Health insurance is a fantastic benefit to offer your employees, but it can take a toll on business expenses. And with the average cost of employee health insurance in 2020 reaching more than $13,000 annually per employee, it makes it hard for a company to grow.
Providing proper healthcare for employees can be challenging, but it’s the best way to improve employee retention, ensure everyone is taken care of and create a positive company culture.
The great news is, there are ways to cut down costs while still providing adequate coverage. From expert negotiation to favoring individual plans and browsing Small Business Health options, here are the key ways to lower healthcare costs for a business.
Offer the right plans
A business doesn’t have to offer its employees the most expensive healthcare plan to be a good employer. In fact, there are many different types of programs available, such as consumer-directed plans, which can lower employee healthcare costs. Instead of the employer telling their workers what care to choose, a consumer-directed health plan encourages employees to make their own decision and informs them on the low-cost coverage options available.
One option to offer is a high-deductible plan, ideal for low-need employees and costing less in monthly premiums for both the boss and the worker. Even high-need employees can make financial gains by choosing this type of plan. However, whatever healthcare they do opt for, they will always cost more than others.
This is just one offering, but employers need to provide adequate resources for their team to make the right choice. Let them know what is available, but also how cost savings work to save on expenses.
Monitor employee use of healthcare programs
Performing frequent audits of how employees are utilizing their healthcare plan can help lower costs. For example, by looking at the number of workers using each program, an employer can identify which elements are not receiving much engagement, such as a gym membership or wellness programs.
A great way to lower employee healthcare costs is by cutting these aspects of the offered program. By only offering what a team is using and making the most out of, you eliminate unnecessary spending and help prevent over-insurance.
Similarly, look at the entire plans that are being offered. If only a handful of employees are opting for a low-deductible, high-premium plan, then it may be useful to stop offering it entirely or alter it in a way that it’s more appealing. And when a business thinks about adding a new program into the mix – for example, one for weight loss – a valuable method to use is researching low-cost yet popular solutions that are guaranteed to get a high number of sign-ups. This avoids elimination and reduces the overall cost.
Provide an FSA
A Flexible Spending Account (FSA) allows employees to place pre-tax dollars aside to pay for eligible expenses they would not be able to afford by themselves. There are three different types of FSAs an employer can offer:
- Healthcare FSA
Employees use this account to pay for services related to their health or for spouses and dependents. This may include medical, dental, and prescriptions.
- Dependent care FSA
This type of account can help pay towards expenses for employees with children, whether it’s for schooling, aftercare, or even summer camps.
- Limited purpose FSA
A business may use this account to pay for more minor eligible expenses, such as dental and vision. Some may include prescriptions and some general over-the-counter items.
Employers don’t have to stick to just one type of FSA, and their employees can enroll in all accounts if they please. This helps reduce the average cost of healthcare insurance because businesses avoid paying payroll tax, and employees supply the funds out of their own paychecks.
Change prescription drug benefits
Some companies’ health insurance plans offer to pay for their employees’ prescriptions, but with prescription costs spiraling and more expensive specialty drugs entering the market, this can add to employee healthcare costs significantly. But there are ways for businesses to change the benefits offered to cut back on costs while still providing their employees with the support they need.
One way to manage this well is by requiring prior authorization. A stepped approach, known as step therapy, also means medications are reviewed before starting a plan, trying cheaper alternatives before advancing to more expensive alternatives. Other options involve financial encouragement by shifting more costs to the employee if they opt for branded medications rather than their generic alternatives or offering certain generic medications without copayments.
Don’t forget about administrative costs
It’s not just the price of healthcare benefits that can make offering insurance expensive, but also the administration costs. The best way to cut down on these costs is by taking advantage of automation.
For example, utilizing an online portal allows employees to handle their own benefits and programs rather than paying someone to do it for them. Try to apply self-service in as many areas of the company as possible, as it reduces payroll costs but can be just as effective.
Another way to cut down on administrative costs is by outsourcing to a third-party provider to manage benefits. They have extensive experience and can offer the support needed without you needing to create an internal team.
Cut down costs today
There are plenty of options available for businesses to cut down on the cost of employee health insurance. In some cases, it is simply a case of negotiating your contracts with healthcare insurance providers. In others, it is finding a balance between employee and employer that is fair to everyone amid soaring medical and prescription costs.
We all know that while healthcare can be an expensive outlay for companies, it is also a substantial benefit that appeals to workers and helps you attract top talent. So it’s important to find a way to balance those costs and create a happy and healthy workforce that stays the course.