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| Creating Your Cost Management Strategy |
“What you’ve been granted is the fairest and most usable of trump cards. While you don’t control external events, you retain the ability to decide how you respond to those events. You control what every external event means to you personally.” - the Daily Stoic
Let's face it. Managing a health plan can be difficult. And while a lot has changed in the industry over the past few years, the broker-consulting community is not always very strategic as to how we educate employers about the ever-changing landscape. With commercial insurance, risk management is pretty logical. Traditional management techniques for handling risks include risk retention (absorb it), risk transfer (transfer it through contract or insurance), risk control (create safety and mitigation practices), and risk avoidance (eliminate that risk from your business). Within those methodologies, a business can make some decisions about how to manage the exposures facing their business.
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But with health insurance, risks feel largely out of our control. Many employers have worked hard to build wellness cultures and create engaged employees only to have their plans turned upside down by an unfair and untimely diagnosis to someone who does not deserve such a fate. During your most difficult renewals, you can find yourselves rejected by the marketplace as an unattractive risk, forcing you to accept the difficult renewal. When it comes to health risks, we don't know what it may be, when it may strike, how long it may last, or how severe and expensive it may become. In some ways, it's an impossible game.
In addition to the randomness of chance, we also have some trends working against us. Those include:
- Care anytime, anywhere: A tight labor market combined with increasingly on-demand consumer pressures are forcing employers to make it convenient for employees and their families to get care. While the long term goal is to decrease spending, more access points raise costs and utilization.
- Mega-mergers. At the insurance company level as well as the health-system level, we continue to see consolidation as entities work to gain market share and power. We are now seeing demonstrative evidence that this merger environment inflates costs across the board.
Now while all of that leans negative, the good news is that there are more solutions than ever to help your business not only overcome these trends but to really create some pretty amazing outcomes at both the individual and business levels. Instead of educating clients about these solutions and helping them create a plan about how and when to consider them within their business, brokers tend to latch on to the hot item of the day and push it as the next great thing.
In doing so, we do a disservice to you and your employees. At the end of the day, we have four major ways to manage costs within your health insurance program. Each of these has numerous sub-parts, but fundamentally every employer should understand these just as they should understand risk retention, transfer, control, and avoidance.
Below, I've listed the four strategies and shared a brief thought on each.
- Reduce the Cost of Services - Making sure you are paying the best price possible for all services is critical to building an optimized benefits plan. There are a few primary ways to do this, and you need to be mindful to apply this strategy to both medical and pharmacy claims.
- Reduce Utilization - This covers a continuum from health and well-being to assuring all services are appropriate and necessary. It also includes making sure you are your employees have a good relationship with a primary care provider. This might be the hardest to control, but ultimately the most effective.
- Shift Cost to Members - No one likes this one, and with the current low employment environment, you must understand the latest benchmark information to ensure your programs remain competitive in the marketplace. At the same time, you need to provide your employees with ways they can manage costs through personalized benefits, or by looking at some of the creative solutions available to help members finance needed care in new and original ways.
- Drive to Quality - Care navigation and health advocacy platforms will soon be integrated into everything we do. The data is becoming increasingly available, and given how expensive it has become to manage high-cost conditions it's vital we identify the right treatment at the right time with the highest quality providers.
At the end of the day, we may be able to control everything, but that doesn't mean we have no control at all. At no point should we give up when we still have a fighter's chance. If you'd like to visit about how to incorporate these strategies into your program, drop me a note at [email protected].
You can also read more at https://inspiredemployees.blogspot.com.
Thank you for taking the time to read these thoughts
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The Author: Jim Sampson
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Advising employers on how to create effective benefits programs that keep employees healthy, invested, and engaged.
We advise businesses and individuals on how to reach their goals. When you partner with us, you’re at the center of a vast network of risk, insurance, employee benefits, retirement and wealth management specialists that bring clarity to a changing world with tailored solutions and unrelenting advocacy. So you’re ready for tomorrow. Specific to employee benefits, we advise our clients how and why to pursue the triple aim of Cost, Quality, and Employee Experience. When done right, our clients manage organizational costs, improve the individual health and medical experience for their people, and create a benefits program that attracts and retains good people.
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