Strategies for Managing Unpredictable Health Care Benefits Costs
July 23, 2024 •HoganTaylor
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If your organization has struggled to accurately forecast and manage the costs of its health care benefits, you’re not alone. A recent report by global HR consultancy Mercer, titled The CFO Perspective on Health, surveyed CFOs and other finance/accounting employees with health budget oversight at 80 employers between February and March of this year.
Among respondents with 500 or more employees, 72% said their health care benefits costs were less predictable than other expenses. Additionally, 67% reported that health care benefits costs are a “significant” or “very significant” concern compared to other operating expenses.
Two Critical Factors
Leadership at many organizations is well aware of the challenge of containing health care costs. But how do you tackle this issue? The answer largely depends on the characteristics of your organization. Generally, managing health care benefits costs can be made easier by focusing on two critical factors: your workforce and the health care benefits marketplace.
Understanding Your Workforce
Your optimal plan design should be driven by the size, demographics, and needs of your workforce. Rather than relying solely on vendor-provided materials, take an active role in communicating with employees about their health care and wellness-related benefits. Determine which offerings are truly valued and which ones aren’t.
Consider the feasibility of a wellness program to promote healthier diet and lifestyle choices. Invest in employee education so plan participants can make more cost-effective health care decisions. Many employers have turned to high-deductible health plans coupled with Health Savings Accounts to shift some of the cost burden to employees.
As you review your plan design, remember that good data matters. Employers can apply analytics to almost everything these days, including health care coverage. Measure the financial impacts of gaps between benefits offered and those employees actually use. Then, adjust your plan design to close these costly gaps.
Navigating the Health Care Benefits Marketplace
Understanding the health care benefits marketplace can be challenging due to the wide variety of providers, plans, and programs. Many companies engage a consultant to provide an independent return-on-investment analysis of their existing benefits package and suggest cost-effective adjustments. Although this entails some expense, an external expert’s perspective can help you save money in the long run.
A consultant can also audit medical claims payments and pharmacy benefits management services. Mistakes happen, and fraud is always a possibility. By reevaluating claims and pharmacy services, you can identify whether you’re losing money to inaccuracies or wrongdoing.
Regarding pharmacy benefits, remember that “everything is negotiable.” When your pharmacy coverage contract comes up for renewal, have an honest discussion with your vendor rep about whether you can get a better deal. If not, it may be time to meet with one or more of the provider’s competitors.
The More You Know
Many employers are concerned about the unpredictability and rising costs of health care benefits. Gathering data about your workforce and gaining a strong grasp of the current state of the marketplace are good starting points. For help identifying, quantifying, and analyzing your organization’s costs in this area, contact us.
HoganTaylor Talent Services
If you have any questions about this content, or if you would like more information please contact Jeff Wilkie, Principal of the HoganTaylor Talent practice. More information is also available on the HoganTaylor Talent page of this website.
INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.
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