ever before as millennials and Gen Zers make up more of the workforce. These generations have predominantly lived in a digital age so expect flexibility, convenience, and personalization.
6| Offer high-deductible health plans
High-deductible health plans (HDHPs) typical charge lower premiums and shift more cost to the employee. This option is particularly suitable for younger and healthier employees. You can also combine HDHPs with the Health Savings Accounts (HSAs) and make a defined contribution to individual employee HSA accounts. This in turn allows you to ensure that your employees have enough HSA funds to pay for any qualified medical expenses, at a lower cost than traditional coverage.
This strategy is known as value-based purchasing. It involves holding doctors, hospitals and other healthcare providers accountable for the cost and quality of care. You can achieve this by researching the prices and patient outcomes of various providers. Then, you can negotiate prices and set employee contributions based on the quality of care delivered by those providers. By linking payments and contributions to performance, providers will become incentivized to improve the quality of care and drive costs down. You can also encourage high performance among providers and health plans through cash bonuses, higher fee reimbursements, or directing more enrollees to them.
7| Base healthcare payments on provider performance
Which strategy or combination of strategies you choose will depend on your organization’s situation. But, whichever one you select will help you mitigate the spiraling costs of medical care while attracting and retaining the best talent.