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Containing Costs: Getting Creative to Avoid Passing Costs on to Employees

Healthcare costs have continued to escalate since the pandemic, and in response, employers have continued to look for solutions.

While this isn’t a new trend due to inflation, employers are now more concerned about passing these costs on to their employees.

There’s no magical button to push to help contain these costs, but there are options for employers to consider based on the specific organization and the wants and needs of its employees.

Strategic Cost Containment

In the quest for cost containment, forward-thinking organizations are turning to a multifaceted approach. Continual consulting and savings strategies are now integral parts of this effort.

Programs like a Drug Utilization Review have gained prominence, focusing on minimizing drug waste, maximizing manufacturer coupons, and providing clinical insights for proper usage. These programs prevent unnecessary overuse, reduce excess medication expenses, and leverage manufacturer discounts to lower overall costs.

Service support and patient engagement are also dynamic and pivotal contributors to cost containment in healthcare. Service support optimizes operational efficiency by implementing technology, streamlining administrative processes, and ensuring effective resource utilization. This involves embracing supply chain management, which ultimately reduces operational costs and improves overall productivity.

On the other hand, patient engagement plays a crucial role in preventative care and chronic disease management. Engaged patients are more likely to adhere to prescribed treatments, leading to fewer complications and hospitalizations. Identifying issues early can happen in person or through telehealth and prevents costly interventions. Shared decision-making also ensures that treatments are not only effective but also aligned with individual preferences, contributing to cost-effective and patient-centric healthcare.

Together, service support and patient engagement create a synergistic approach. Service support optimizes operational efficiency, and patient engagement empowers individuals to actively manage their health, fostering a culture of prevention. This dual strategy not only reduces costs but also improves overall healthcare quality and outcomes.

Another cost containment consideration surrounds the ongoing debate surrounding drug transparency versus formulary rebates, especially as employers increasingly recognize the importance of clarity in drug pricing. Drug transparency promotes informed decision-making and competition by disclosing detailed information about drug development, production, and pricing. Increased transparency fosters competition among manufacturers, potentially leading to lower drug prices, whereas formulary rebates can reduce drug acquisition costs within the insurance system.

Creativity in Medical Plan Design and Funding

The need for creativity in medical plan design and funding has never been more critical. Beyond traditional fully insured health plans, the following alternative models are playing a crucial role in reducing margins for many employers:

  • Self-insurance empowers employers to directly assume the financial risk of their employees’ healthcare, allowing for greater flexibility in plan customization and potential cost savings.
  • Captive insurance involves forming a subsidiary to provide coverage, enabling more control over risk management.
  • Consortiums enable small businesses to pool resources for collective purchasing power, negotiating better rates.
  • Level funding combines aspects of self-insurance and traditional plans, offering a fixed monthly cost while maintaining flexibility.
  • PEOs streamline HR functions, providing access to cost-effective healthcare plans.
  • ICHRAs allow employers to reimburse employees for individual health insurance premiums, fostering personalization in healthcare coverage.

Together, these inventive models create a landscape where employers can tailor plans, mitigate risk, and explore cost-effective strategies, ultimately contributing to effective healthcare cost containment.

Boosting Awareness of Voluntary Benefits

Voluntary benefits continue to attract employees due to their ability to help employees protect against the unexpected, reduce expenses, and promote overall well-being. They’re also only beneficial if your employees know about them. By understanding and utilizing available voluntary benefits, employees can tap into supplemental coverage for unexpected expenses, recover costs associated with medical bills, and subsidize out-of-pocket spending through customized insurance options.

Child and elder care assistance, critical illness, hospital indemnity, accident plans, and pet insurance tend to be the most popular products these days. Student loan assistance programs have been particularly attractive, with student loan debt emerging as a frustration to students now entering the work world. Additionally, one newer and emerging benefit trend to note is a lifestyle spending account (LSA) that employees use for wellness-specific benefits funded by the employer. This allows flexibility for an employee to be reimbursed for various wellness expenses that are most important to them.

Looking Ahead

As we step into the year 2024, the increased cost of healthcare is reshaping the way organizations approach employee healthcare benefits. Employers must remain agile in their strategies, leveraging innovative solutions to tackle the challenges posed by rising healthcare costs and evolving employee expectations. The journey ahead demands a proactive and holistic approach to ensure the health, financial wellbeing, and overall satisfaction of employees while also not passing the increased costs on to them. Keeping these options in mind will ultimately contribute to a comprehensive and effective healthcare cost-containment strategy.

Looking to learn more about how to contain healthcare costs for your company and employees? Watch Cancel the Waste: How to Break the Cycle of Skyrocketing Health Costs, a OneDigital Employer Advisory Session.

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