Group benefits have never been more important to employees. Access to health care can increase job satisfaction and productivity, and today, 77% of Canadians believe they are entitled to employer-sponsored benefits. At the same time, Canadian health care costs are rising even higher in 2017.
This leaves employers in a difficult situation. Should they continue to offer group benefits knowing the costs will only increase? Or do they risk cutting back and facing employee resentment and backlash?
There is another solution, but it requires some benefits savvy: reducing healthcare costs without reducing coverage at all.
The good news is, most of these cost-saving strategies are just a call or click away. In this article, Collage co-founder and benefits expert Peter Demangos shares simple strategies employers can adopt to cut costs while maintaining coverage:
1. The more you know, the less you spend
One of the biggest contributors to benefits overspending is a lack of awareness. According to Sanofi, 66% of employers saw benefits costs increase in 2016, but less than half know about common cost controls. This lack of awareness increases financial anxiety while reducing employers’ ability to make smart decisions.
66% of employers saw benefits costs go up in 2016, but less than half know about common cost controls.
The solution? Listen and learn. Set up a call with your benefits broker or plan advisor to fully understand your current plan and find opportunities for immediate savings.
2. Next up: talk to your employees, too
Employees are just as likely to be in the dark about their benefits. An international survey found that 80% of employees don’t bother reading their benefits materials. Of those who do, 50% still don’t understand what they’re covered for.
This can affect employers’ group benefits costs in a few ways. First, if employees don’t know what they’re covered for, they may not use their benefits at all. This leaves employers paying for services that aren’t even being used. Find out what they value, and design the optimal plan for their needs.
50% of employees don’t understand their benefits coverage.
Improving benefits communication can also reduce the number of questions asked by employees (and the amount of time wasted sorting through paper handbooks for answers).
Finally, it can help them understand the value of their benefits plans, which can boost morale, attraction, and employee retention.
3. Take control of prescription drug costs
Two of the main reasons for spiking benefits costs are more expensive drugs and more plan members making drug claims. But that’s not the whole story. Research shows that employer-funded insurance plans have spent more than $3 billion per year for covering expensive drugs that have cheaper options and paying for unnecessary dispensing fees.
Luckily, there are ‘pharmacy management techniques’ that can significantly reduce these unnecessary costs. Three common pharmacy strategies to control drug costs are
• Mandatory generic substitution: this feature only covers the cost of generic drugs, where they are available. Plan members who choose chemically-equivalent, brand name drugs are only reimbursed up to the cost of the generic version.
• Multi-tiered formularies: employees pay varying amounts depending on the ‘tier’—or preferred use—of the drug. For example, generics or preventive medicine may fall into ‘tier one’ and receive 100% coverage, while preferred name brands (tier two) receive only 80% coverage. Another common tier is an ‘out of pocket limit.’ For example, coinsurance may be 80% until the plan member’s out of pocket expenditures reach $1,000 (or any other amount), at which point the coinsurance becomes 100%.
Canadian employers spend $3 billion per year covering expensive drugs that have cheaper options.
• Save on dispensing fees: fees charged by pharmacies for filling a prescription can vary widely depending on where your employees shop. One of the easiest ways to control drug costs is to introduce a limit on coverage for dispensing fees. This will encourage employees to either shop at less expensive pharmacies, or request larger batches of medications they take on a regular basis.
4. Get flexible with an HSA
Health spending accounts (HSAs) are a popular and cost-effective complement—or even an alternative—to traditional group benefits. HSAs consist of a fixed amount of tax-free money (anywhere from $500 to $5000) that employees can spend on their healthcare needs.
For employees, HSAs provide more freedom than traditional plans, and allow them to choose where and how they spend their dollars. For employers, HSAs mean complete control over claims costs, as employees can only claim up to their individual maximums. Most insurance providers offer HSAs along with more traditional benefits features, offering even more flexibility if you want the best of both worlds.
5. Save time and money with telehealth
Like HSAs and EAPs, telehealth apps are emerging in the benefits scene as a way to reduce costs and offer more modern, personalized care.
With new employer-sponsored solutions like Montreal-based Dialogue, employees can call, text, or video conference with a licensed medical pro from the comfort of their home or office. This reduces absenteeism and saves employees from wasting time in over-filled clinics.
The best part? Telehealth apps are very affordable. It’s a win-win-win (the third win is healthier workplaces for everyone).
6. Be an early HR tech adopter
One of the most overlooked healthcare costs is that of benefits management itself. Paper-based enrolment forms are frustratingly complicated, prone to errors, and a major drain on HR resources. Thanks to modern benefits solutions, they’re also becoming obsolete.
One of the most overlooked benefits costs is the cost of benefits management itself.
Automated group benefits management can reduce costly information errors by up to 30%, and save countless hours sifting through spreadsheets and paper forms.
And if you’re ready to start a brand new benefits plan, you can get a digital quote in hours without spending a second on the phone. Modern, accessible group benefits is one of our core beliefs.
7. Make friends with your broker…or find a new one
This last point brings us right back to the beginning: the more you know, the less you spend. Unfortunately, there is so much benefits knowledge out there, the average business owner couldn’t possibly learn it all. With a trustworthy, experienced benefits broker on your side, you won’t need to.
From an employer’s point of view, the most important aspect of working with a broker is to build a relationship and establish trust.
Brokers can navigate and negotiate the murky waters of benefits enrolment, but only if they understand the ins-and-outs of your business, including financial concerns. Ensure that you’re in regular communication with your broker, especially if your business is going through a change. Managing benefits is a relationship, not a transaction.
Managing benefits is a relationship, not a transaction.
The cost of group benefits in Canada is on the rise, but that doesn’t mean your actual benefits coverage has to drop.
As a small-medium business, even minor cost savings can equal major value in the long run. Bring up each of these tips with your broker or plan advisor, and begin to devise a plan for cost-savings. With just a bit of know-how, you can cut group benefits costs without cutting the benefits your employees value most.
A modified version of this post originally appeared in Benefits Canada magazine.