In preparation for another health insurance renewal season, employers need to be prepared for projected double-digit increases in premiums. These increases are fueled by rising costs in medical services and pharmaceuticals that are well above inflation. Utilization of care has also returned to pre-pandemic levels and there has been some catch-up due to delayed care due during the pandemic.
To mitigate the impact of the premium hikes, there are several ideas floating among employers such as leveraging professional employer organizations (PEOs) and individual coverage health reimbursement arrangements (ICHRAs). In many cases in Upstate New York, PEOs still do not make sense. Organizations want to establish a home base and a culture for employees that is theirs, and the overall return on investment remains low, despite potential cost savings on health care. ICHRAs are a new trend and can work in some areas of high risk but put a lot of the onus on the employee to find their own plan. Also, in cases where companies are struggling to recruit staff, ICHRAs can be a turn off to prospective employees simply because it can be difficult for them to understand the process.
We have advised many of our clients to adopt a fixed-dollar approach to their employer contribution, rather than a percentage. Employees should be offered the full spectrum of choices from the different plan metal levels so each employee then can choose the plan that best suits their individual needs. This method allows employees to determine the best balance between premium and out of pocket expenses at the point of service.
Some clients have taken a different path by choosing to self-fund some of the claim risk for their employees. They do this by enrolling employees in larger deductible Bronze or Silver level plans, then use a health reimbursement account (HRA) to fund a portion of the risk for their employees. This benefits the employee by lowering their out-of-pocket risk when they experience a difficult health year. Even though the employer has to invest a larger dollar amount to cover all their employees, the reality is most employees do not have large health care expenses and all unspent funds are returned to the employer at the end of the plan year.
In addition to the plans offered and the funding strategy used, it is important to educate employees how to make the best decisions with their health care dollars. This also includes taking advantage of the preventive and wellness services provided within the plans they select. Ensure employees are aware of preventive services that are covered with little to no out-of-pocket expense such as routine physicals, preventive screenings, and preventive medications. Encourage them to utilize telemedicine services that are available at reduced costs compared to in-person visits for lower severity issues. Also take advantage of wellness programs such as health risk assessments and reimbursements for participation in gym activities.
Companies with 100 or more full-time equivalent employees have more funding options in terms of lowering their health care costs. They should make sure their broker is doing competitive bidding amongst carriers to secure the best rates. In addition, they can evaluate whether self-funding is an option and offer wellness programs to improve their experience rating with carriers.
Employers with less than 100 full-time equivalent employees are more limited in terms of funding options as they fall into the community pool, but there are still ways to ensure they are getting the most for the dollars they are spending. To start, they should conduct a review of all the carriers available in their region to identify the most cost-effective options available.
No matter the approach, employers need to utilize quality health care strategies so they can provide the best coverage to meet their employees needs and maximize the value of health care dollars spent—both for the employees and the company.
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