Health care costs and ways to mitigate increases?

Health care costs consist of many different variables, demographics, utilization, claims, plan design, turnover, etc…..the first question you need to answer is how big is your group, if you are under 200 employees, for the most part you are going to be in a pooled product which will limit or mitigate many of the variables I mentioned with the exception of plan design. Plan design will always have some impact on your rates. Claims will still play some factor even in a pooled product s the underwriter will still be able to review claims over $25,000. If you have had a bad year, even in a pooled product you can expect an “outlier” renewal which would most likely be in the 20%+ range

Assuming you are more in an experience rated product, the previously mentioned variables will have a significant impact on your renewals. Most companies can’t change their hiring practices and only hire 21 year olds; therefore the demographics are a variable that cannot be impacted. However, claims, utilization and plan design can be. Like many parts or business the 80/20 rule applies, 20% of your people drive 80%+ of your claims. Health and wellness programs are a potential solution, but they don’t always ROI. With these plans there is an outlay to now only have the plans/programs in place but to incentive employees to participate. These plans can get complicated and may not always be the best solution. Often times carriers offer “free” health and wellness programs that should be explored and offered.
Which brings us to plan designs, plan designs can be a big driver of utilization. Too often we see employees and dependants inappropriately use a plan because the way most plans are constructed. Statistically a large number of emergency room, lab and x-ray, and many specialist visits are either unnecessary or unwarranted.
Employees and employers paradigms need to be looked at and questioned. Plans such as Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA) and plan design for HMO and PPO plans in general need to be considered and reviewed. The more the employees and their dependants can be made aware of the costs involved or in some cases share in the costs (HSA/HRA) the better consumers they will become.

Ultimately a healthy group will get a favorable renewal, but no one can look at employees and know who is healthy. What you need to be able to do is impact behavior if/when an employee or a dependant needs care. If you can mitigate employees going to the ER when they should be seeing their primary care or unnecessarily getting an x-ray or lab work, you are now bending down your utilization line which will always have a favorable impact on increases. This behavior modification can be affected by what plans you offer and how the plans are designed.

Self-insurance has proven effective for many companies, but you have to a)be large enough that you can self-fund, and b)recognize that self-funding does not change the fundamental cost drivers of health insurance: the cost of providing health care.

First point first: you have to be "big enough" to provide this coverage. Small companies could be sunk by one employee if that employee has horrific health expenses. I would do a pretty thorough analysis of what the range of expenses "could/might" be before I jump into this. I have recently heard, when broching this question with my own company broker, that there may be some insurers providing or at least contemplating providing ceiling type coverage for self-insurers. This is sort of the equivalent of a high deductible plan, but for the company. The way I understand it would work is that the company can self-insure up to a point, then this extra coverage kicks in. Thus, if you have that one really expensive employee, you cover them up to your ceiling and then the third party takes over. This coverage costs relatively little b/c they expect few employees to go that far into health costs (same economics as high deductible plans for the user). You may want to ask your broker about it.

On the second point, remember that you are still footing the underlying cost of health insurance, the cost of getting health care. Your core savings by self-insuring come from cutting out a middle-man, and covering your own demographic of employees and their families. Getting the middle-man out is great. Clearly you will recapture their fees, although you will have to provide self-service for your employees, so it's not a free ride by any stretch! But the cost of health care remains and unless you are a Wal Mart sized company you will have a tough time negotiating down the core fees charged by providers.

Although this is not a popular approach, you may want to create groups of employees and seperte them into different health benefit groups.

For instance you may want to seperate your management team (presumably a smaller group size but older employees) from the rest of the employee population (presumably a larger pool of employees that are younger and healthier). This may yeild a senior group with higher overall premiums and a junior group with lower overall premiums.

If the junior group's premium reduction yeild enough savings, you could then equalize the portion of the premium paid by both groups within the company, by having the company pick up additional cost of the senior group and offsetting it with the savings generated by the junior group.

For accounting purposes you would establish a GL account called "Premium Equalization" to monitor and post the overs and under to.

This is admittedly a creative solution to regulating healthcare costs and may not be a workable solution in all companies.

The key is to help people determine when or if they need to go to the doctor. The use of a nurse line can help in this regard. Most healthcare insurance providers can provide this service for a minimal fee.

High deductible plans also help employees see the true cost of healthcare. Coupled with health savings account, your employees will reduce the number of times they go to the doctor for minor issues.

That being said, with 40 million new people receiving health insurance, and the number of providers falling, prices will go up. It is a simple result of supply and demand. Ultimately, we will all have government run insurance.