In survey after survey, employees rank the medical care program as the most important benefit. For most employers, the cost to sponsor medical care programs represents 40% or more of the total benefit package. Given the importance of the benefit to employees and the significant cost to employers, it is critical that high quality health care choices be offered within acceptable budgets. Rising costs threaten this strategic balance. These dramatic cost increases are reminiscent of the late 1980’s and early 1990’s.
To address the need to provide high quality healthcare choices in a fast rising cost environment, employers should:
- Raise consciousness of senior management to the issues
- Managed care efficiencies have run their course
- Technology and new medicines costly
- Prescription drug costs up 40%
- Competitively bid your program to leverage/optimize existing provider relationships
- Informally request rates and network match
- Formally with an RFP, disruption analysis, presentations and site visits
- Negotiate risk sharing and funding arrangements, performance agreements, and multiple year guarantees
- Analyze and redesign plan benefits
- Increase co-pays for PCP visits, specialist visits, hospital stays, ER visits
- Introduce 3 tier drug card and mail order prescription drug program
- Increase employee contributions
- Common contribution rates tend to be 25% single and 35% family
Over the next few years, the Health Care Financing Administration and other industry experts have predicted cumulative increases of 40-60%. It is incumbent upon employers to be proactive to navigate these increases as effectively as possible. To do so:
- Align with vendors who have invested in technology — enabling the availability of manageable utilization information, and keeping administrative costs as low as possible
- Strategically determine budget constraints and cost sharing with employees
- Evaluate entire benefit package and consider a defined contribution approach
- Evaluate employee communications to ensure appreciation of costs and benefits
- Create annual Employee Benefit Statement
- Implement a Section 125 plan if not already in place
- Annually re-assess and re-confirm arrangements and strategy.