Is your health care plan really a benefit?
Employers need to take a hard look at their plan and truly assess what it’s costing employees.
The COVID pandemic has caused a number of challenges for American businesses such as tightened purse strings and employee recruitment and retention issues – with a record of 47.4 million people voluntarily leaving their jobs in 2021. To curb the impact of the pandemic, American businesses have completely re-envisioned their business model over these last few years. Whether it’s managing equipment and technology around teleworking, implementing significant cost savings measures or dealing with supply chain delays, business owners have been evolving to survive.
While the business landscape is ever-changing, one element of business that remains unevolved for many employers is their health care plan.
Related: Health plans are playing catchup as they head to a digital future
Premiums and prescription prices continue to rise, and with health care being the largest expense behind payroll, businesses are struggling to sustain the cost of employer-sponsored health care as is. To make matters worse, employers are forced to pass along these high health care costs onto employees in the form of higher premiums, copays and deductibles. With so much cost shifting to employees, many are asking whether the health care benefits that come with a job are really benefits at all. Employers need to take a hard look at their plan and truly assess what it’s costing employees – factoring in premiums, deductibles and co-pays.
The dominant players in the industry, hospitals and major PPO insurance providers, negotiate and establish rates. The discounts offered by PPO plans often sound great – 40%, 50% – but with costs this high, is your business actually getting a deal?
As consultants and brokers look for options to help their businesses make cost-effective changes, we are seeing an increasing trend of self-funded businesses switching to referenced-based pricing (RBP) plans, which may be the solution they are looking for. Although RBP is not a new solution, it is an underutilized resource that can save self-funded businesses millions.
Want to know if RBP can help you thrive during the tight labor market? Let’s look at a large nursing home organization in Kentucky as an example. When faced with a recruitment crisis, they changed their health plan to offer two options – a PPO plan and a RBP plan. More than half of employees chose the RBP plan, which was the more affordable option, and the organization reinvested those savings into offering more employee benefits such as rideshares to work, daycare and tuition reimbursement. Their benefits began to attract applicants and their problem was solved.
Most employers are not aware of their options and feel resigned to a stagnant and costly health care system. If more business owners got creative with their health care choices, they could reinvest savings from a RBP solution into their business. For employers who want to test the waters, they can offer employees a choice of a PPO or RBP plan. Either way, the savings from RBP will put employers in a much better position to recruit talent as they can differentiate themselves with their improved benefits package.
Consultants and brokers have the opportunity to help guide the businesses they work with to consider innovative solutions and outline the potential benefits to employee retention. If we have learned anything from this pandemic, it’s that Americans are resilient, so it’s a good time for employers to consider how to make their health care plans resilient – and truly a benefit – as well.
Jeff Bak is an expert in reference-based pricing and the CEO of Imagine360, a company offering simplified, total health plan solutions for self-funded businesses.
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