If your organization needs to find significant savings or cost mitigation opportunities within your employee benefits program, and more specifically your health plan costs, reducing benefit coverage and/or increasing employee cost-share may be necessary.
High deductibles, high co-pays, limited networks, reference-based pricing models, and excluded services can result in what is known as “barriers to access.” The intangible costs of those barriers include covered members avoiding care because they cannot find a suitable doctor. Or, they see a doctor, but then avoid the doctor’s treatment plan and tests as they are not covered or come with prohibitive out-of-pocket costs.
Limited network or reference-based pricing plans
These plans are designed to help mitigate costs by limiting the number of in-network providers or, in the case of reference-based pricing, changing the claim pricing equation resulting in lower dollar claims. While it may sound like a win-win, there may be friction with employees whose current doctors are not in these new networks. They may have to find new Primary Care Providers (PCPs) and specialists.
Reducing plan coverage
Whether through design changes or increased payroll deductions, raising plan cost-sharing (e.g., deductibles, coinsurance, copays, out-of-pocket limits) is a measurable way to reduce costs, and an obvious choice for cost mitigation. On the other hand, reducing benefits or shifting cost increases to employees may make them feel undervalued and could lead to disengagement and lower morale. Though these changes can have an immediate impact on your organization’s bottom line, for many employees the financial burden may be too great and lead to the wrong type of utilization decreases. As an example, if an employee can no longer afford their medication due to increased prescription drug copays, they may not comply with their course of treatment potentially leading to a worsening health condition and ultimately leading to an increase in plan costs in the future.
These barriers can lead to more costly medical care as unresolved health issues worsen. Delayed care often results in higher claims down the line. Consider these two potential outcomes:
- Example 1: A stage 1 cancer diagnosis becomes stage 4 due to delayed cancer screenings. This results in a significant increase in the cost of treatment. There is also higher absenteeism associated with a later stage cancer diagnosis.
- Example 2: An employee is out for a week with an infection when a visit to the doctor could have led to a low-cost prescription and feeling better after a day.
There are many ways to create new benefits strategies that reduce or avoid costs while minimizing the impact on your employees beyond those mentioned above. These decisions make the collaboration between the CHRO and the CFO all the more important to identify the right benefits mix managing affordability and broad coverage to employees. However, when deeper savings seem necessary, it is very important to carefully consider the trade-offs before making decisions.
Learn effective tactics that can help your organization with this delicate balance. Download our white paper on Effective Employee Benefits Cost Mitigation Strategies or contact us at benefits@risk-strategies.com.
With more than 10,000 clients managed in our National Employee Benefits Practice, Risk Strategies delivers the high-quality, cost-effective, and compliant benefits programs and solutions employers need and employees value. Visit risk-strategies.com for the latest observations in employee benefits.
