As business leaders begin budgeting and strategizing for 2024, many are faced with balancing two items when it comes to benefits: ensuring low costs and prioritizing employees’ requests to offer better health benefits. With benefits slated as the second largest people expense for businesses, next to payroll, and health care costs across the nation estimated to escalate as much as 7%, it is crucial to find cost-saving solutions as we enter the new year.
There is no magic formula for lowering rising health care costs, as each business operation is unique. However there are various strategies employers can implement to reduce their health spend without diminishing the quality of coverage and care in 2024.
One sector of balancing spend that is often underutilized and not always recognized is the power of steerage and incentives. Steerage, widely known in the health care spaces as navigation, is a simple way to achieve significant cost savings for not only your business but your employees and their families too.
Employers can save money by spending on planned incentives with specific providers, such as reduced or waived out-of-pocket costs for steering your employees to their out-patient facility or hospital. To successfully obtain these incentives, you must do the research or work with your broker to find the most competitive, high-quality providers within an area or specialty. Guiding members to out-patient rather than in-patient facilities for MRIs or everyday X-rays can be night and day when it comes to cost savings and often a better care experience for patients. Advisors and employers who do the legwork to find steerage and incentive opportunities often see success in cost reduction.
Similar to steerage, many employers have been exploring direct-to-employer (DTE) health plans in recent years. This self-funded health plan model consolidates employee health care within an integrated health system for better coordination and greater influence over cost and quality of care. Employers can partner with health care providers to develop a strategy that fits the needs of their organization and employees. When an employer and health care system have an aligned strategy, all boats rise in the form of reduced health care costs and increased member satisfaction.
According to the Mercer National Survey of Employer-Sponsored Health Plans, 2023 pharmacy benefit costs jumped 8.4%. With significant cost increases, it’s no wonder that 91% of large employers are concerned about pharmacy cost trends. Today pharmacy spend accounts for over 40% of the employer health care spend and that number will continue to rise without a focus on controlling drug spend. With prescription drug costs driving overall health benefit costs and potentially higher increases ahead, employers must take a more active role in controlling their pharmacy spend heading into 2024.
As an employer, one way to take control of your pharmacy spend is to have dialogue with your broker about transparency specific to your drug spend. As many pharmacy benefit managers, third party administrators and brokers earn commission and margin on pharmacy spend, ask them the tough questions, like how they make money, how transparent they are with sharing acquisition costs and if they are open to negotiating.
Navigating the nuances of the health care industry, and specifically pharmaceutical benefits, can be tough without guidance. Having a solid and transparent relationship with your benefits broker can unlock cost-saving opportunities through prioritizing generic drugs, increasing rebates or a combination of these tactics.
Overutilization when it comes to the consumer use of health care is a falsehood. Consumers are not opting to go to their doctors more often than what is required, in fact, nearly four of 10 Americans said they had to put off care in 2022 because of cost. Demand for care is managed through building healthier habits and lifestyle changes. Employers can play a large role in regards to supporting employees to become their healthiest self, and there are a few ways to ensure your employees are set up for success — the first being communication and education.
With New Year’s resolutions motivating consumers in January, Q1 is a great time to implement a communication plan surrounding overall health and your health care benefits. Oftentimes, companies take a one-and-done approach to health care benefits, only offering a brief education session during open enrollment. For long-term success, incorporate health and wellness education consistently year-over-year to help employees and their families control their health and, in turn, their health care costs. Business owners and HR professionals should communicate with their benefits broker or health plan administrator for education ideation and strategies.
Another way to focus on demand stems from removing barriers for preventative care. Approximately 133 million Americans – nearly half of the population – suffer from at least one chronic illness, many of which are classified by the industry as preventable. However, it can be tough to convince consumers the benefits of going to the doctor when they seem perfectly healthy. Even though preventative care is far less expensive and offers long-term benefits compared to failing to diagnose an underlying condition, there are barriers to consider, including cost, inaccessibility and lack of awareness.
By investing in a health plan and education strategy that is patient-centric and offers high-quality care and improved access, employers can lower their health spend, reduce employee health care costs and improve the health and wellness of their workplace.
Balancing costs and benefits is not a simple task, especially in an industry as ever changing as health care. As we head into the new year, it’s important to remember that good health equals good business. The more a business prioritizes the health and wellbeing of their workforce, whether it be through deepening education, enhancing transparency or developing a new health plan altogether, the easier it is to control cost savings.
Article Published By: BenefitsPro.com
Article Written By: Oliver Ayres