According to the 2019 October Department of Labor inflation report, healthcare costs rose 4.3 percent year-over-year, surging to the highest levels in three years. The increasing cost of hospital services and rising drug costs are to blame for this surge, making healthcare costs the fastest growing sector in the economy.
If a 4.3 percent increase doesn’t sound like a lot, consider this…growing the $3.6 trillion the US healthcare spend by 4.3 percent adds an additional $155 billion to the cost of care. For perspective, with a $155 billion, we could double the budget of the US Department of Education, fund almost four months of interest on the national debt, or a personal favorite…let Americans keep that money in their wages, HSAs, investments, or retirement savings for something else.
According to the Kaiser Family Foundation, the average 2019 family healthcare premium reached $20,576 for the first time, with workers contributing $6,015 towards that premium and employers picking up the rest. Next year, premium costs could increase by another 5 percent (based on the projected CPI) to $21,604 as healthcare costs continue to outpace wage growth and inflation. These out of control healthcare costs are eating our paychecks and robbing both employers and employees of their financial security.
Fortunately, intrepid employers and their employees don’t have to accept the status quo. Instead, they can push back on rising costs and stop overpaying for healthcare. Here are seven cost-saving healthcare solutions worth considering:
7 Cost-Saving Solutions to Reduce Employer Healthcare Costs
Analyze prior year claims information to unlock potential savings opportunities and develop cost reduction programs for employees. Your broker should be doing this anyway, and if not, ask why? Where are employees going for care? Which providers are the most expensive? Which procedures are driving your claims costs? How much of your claims spending is shoppable?
- Analyze prior year claims information to unlock potential savings opportunities and develop cost reduction programs for employees. Your broker should be doing this anyway, and if not, ask why? Where are employees going for care? Which providers are the most expensive? Which procedures are driving your claims costs? How much of your claims spending is shoppable?
- Get multiple quotes for health insurance and consult with a new broker. Speaking with multiple brokers allows you to get competitive quotes and incentive your current broker to ensure you’re getting the best plan for your money.
- Offer an HSA-qualified health plan. These plans provide lower premiums for employers and employees while encouraging employees to maximize their HSA benefit by reducing healthcare spending. HSAs are triple-tax-advantaged for employees and help them not only pay for care today but invest unspent funds for future medical expenses.
- Include a price transparency benefit for all of your HDHP-enrolled employees. Price transparency tools empower employees to make more informed care decisions by utilizing high-quality, lower-cost providers to reduce healthcare expenses. Shopping for care lowers medical claims (potentially reducing premium costs) and increases HSA balances for the future. This is a win-win for both employers and employees.
- Reward employees who shop for care by depositing a portion of the claims savings generated into a “rewards-enabled” HRA. You may also want to reward employees for meeting other program goals (e.g., wellness, shopping, screenings, etc.). Rewards from actual savings going into a tax-advantaged healthcare-oriented account is a better investment than cash incentives that can lead to overutilization and have the opposite effect of lowering claims cost.
- Switch to a health plan design that rewards consumerism. Some of these plans will create significant plan savings and consumer engagement while maintaining the same or lower out-of-pocket exposure for employees.
- Involve employees in the fight to lower healthcare costs by letting them know about what they can do to control costs. Educate your employees on what to ask their physicians when care is needed. Like, is the test/procedure really necessary? Are there lower-cost alternatives? What will it cost? Let your employees know that they, too, have control over rising healthcare costs. Healthcare is never “free,” and it’s not the insurance company that’s paying the bills…it’s the both of you.
If this is the first time you’ve heard of some of these ideas, then it might be time to fire your broker. Balancing affordable healthcare with affordable premiums for employers and employees is certainly achievable. But capturing those savings requires new thinking when the current methods don’t seem to be working.