Have you ever played a game of chess? Chess isn’t your kind of game if you want to play something mindless and quick. It takes some time.
And, to do well, you have to keep planning two or three moves ahead. You have to have a strategy.
It’s the same with group health insurance.
While many insurance agents and Employee Benefits Advisors treat it like a game of chance, to have a successful group health insurance program it takes a well-thought-out, long-term strategy!
If your current group health insurance strategy is pricing out next year’s group health premiums and hoping for pretty good rates, you should expect regular increases in your premium costs. This is the short-term approach.
To reduce your premium costs or even maintain your costs, you must have a long-term strategic approach.
Over the years, I have helped large and small businesses take back control of their group health costs. Many of these businesses had come to expect insurance increases year after year.
It doesn’t have to be that way!
As an employer, you have several factors within your control that directly impact your group health costs. Addressing these factors does not always translate into immediate savings, but long-term they lead to reducing your premium.
“So,” you’re probably asking, “what are these factors?”
- Analyzing risk
- Evaluating and managing claims
- Designing your group health plan
- Incenting wellness among your employees
- Reviewing all compliance regulations
- Leveraging the insurance marketplace
These factors are the pieces on your chessboard. Depending on how you move them, you can have an incredible impact on your group health program. Let’s dive into these factors to devise a long-term strategy that will deliver lasting results to your program.
1. Analyzing Risk
The two parts to analyzing risk involve looking at the amount of risk you are willing to take as the employer and how much risk you want your employees to take.
Risk Tolerance
When you purchase home or auto insurance, you most likely analyze your risk tolerance without even realizing you’re doing it. When your agent asks how high you want to set your deductible, you’re deciding on how much risk you want to take on.
The lower the deductible, the less risk you are owning. The higher the deductible, the more risk you are owning. You have the power to decide how much you are willing to risk having to pay out of your own money.
In many ways, it is the same with group health insurance. As an employer, you can determine how much risk your company is willing to own.
A very basic example of this is deciding between a fully-funded group health program and a self-funded group health plan.
In a fully-funded plan, you are “assigning” all of the risk to the insurance company. They will have to pay out all of your employees’ claims.
In a self-funded plan, you choose to budget for your employees’ medical claims. You are willing to risk having to pay those costs.
Another risk tolerance consideration is potentially using HRAs for your employees. In doing so, you are agreeing to pay for part of their health coverage.
In an HRA, you can reimburse your employees for medical claims associated with their deductible. You can fund all or portions of your employees out-of-pocket costs.
You will know your maximum risk, but will likely only spend 40% of that or less. But you are also risking that you may need to spend 100% of that maximum amount.
Risk Assignment
Just as you have control over how much risk you are willing to take on, you also have decisions about how much risk you will give to your employees. Will you fund 100% of their health insurance deductible, 50% of it, or somewhere in-between?
These decisions involve how much money you require your employees to contribute to their medical costs.
As the employer, you determine the deductible amount your employees will have to pay. You can “assign” more risk to your employees by using HSAs.
As an employer, you can decide to contribute the maximum amount to your employee’s HSAs, or you can assign some of the risk to your employees and require that they also contribute to their HSAs.
A good Employee Benefits Advisor will present you with several options to consider when determining how much risk you want your employees to own and how much you are willing to own as the employer.
2. Evaluating and Managing Claims
In terms of your group health premiums, the cost of your claims as well as effective management of those claims impact your group health costs. To create an effective long-term group health strategy, you need to analyze the costs of your employees’ claims and also ensure that those claims are being efficiently managed.
Cost Analysis
Cost analysis relates directly to your employees’ claims. This only comes into play if you are a large business with 100+ employees or are self-funded.
The real question here is: Are you helping your employees manage their claims costs or do you just know about them?
Because your employees’ claims have a direct impact on your insurance premiums, you need a clear picture of your employees’ claims history. What are they spending their insurance dollars on? What amount of their claims come from pharmacy costs? Where are they receiving their care? Are there ways they could spend their insurance dollars more efficiently?
An important thing to keep in mind as an employer is that out of every dollar spent on health insurance premium, 80% to 90% of that is going to claims.
Essentially, if you can help your employees lessen the amount they spend on claims, you can lessen your health insurance premium.
Claims Management
As important as knowing how your employees are spending their insurance dollars on claims, you also need to keep a close eye on how their claims are being processed.
Here is a list of questions to help you start down the path of effective claims management:
- Are you regularly auditing your claims and reconciling your records with your group health carrier?
- Are you directing your employees to low-cost providers for high-cost procedures?
- Do you monitor high-cost diagnoses like diabetes or autoimmune diseases?
- Do you make sure you have a nurse helping coordinate care for high- cost diagnoses?
- Do you help your employees manage diseases like diabetes or cardiac care?
- Are you looking at your employees’ pharmacy costs?
- Are you making sure you are getting any pharmaceutical rebates?
To reduce your premiums and group health costs, you must take an active role in managing your employees’ claims.
3. Designing Your Group Health Plan
As an employer, you can incent your employees to seek out cost-effective medical care. Often this can be done through the way you design your group health plan.
