Health Care Cost Crisis Inspires Sucessful New Strategies

Some things to consider in looking for savings.

The rising cost of healthcare and unaffordability of health insurance is, of course, a national problem. But with our employer-provided insurance model, it is above all a crisis for employers seeking to attract and retain the best employees with an attractive wage and benefit package.

It would be hard to even casually follow labor relations news and not notice that in the collective bargaining arena healthcare costs have consistently been issue number one for many years now.

So any employer successes in controlling healthcare costs are worth: (a) celebrating, and (b) emulating.

Today I ran across a couple of items definitely worth studying if this is a problem you need to be trying to solve. One is a study by consulting firm Watson Wyatt highlighting several successful approaches to controlling healthcare costs. The other is an interesting article on self-insurance.

Study on controlling healthcare costs

The Watson Wyatt study is summarized in a brief piece in the BLR HR Daily Advisor: “Survey Identifies Four Factors that Control Healthcare Cost Increases”

First, Watson Wyatt found that the combination of high deductible coverage with an attached reimbursement or health savings account has really taken off, with the percentage of companies surveyed offering such plans jumping from only 7% in 2004 to 29% this year, with 33 % more intending to offer such a plan next year.

Second, Watson Wyatt identified the four factors referred to in the article’s title:

Focusing on healthcare quality, including, somewhat paradoxically, saving money by paying more to higher quality providers.
Offering programs to assist employees in managing their own healthcare.
Using data mining and ROI analysis to make healthcare program decisions.
Giving employees information and incentives to use healthcare services more appropriately.

Significantly, the study found that companies that used these approaches the most saw only a 3% annual healthcare cost increase in each of the last 2 years, while others were burdened by 11.5% annual increases.

That’s a big competitive advantage — or disadvantage — given the prominence of health care costs in the total compensation package.

The full report is: “Delivering on Health Care Consumerism: Strategies for Employer Success – 11th Annual National Business Group on Health/Watson Wyatt Survey Report 2006″ (available for download for $45.00).

Self-insurance

Self-insurance has been a secret weapon of many larger employers for quite some time. It allows them to leave the risk of large claims on a stop-loss carrier while shouldering more of the day-to-day risk.

As with an individual switching to a higher deductible on an auto or homeowners policy, if the employer beats the odds in a given period of time, it pockets the benefit, rather than seeing it go to an insurance company.

“BLR HR Daily Advisor: Dump Your Health Insurer for Good!” puts it like this:

Just think about it. You take the premiums paid to your current health carrier and instead put them in your company’s bank account, where they earn interest and help your cash flow.

Then, when a claim comes in, you simply pay it … no time-consuming back and forth with the carrier, no indecipherable forms never designed for your business, no irate employees complaining about how their medical bills haven’t been paid yet.

What’s more, says Karin Landry of Spring Consulting Group, you don’t have to be Big Business, Inc., to self-insure. The program can be appropriate for companies with as few as 100 employees.

Sounds like an option worth looking at.

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