How to revise your company's health care strategy in an age of uncertainty
Interviewed by Leslie Stevens-Huffman
HR professionals haven't seen a need to revise their company's health care strategy. After all, they've been busy with staff reductions and taking steps to offset rising health care costs, while waiting for a government committee to clarify the murky details of health care reform.
But it's time to stop procrastinating and get back to the drawing board, because employer health care costs are projected to rise by 7 percent in 2012 and insurance carriers are reporting an increase in employee claims for illnesses related to post-recession stress.
"It's easy to avoid change in times of uncertainty, but at some point it only puts you further behind," says Bruce Davis, principal and national practice leader for Health & Group Benefits at Findley Davies. "Employers should continue introducing purposeful changes to their health care plan within the context of a clearly conceived strategy."
Smart Business spoke with Davis about the latest health care trends and how employers are using the information to make plan changes and update their current strategy.
Is cost shifting the new reality?
Surveys show that companies will continue shifting costs onto employees, who are already stressed because they're working longer hours and haven't received a substantial raise since the start of the recession. So this is the perfect time to revisit your basic contribution philosophy. For example, it might make sense to shift costs for dependents and part-time workers instead of reducing the health care subsidy for full-time employees. If you communicate a new pricing structure and reinforce the eligibility requirements before open enrollment begins, employees may voluntarily lower costs by removing ineligible dependents or transitioning to a less expensive plan. If your plan costs are still too high, conducting a dependent audit or changing the spousal requirements, because you may be able to avoid additional cost shifting.
Is wellness really the solution to rising costs?
Employees receiving short-term disability benefits may be responsible for more than 50 percent of an employer's health claims. Furthermore, new studies indicate obese workers have greater incidence of workers compensation claims and a longer/more expensive duration of treatment.
Also, working long hours while caring for an aging relative creates so much stress that employees often use the Federal Medical Leave Act to take time off and are less productive when they finally return to work. Savvy employers are starting to understand the connection between work-related absences, family issues, depression and disability claims, so they're taking a holistic approach to wellness by bundling health incentives with workplace safety programs. They're also offering stressreducing benefits like EAP and elder care resources in an attempt to control the entire spectrum of health-related costs.
Will employers continue migrating toward high deductible health plans and HSAs?
High deductible plans and HSAs are not a magic bullet for rising health care costs. In fact, data shows that education and marketdriven plan changes may yield similar results. One company with a zero deductible plan substantially lowered its costs by educating employees and helping them become smarter health care consumers. Generic drugs already accounted for 40 percent to 50 percent of this company's filled prescriptions, but teaching employees to request less costly alternatives from physicians and pharmacists increased generics to 70 percent. Employees have a vested interest in maintaining their coverage, so don't under-estimate their desire or ability to help the company save money.
How are employers handling healthcare reform?
While some employers have been reluctant to change their current plans and forgo grandfathered status, because they would have to comply with additional requirements, other HR professionals have been concerned about the excise tax on 'Cadillac plans,' so they have been tweaking their plans to stay below that tax threshold. They're initiating changes to control costs, like adjusting co-pays on prescription drugs, changing contribution levels and encouraging employees to proactively manage their health by offering incentives to complete a risk assessment.
How should employers approach this year's open enrollment period?
Many are using this year's open enrollment period to educate employees, scrub ineligible members from the program and introduce outcome-based incentives. Several of our clients are using inducements to increase participation in programs that help employees manage chronic conditions, as the majority of health care claims emanate from illnesses like diabetes and hypertension. The use of onsite medical clinics is also increasing, especially for employee assessments and health care screenings. These clinics have been successful because fewer families have a regular physician and employees are more inclined to proactively manage their health when they have convenient access to a doctor.
What else can employers do to manage health care costs in this era of uncertainty?
Employers are leveraging their purchasing power to lower costs by joining prescription drug collaboratives and purchasing groups. They're also excluding certain pharmacies to improve overall ingredient cost discounts and eliminating coverage for expensive brands that have generic or over-the-counter alternatives. In addition, employers are re-considering the use of more narrow networks of hospitals and physicians to optimize discounts while preserving quality and access. Also, the competitive market for life and disability coverage has let companies request bids and apply the savings to health care. Overall, it's not a time for rash decisions, but there's never been a better time to institute small changes and revisit your health care strategy.