You can create a plan that:
- Encourages employees to utilize telemedicine
- Discourages using the emergency room
- Utilized copays
- Incent employees to go to freestanding facilities that charge less for MRIs, CT scans, etc.
With the help of your Employee Benefits Advisor, you can design a plan that provides for the needs of your employees while also helping them to be active participants in their care.
You can also limit or incent various options as a way to lower your group health costs.
4. Incenting Wellness Among Your Employees
In terms of how effective creating an environment of wellness in lowering group health costs, there is much debate. To get a clear picture of how a culture of wellness impacts a business’s group health costs, the business would need to collect significant amounts of data over 5 or more years.
Even so, many believe that creating a culture of wellness at work will impact the overall health of your employees and have benefits outside of your group health costs.
An employer can implement simple strategies like filling their vending machine with healthier snacks or offering water instead of soda. Some businesses have been known to contribute money to employee’s HSA if they are willing to wear a pedometer and track their steps.
There are many creative ways employers can encourage their employees to make good health decisions!
And most group health carriers offer wellness programs as part of their insurance package. For instance, the UPMC Health Plan offers a website called My Health Matters to provide helpful suggestions and information to encourage those in their network to make good health choices.
As an employer, you can encourage your employees to take advantage of the wellness opportunities your carrier offers.
Presenteeism
One benefit of creating a culture of wellness is decreasing the amount of work your employees miss. While this does not impact your group health premium, it can impact your bottom line. Missing employees generally results in less productivity.
Encouraging your employees to take their health seriously can only have positive outcomes!
5. Reviewing All Compliance Regulations
Without the aid of an Employee Benefits Advisor, ensuring your company is in compliance with government regulations is challenging! Your Employee Benefits Advisor has the expertise to understand what each regulation requires of your business and what you must do to satisfy it.
Businesses who provide group health for their employees are subject to the following three regulations:
1. ERISA
The Employee Retirement Income Security Act of 1974 (ERISA) is an act the government put into place regarding employee benefits. Many employers think this act applies only to retirement plans. This act applies to any benefit the employer offers to their employees including group health insurance.
To comply with ERISA requirements, the employer needs to provide documents to the IRS, Department of Labor, and their employees. Your Employee Benefits Advisor should help you prepare these documents properly to prevent you from being subject to fines for noncompliance.
2. ACA
The Affordable Care Act (ACA) has several regulations that apply to both large and small businesses concerning their group health plans. These regulations vary according to the number of individuals you employ.
Your Employee Benefits Advisor will help you determine if your business falls under the large group guidelines or small group guidelines. Then, your Employee Benefits Advisor will help you create a plan that satisfies the requirements of the law.
3. Section 125
If you take any health plan contributions out of your employees’ paychecks, your business is subject to Section 125 regulations. To stay in compliance with this regulation, your business will need to create a Plan Document.
Your Employee Benefits Advisor along with a payroll company or accountant can help you prepare this document to make sure that it complies with the law.
If a business is found out of compliance with the above regulations, they are subject to steep fines. These regulations can be complex and challenging for employers to manage on their own. Often, in my work with new clients, we uncover areas that their program has not been in compliance.
6. Leveraging the Insurance Marketplace
When I talk about leveraging the marketplace, I’m talking about the process of quoting your insurance policy.
The reality is that any broker can do this!
But because many brokers start here, they neglect to create a plan that will satisfy your long-term goals and result in a long-term premium reduction.
Quoting your insurance is actually the least important part of creating an effective group health insurance program!
When it is time to quote your insurance, your advisor should be well-equipped to represent your company in the insurance marketplace.
How an insurance company views your business will depend very heavily on how your agent represents you to that company. You must choose an agent who has taken into account all of the other factors we discussed in this article before going to market on your behalf.
I want to take a long-term approach to my company’s group health insurance program. What’s my next step?
If you are ready to get out of the annual rate game and constant increases, you can begin putting together a long-term strategy for your group health.
The best way to make this happen is to find an Employee Benefits Advisor whose philosophy aligns with this desire. Many Employee Benefits Advisors are not prepared to help you design a group health program that takes into consideration the factors we talked about in this article.
To determine if an Employee Benefits Advisor can help you with this process you can ask them these questions:
- What process do you use to plan 3 to 5 years into the future for my health care costs?
What methods do you use to control costs during that 3 to 5 years? - How do we set expectations for our employees for potential changes that could happen in the future?
- Do you have a substantial team to support these efforts?
At Baily Insurance Agency, we like to work with clients who are willing to roll up their sleeves and dig in to their insurance issues. Clients who take an active role in controlling their insurance costs end up with the best results.
Group health insurance is not a sprint; it’s a marathon.
To have an effective program you can’t hurry to a good rate. You must methodically look at and respond to the underlying factors that contribute to your premium costs and expect that it will take time to achieve your group health insurance goals.
If you’re looking for an Employee Benefits Advisor to help you navigate your group health program, Baily Insurance Agency is ready to team up with you.
Our experts have the experience and know-how to help you take back control of your insurance premiums and establish a long-term vision for your group health program! Schedule an appointment with us today!
