Retirement plan sponsors are the first, and most important, line of defense in providing employees with well-managed retirement savings plans.
Employer health costs have increased each year since the dawn of the millennium. This happens for many reasons including inflation or a global pandemic. With all the economic headwinds this year, employers can bank on prices going up again in 2023.
According to projections from Aon, “Average costs for U.S. employers that pay for their employees' healthcare will increase 6.5% to more than $13,800 per employee in 2023.”
This means employers must think both strategically and creatively about how they can reduce their health benefits expenses, today, to prepare for next year.
In this blog post, we’ll cover five strategies businesses can use to help reduce spending without compromising the quality of their benefits.
1. Control Drug Spending
As an employer responsible for providing health benefits to your workforce, the rising cost of specialty drugs should be among your top concerns when it comes to controlling the cost of benefits. Total medical spending for a business consists of medical costs and pharmacy costs. The pharmacy cost portion previously represented about 18-22% of that total cost for employers. Today, that number is closer to 35-45%.
What accounts for this average 20% increase in pharmacy costs? A good portion is due to the sharp increase in the price of specialty drugs—a trend that is only expected to grow.
According to the Commonwealth Fund, “One of the country’s largest pharmacy benefits managers projects the price of specialty drug will increase between 21-24% annually over the next three years.”
Action Items for Business Owners to Help Control Drug Spending
The first thing to do is to start paying closer attention to how big of an impact the price of specialty drugs has on your total medical spending. Next, you may want to consider re-evaluating your plan model specifically around this category of prescription drugs.
Like all aspects of your health plan, it's important to have a thorough understanding of your employee base and their health needs so you can tailor your plan and wellness program to support their health needs and your bottom line.
2. Embrace Healthcare Consumerism
Healthcare consumerism is a large-scale effort that aims to make the process of accessing healthcare services more efficient and transparent. Healthcare consumerism is intended to make using healthcare services more affordable by encouraging employer-sponsored benefits plan participants to become conscious consumers. This will ultimately improve patient outcomes and levels of satisfaction with the medical care they receive, and reduce costs within the entire healthcare industry.
According to DataPath, healthcare consumerism is designed to:
- Facilitate closer communication and collaboration between healthcare providers and patients.
- Improve patient participation and adherence to treatment recommendations.
- Increase patients’ knowledge, understanding, and awareness of healthy lifestyle practices.
- Heighten focus on preventative medicine by encouraging healthy activities and habits.
Action Items for Employers Who Want to Encourage Healthcare Consumerism
As an employer, if you want to help reduce benefits costs for your business by encouraging your workforce to participate in healthcare consumerism, you’ll need to set your employees up for success by providing the information and resources they need to make well-informed decisions.
3. Promote Insurance Literacy Among Your Employees
One of the primary reasons employees are not using their benefits to maximum effect is that using insurance is just plain complicated.
A troubling four out of five consumers find it difficult to compare the cost and quality of healthcare services during their decision-making process. Though not unexpected, these numbers are cause for concern, given that 75% of consumers feel their healthcare decisions are among the most important—and expensive—decisions they’ll make in their lives.
Encouraging healthcare and benefits plan literacy among your employees will help them become more thoughtful and informed participants in their healthcare journeys. It will also empower your workforce to reap the maximum value from their health benefits. In order to get employees more involved in their healthcare choices, employers will want to provide outreach and education, help with the enrollment process, and inform them about any changes that might affect their plan or the care they receive.
Action Items for Employers to Promote Insurance and Benefits Literacy
Consider developing a straightforward, step-by-step guide to help workers use their health benefits effectively. You’ll want to make sure the language is easy to understand. Include a glossary of common industry terms and a simple explanation of benefits for each plan option. Be sure to include the plan carrier’s and/or broker’s contact information so your employees know where to turn if they have questions about their benefits.
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