5 things employers should consider when changing health plans

Buying or changing health insurance plans is a major decision. With so many products and services on the market, it can be difficult to consider what benefits and services employees want coupled with the best care options available at differing price tiers. When researching health insurance with their benefits advisors, employers should take into account these top five considerations: cost, innovation, affordability, access and contribution strategy.

Cost is important, but it does not tell the whole story. All too often, the summary analysis of a renewal policy focuses on the net cash impact before and after the proposed benefit plan design changes. There may also be a discussion of the prior period experience to identify why expectations for claims costs next year are higher and why a rate adjustment (or plan adjustment) is needed. However, only looking at the numbers ignores a tremendous amount of improvement and innovation that has emerged over the past five years that can have a major impact on the bottom line.

Beyond cost is the broader consideration of each health plan’s investment in and implementation of value-add services considered for the renewal and their respective improvement in care management capabilities at the member level. These capabilities and initiatives would be expected to help control costs by identifying and proactively managing potentially avoidable events and/or potentially avoidable health complications. Plus, the halo effect of improved (lower) absenteeism and high productivity are just as important as the cash expense.

Affordability is important too. Recruiting and retaining employees means having competitive medical benefits. The trend for the past 20 years has been more about increasing deductibles and copays and shifting the burden to the employee who has likely only ad a modest increase in income during that same time. If employees cannot afford to use the health benefit plan, it has no value and no impact on their retention. A shift to self-funding may save the employer benefit expenses, but oftentimes has little to no impact on the employee. Similarly, direct contracting strategies may appear beneficial for primary care access but leaves the employees at risk for large dollar claims. The same comprehensive consideration regarding the use of technology and innovation for efficiency of administration and proactive care coordination can also lead to alternative plan design and pricing considerations that increase employee engagement and satisfaction while reducing cost.

Don’t look to save money on gatekeeper plan designs. Restricting access to care is not an effective cost management strategy. Some benefit plans require a primary care physician (PCP) or require pre-authorization to see a specialist. Denial of care and restrictions on access to care have been shown to increase provider and member frustration and have very little impact on cost management. Instead, look for a health plan with greater use of technology that improves access to care and more importantly, access to a wide range of professionals that maintains the quality of care, increases convenience and improves satisfaction.

A plan design that embeds telehealth options for employees will out-perform in terms of care management and will have higher engagement than a design that bolts-on telehealth, with separate brands and mandatory copays. A diverse panel of professionals should be part of the telehealth platform. Look for scheduling assistance as well as capabilities in price transparency and data portability. A telehealth network with access to specialists like cardiologists, psychologists and oncologists in addition to primary care, physical therapy and nutritionists will be more valuable to employees and more impactful in lowering plan costs overall. This is especially pertinent in addressing the under-diagnosis and under-treatment of mental issues. A diagnosis of a life-threatening condition or chronic illness may be accompanied by stress, anxiety and even depression, all of which lead to complications and higher medical expenses.

An employer’s contribution strategy is an important consideration. A common benchmark for employer cost-share typically has been 70% employer and 30% employee. Budget pressures over the past decade have led to alternative designs, including defined contribution strategies and subsidized tiers. A defined contribution strategy, where a fixed dollar amount is set, will limit the employer’s share of the cost of health insurance, but it also produces extreme increases in employee share if the benefit plan rates are increased. Consider an individual employee monthly premium of $550, with a defined contribution of $400. A 10% increase in the rate to $605 results in a 37% increase for the employee ($150 increases to $205). Increases in benefit plan costs compared against single-digit wage increases will negatively impact lower-paid employees more. Similarly, subsidized tiers, where the employer picks a certain tier and pegs their contribution to that cost, either penalizes higher costs tiers (because family coverage is a multiple of employee-only coverage) or results in a windfall (which is not appreciated like salary and therefore has less value to employees).

The goal with contribution strategy should be aligned to the intent of managing plan costs from a clinical perspective, versus a budget perspective. What strategy will work best for an employer will depend on many factors unique to that employer but maximizing plan participation and inclusion in an innovative health plan will capture more impact and therefore more savings. As contribution strategy directly impacts affordability, enrollment and satisfaction, it will also impact retention and recruitment.

There are many things to take into consideration when evaluating the best health insurance plans for a business. Going for a cheaper plan seems like the obvious choice but instead of focusing solely on price, it is important to look at the bigger picture. With the help of your benefits advisor, consider each plan’s innovation, affordability, access and contribution strategy, each of which have a direct impact on cost. Looking at all of the underlying factors that impact pricing will help employers pick an overall health insurance plan that provides employees valuable care options while benefiting both employers and employees.

Chris Gay is the CEO and co-founder of Evry Health.