Most employers want to succeed in controlling employee healthcare benefit costs. With healthcare costs for employers expected to rise by 4.4% in 2021, efficient strategies to reduce healthcare costs are in high demand.
As employers try to avoid shifting excess costs to their staff, healthcare cost management must remain a priority. That said, healthcare avoidance and stress throughout 2020 may result in higher healthcare utilization rates in 2021. Additionally, struggling health care systems may try to recoup lost revenue by increasing their prices.
On a positive note, with COVID-accelerated innovations in telehealth systems, digital health is becoming more efficient and better organized. This easy-access healthcare provides greater satisfaction for employees and employers. Reasons for this include:
- Convenient and easy-to-use health services
- Better access to specialized healthcare
- Improved company culture regarding health and wellness
In this blog post, we will discuss how to lower health insurance costs and provide some healthcare cost management solutions.
Employer Health Care: Understanding the Basics
As an employer, health insurance is one of the most desirable benefits you can offer to employees. When setting up a plan, you have a few options:
Although there are several forms of managed care, the two most common are:
- Health Maintenance Organization: This is essentially a pre-paid health arrangement. As part of this arrangement, employers must only use doctors under contract to or employed by the HMO and specific hospitals approved by the HMO.
- Preferred Provider Organization: Under PPOs, insurance companies negotiate discounts with hospitals and physicians. Employees can choose doctors from an approved list. They have to pay a set amount per visit (typically between $10-25), and the insurance company covers the rest of the fee.
Traditional Indemnity Plans (Fee for Service)
Using this structure, employees can choose their medical care provider. After each visit, the insurance company will either pay the provider directly or reimburse the employee for the covered amounts.
For self-insurance, you pay employee healthcare costs, employees help pay premiums, and an outside company typically helps with the paperwork. Benefits of this method include cash flow advantages, customized reporting procedures, and greater control of health plan design. A disadvantage of this process is that you are liable for claims. However, you can take out ‘stop-loss’ insurance (the insurance company pays for claims if they exceed a specific dollar amount) to limit your liability.
Health Savings Account (HSA)
Health savings accounts (HSAs) have been available to the public since 2004. An HSA allows you to save for future health care costs. The account works similarly to a personal savings account: you deposit money into the account and pull from it when medical expenses arise. With an HSA, though, the money you contribute to the account is not taxed. By using untaxed funds to pay for medical care, you can lower healthcare costs. HSAs are generally used in conjunction with high-deductible insurance policies.
Our services complement all insurance plans as we provide premium health services designed to attract and retain employees. We enhance your existing benefits by giving access to our world-class medical offices, 24/7 virtual care via our app, and custom on-site wellness pop-ups inside your corporate offices.
Normal Health Care Costs for Employers
As you evaluate a new or existing health insurance package, you must consider your company’s contribution strategy. You’ll need to ask questions like, ‘how much will my employees contribute to coverage?’ and ‘what percentage of healthcare costs will be paid by the organization?’
When you sign up for employer-provided health insurance, your organization must pay a minimum percentage, and your staff must pay the rest. This is usually processed via a payroll deduction.
In the U.S., according to a 2019 survey, the average percent of healthcare costs paid by employers is 82% for single coverage and 70% for family coverage.
So, last year, an average employer-provided health insurance policy cost $7,188 per annum for single coverage, with employers paying 82% of the premium ($5,946.) Employees contributed the 18% that remained, which equated to $1,242 per year.
An average policy costs $20,576 per annum for family coverage, and employers paid roughly 70% of this fee. Employees covered around $6,015 per year, which equates to the remaining 30% of the overall cost.
How to Reduce Health Insurance Costs
When it comes to healthcare expense management, you’ll find yourself wondering how to lower health insurance rates. Below are some tried and tested strategies to reduce healthcare costs:
Promote Healthcare Spending Education Programs
In the ongoing battle to control and decrease healthcare costs for employers, informed employees can be your biggest ally. Employers who realize how their actions impact their health and, therefore, their health insurance premiums are likely to act responsibly. Our virtual care app and pop-up healthcare visits to your workplace help educate employees on how to take responsibility for their wellbeing.
We encourage employees to take preventative measures for cost-efficient care, promoting smoking cessation, nutrition, exercise, and stress reduction education. All of these lifestyle choices encourage healthier living and health-conscious mindsets. This type of medication and care can help to lower overall healthcare costs.
Reduce Administration Costs
The time and effort involved in managing healthcare plans can be the most significant burden an organization faces. However, software solutions can help managers save time on tracking and reporting healthcare data while gaining accuracy in their results. This type of software can provide robust healthcare cost management solutions for your business.
Our team of healthcare professionals takes care of the time-consuming parts of insurance navigation on your behalf. We can help reduce your total medical spending on employee health by between 5-10% per year.
Offer High-Deductible Healthcare Plans
This option appeals to younger, healthier employees as they don’t anticipate the need for any insurance coverage unless there’s an emergency. If you combine high-deductible plans with health savings accounts, these employees will feel financially protected, at a lower cost to both parties. Some organizations decide to contribute to their employee’s HSA accounts instead of paying for traditional coverage, which ends up being cheaper.
Health Care FAQs
How much do employee benefits cost?
Experts suggest that you can expect to pay between 1.24 and 1.4 times the employee’s base salary in benefits. This extra money can include $520 for dental insurance, around $5,000 for family health coverage, $200 for any long-term disability, and $120 for life insurance.
Should employers pay for health insurance?
If you’re looking to attract and retain the best possible employees, you should offer health insurance as your primary company benefit. Health insurance is the number one benefit that employees look for in a potential employer. Plus, healthy employees are happier and more productive, so providing insurance pays dividends for all parties.
Do employers have to pay premiums for dependents?
No, as an employer, you have no legal obligation to pay premiums for dependents. You may contribute towards premiums for dependents, but you are free to refuse to contribute and ask employees to cover the full costs for any covered dependents. However, if you’re trying to recruit sought-after employees, they may find your employment offer more attractive if you provide healthcare coverage for their families.
How can Eden Health Help with Healthcare Costs for Employers?
- Access to exceptional healthcare: Our Care Teams get to know your employees, prioritizing their health and time, and are available virtually or in-person. Healthier employees require less medical care and ultimately reduce healthcare costs.
- Save 5-10% on your total medical spending: Reduce your healthcare costs, access analytics about your expenses, and drive a high ROI on your employee health investment.
- Give HR leaders and employees back their time: Our experts advocate on your behalf and take on the time-consuming parts of insurance navigation.
To find out more about how we can help manage and reduce healthcare costs for employers, contact us today.