According to the International Foundation of Employee Benefit Plans, employers are projecting a 7% increase in healthcare costs for 2024. These rising prices can be attributed to the utilization of services for chronic health conditions, catastrophic claims, costly prescription drugs and the increase in medical provider costs.
Employers are faced with the challenge of administering viable solutions to control high increases in healthcare costs without reducing benefits for their employees.
In this blog, we will cover some solutions that you can use to control costs without compromising employee benefits or employee satisfaction.
How can employers control healthcare costs?
Offering competitive benefits is essential for attracting and retaining top talent, making it crucial for you to find cost-effective ways to provide quality health plan coverage and benefits.
With healthcare costs consistently outpacing inflation, traditional approaches may no longer be sustainable.
Below are several solutions to consider when looking at ways to control your healthcare expenses.
Self-Funding
Unlike traditional fully-insured plans, self-funding allows employers to assume the financial risk for their employees' healthcare expenses. This allows employers to reduce insurance premiums by eliminating costs associated with policy overhead and profit. Self-funding solutions allow employers to customize benefit plans, promote cost-effective care and negotiate with providers for better rates.
Self-funding allows employers to monitor and manage healthcare utilization, allowing you to identify cost-saving opportunities and implement targeted interventions to reduce unnecessary spending.
Health Savings Accounts and Flexible Spending Accounts
Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are powerful tools for controlling healthcare costs by providing employees with tax-advantaged funds to cover medical expenses. Contributions to HSAs and FSAs are made with pre-tax dollars, reducing employees' taxable income and offering immediate savings. HSAs, in particular, offer the added benefit of allowing unused funds to roll over from year to year, fostering long-term savings and financial security.
By encouraging employees to budget for medical expenses, HSAs and FSAs can help promote cost-consciousness and awareness of healthcare spending. Additionally, these accounts can be paired with high-deductible health plans (HDHPs) that typically have lower premiums. When paired together, this option helps both employers and employees more efficiently manage healthcare costs.
Employers can contribute to employees' HSAs or FSAs to enhance the value of these benefits and boost employee loyalty and satisfaction.
Negotiating Prescription Drug Costs
Through Pharmacy Benefit Managers (PBMs), employers can negotiate drug prices to control overall healthcare costs. PBMs leverage their purchasing power and expertise to negotiate discounts, rebates and favorable pricing arrangements with drug manufacturers, pharmacies and wholesalers.
By securing lower prices for medications, PBMs enable employers to achieve immediate cost-savings on their pharmacy benefit plans. These reduced drug costs translate to lower out-of-pocket expenses for employees and decreased premiums for employer-sponsored health plans, directly impacting the company's bottom line.
PBMs also implement cost-saving measures such as formulary management, generic substitution and medication therapy management to promote the use of cost-effective medications and reduce unnecessary spending. Additionally, PBMs provide valuable data analytics and reporting tools that enable employers to identify cost-saving opportunities and optimize their pharmacy benefit plans for maximum efficiency.
Offering Voluntary Benefits
Voluntary benefits enable employers to enhance their overall benefits package without significantly increasing fixed healthcare expenses, as employees typically incur the cost of voluntary coverage through payroll deductions.
Offering voluntary benefits can help attract and retain top talent and contribute to a healthier and more productive workforce. Additionally, voluntary benefits often provide preventive care and wellness programs, which can help mitigate the need for more costly medical interventions in the long run.
Furthermore, voluntary benefits can include options like telemedicine and virtual care, which offer convenient and cost-effective alternatives to traditional healthcare services.
Wellness Programs
Offering wellness programs is a smart way to control healthcare costs because they focus on keeping employees healthy and preventing illnesses. These programs often include activities like fitness challenges, nutrition workshops and stress management sessions that promote healthier lifestyles. By encouraging healthier lifestyles, these programs can prevent costly chronic conditions and reduce the need for expensive medical treatments.
Additionally, companies that invest in wellness programs may also benefit from lower insurance premiums as insurers often offer discounts for implementing these initiatives.
Control healthcare costs without cutting your benefits.
By putting creative strategies in place, you can play a proactive role in reducing potentially wasteful healthcare spending and improving the overall value of your company’s employee benefits packages.
A benefits expert, like Ascela, can help you identify areas where your company is overspending and put strategies in place to reduce wasteful spending.
Contact our team today for a comprehensive benefits assessment to identify ways to reduce inefficient costs and maximize your benefits package.