Goodroot president of cost solutions Steve Palma wrote an article for Human Resource Director magazine about how employers can fight rising health benefit costs.
As 2023 health insurance cost increases come into focus, it’s not a pretty picture. For fully insured companies that purchase health coverage for their employees, the cost per employee is set to increase 6.5 percent — more than double the rate of increase last year. The increase to ACA plans is even higher, reaching double digits.
As employers and employees struggle under these increases, the solution they turn to tends to be high-deductible health plans, which offer lower premiums, but can come with a family deductible well over $10,000. While HDHPs share the up-front cost between employers and employees, if there is a need for significant care, many people are not financially prepared to pay the deductible.
While HDHPs were intended to lower premiums by empowering consumers to make better healthcare choices, these plans have proven to be an unsustainable solution that contributes to medical debt. Rather than jumping on the ineffective HDHP bandwagon, there are other steps employers can take to control costs that actually work.
Amid such dramatic price increases, self-insurance is now often the most cost-effective option for most companies – even those with as few as 25 employees.
Since self-funding is inherently more flexible, taking this step opens the door to more cost-containment options and provides greater transparency into the actual medical costs of the organization. Rather than simply absorbing increases, the group can identify high-cost claims and implement solutions.
Many groups hesitate to switch to self-funding because of employee concerns around changing their doctors, but companies making this transition can usually create a benefit design that includes the providers their employees already use. They can also avoid taking on a great deal of claim risk through stop-loss or reinsurance coverage that minimizes financial exposure.
Pharmacy benefit creativity
The cost of a healthcare benefit to an employer is typically 70 percent on the medical side and 30 percent on the pharmacy side. Surprisingly, some of the greatest savings can be found in the pharmacy benefit. For example, pharmacy benefit coalitions allow groups of any size to gain better leverage in the drug-pricing marketplace which results in savings.
While they clearly offer a stronger negotiating position, some employers are wary of coalitions because they presume the PBM (pharmacy benefit manager) contract will be more inflexible than a deal they might strike on their own. This is not the case. Newer models exist offering both choice and buying power without restricting carve outs and add-ons.
Working with a coalition can also get you access to pharmacy experts who can assist your organization through a PBM RFP process, which can be quite complex. There are multiple layers to sift through and the way specific terms are defined can vary for each PBM. A good coalition has experts who can get through this to compare apples to apples.
Read the full article at HRD America.