Nine Strategic Ways to Reduce Employee Benefit Cost

NineStrategicWays - OKHR Blog

Today’s guest post is brought to you by a proud 2016 OKHR State Conference sponsor, Hub International!

In today’s rapidly changing workplace, building a cost-effective benefits plan is essential. To meet this objective, companies need to determine an overall cost-savings goal.

Once you have determined your overall cost-savings goal, there are a number of ways to redefine your employee benefits plan structure to better manage costs. Here are nine cost containment strategies that companies can implement.

 

 

The Top Nine

Strategy Potential Savings
High Deductible 2% through lower annual premium increases – it allows employers to reduce costs while motivating employees to carefully consider how and when to access health care services
Self-funding 8-9% in annual premium increases – growing increasingly popular even with smaller organizations
Telehealth 5-to-1 return on investment – it enables the delivery of care at a lower cost than the traditional health care model and reduces unnecessary emergency room visits and urgent care services
Reference-based Pricing Up to 20% of total medical claims – it promotes comparison shopping by establishing caps for selected services that have a wide-range of prices from providers
Voluntary Benefits Reduction of the annual 8-9% premium increases down to 0% – they supplement fixed plan options and can include hospital-stay expense coverage, dental, vision, disability and life insurance
Pharmacy Benefits Management 20% for an expense that typically comprises 20% of overall health care costs – to curb the steep rise in pharma costs in recent years, a pharmacy contract management company can renegotiate new terms, including better contract provisions, discounts and rebates
Narrow Networks 6-17% annually versus a total network of providers – under narrow network plans, 99% of health care costs are covered when in-network providers are utilized; these providers have track records for the highest quality of care and have proven over time to deliver it at a lower cost
Defined Medical Contribution 5-10% savings on annual premium increases – it allows organizations to directly manage costs and encourage employee plan selection and ownership; it can be coupled with an employer exchange shopping technology solution or steering employees toward a public exchange environment
Metallic Spectrum Product Plan Avoid the $3,000 per eligible employee penalty the IRS will levy on non-compliant affordable plan options; multi-plan benefits options or a metallic spectrum of plans – silver, gold, platinum – is a way of serving a wide range of employee needs, budgets and concerns, and reducing the potential of over-insuring the healthiest employees

The Big Three  

Along with the nine benefit cost reduction strategies, when realigning a benefits plan, a company should also review the three Cs of cost management.

Cost Management Review Item Question to Ask
Consumerism Do you want your employees to be smarter health care consumers and make better decisions that bring down the total cost of the benefits?
Choice Do you want to offer more options to attract and retain employees without increasing your total benefits costs?
Control Do you want to reduce financial risk and create long-term, sustainable cost savings?

As organizations look at their balance sheets this year, one area that will undoubtedly undergo intense scrutiny is employee benefit costs. It is a notoriously difficult item to manage due to the increasing cost and utilization of health care, not to mention ACA compliance burdens. HR and finance managers need to take a longer view and commit to developing a multi-year strategy instead of relying on short-term tactics to contain costs.

A multi-year plan incorporates plan design, administration, funding, contribution, and health management strategies to deliver savings of up to 30 percent.

Better Benefits Management

While each strategy holds the promise of lowering the cost of your benefits plan, the key is finding the ones that best suit your organization’s culture and employee needs. For a more in-depth look at employee benefits cost management, download this eBook.

 

Be sure to check out HUB International at the 2016 OKHR State Conference!

 

Shelby Toney
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Shelby Toney

HR Consultant at Nextep
Shelby Toney, MBA, PHR, SHRM-CP, is the 2017-2018 Social Media Director for OKHR and the 2017-2018 Treasurer for the Sooner HR Society. Shelby is also an HR Consultant at Nextep, providing HR guidance to small business owners on employment best practices, employee relations, discipline and termination, employee handbooks, job descriptions, FMLA, unemployment, and more. Shelby is a graduate of the University of Central Oklahoma with a degree in Human Resource Management and holds an MBA from Southern Nazarene University.
Shelby Toney
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About Shelby Toney

Shelby Toney, MBA, PHR, SHRM-CP, is the 2017-2018 Social Media Director for OKHR and the 2017-2018 Treasurer for the Sooner HR Society. Shelby is also an HR Consultant at Nextep, providing HR guidance to small business owners on employment best practices, employee relations, discipline and termination, employee handbooks, job descriptions, FMLA, unemployment, and more. Shelby is a graduate of the University of Central Oklahoma with a degree in Human Resource Management and holds an MBA from Southern Nazarene University.

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