Last year, Americans spent over $3.5 trillion on health care in 2018 per a report by Fitch Solutions. This amount is more substantial than the total GDPs of countries like the U.K., Brazil, Mexico, Spain, and Canada. It means the average American spent more than $11,200 per person in 2018 on health care. But, contrary to what many may believe, these expenses don’t equal a better quality of care.
While spending is the highest, the U.S. ranks 27th in the world for its level of health care. So, employers across the country are increasingly turning their focus on attempting to lower health care costs while simultaneously improving quality of care. This task, depending on whom you ask, may seem next to impossible.
Luckily, in the past decade, we’ve seen an explosion of the development of various health care cost-containment strategies. In this article, we’ll cover 11 different cost-containment strategies your company can use to reduce its health care costs. Keep reading to find out how your business can shrink its health care expenses and improve quality of care at the same time.
11. Numbers Don’t Lie
The first strategy your firm can use to contain health care expenses is to gather and engage in health care data. One of the essential pieces of data you can track is referrals. These referrals play a significant role in overall health care costs.
Additionally, you can use healthcare claims and health record data to uncover quality, low-cost care providers who yield the best health outcomes. So, the more detailed your data, the better your firm can use it to steer employees to the best possible providers, so they receive the best possible care.
10. Medical Case Management
The next strategy you can use to curb health care costs is a medical management program. These programs help coordinate employees care, suggest treatment options, and monitor ongoing medical treatment. Like using more in-depth health care data, medical case management can work to direct your staff towards both high-quality and lower-cost care providers. The goal of medical case management is to provide your employees with the right care, at the right place, at the right time, for the right price.
Another method many companies are using to address health care expenses is telemedicine. Telemedicine can give employees more convenient access to care, promote a healthier workforce, and produce significant cost savings for both employees and employers. But, don’t just take my word for it.
According to BenefitsPro, some experts have determined telemedicine visits, for the most common health conditions, save employers an average of $472 per episode of care. Similarly, the American Hospital Association reported savings of 11 percent for those operating a telehealth program.
8. On/Near-Site Clinics
The next means your firm can reduce health care costs is to utilize an on-site clinic. An on-site clinic can improve care coordination, boost the quality of primary care your employees receive and save both parties money. Through on-site clinics, your firm can offer employees:
- Wellness screenings
- Health risk assessments
- Chronic condition management
- Employee health and wellness coaching
Each of these offerings works to educate employees about their health conditions and prevent these conditions from worsening. An on-site clinic ensures your employees receive quality and timely, primary care. This improved primary care acts as preventative medicine. Also, according to BenefitsPro, preventative care helps your employees stay healthier, reduce the need for pharmaceuticals and medical treatments, and even reverse chronic conditions.
7. Direct Primary Care (DPC)
One other method to lessen health care expenses your business can use is direct primary care (DPC). DPC is a form of health coverage but isn’t health insurance. Plan participants pay a flat, monthly fee, and receive easy access to a primary care provider without having to send claims through an insurance provider.
There are multiple advantages DPC can offer both you and your employees. Direct primary care gives your employees more time with a physician, less hassle with insurance companies, a better quality of care, and less out-of-pocket costs. Research shows DPC costs an average of $77 per patient per month, while PPO plans cost an average of $251 per patient per month.
6. A Fiduciary Pharmacy Benefits Manager (PBM)
An additional way your business can knock down its health care costs is through a fiduciary pharmacy benefits manager. We’ve already detailed the rise of overall health care costs, and a large portion of these increases can be tied to rising pharmacy prices. Last year, prescription drug spending increased 3.3 percent over the previous year.
A pharmacy benefits manager is an organization that contracts with health plans to administer its pharmacy benefits. A PBM creates drug formularies which designate “preferred” drugs the insurance plan will cover. This formulary puts the PBM, and by extension, your health plan, in a dominant bargaining position.
Because, if a manufacturer’s drug isn’t in the formulary, insurers won’t cover the medication and physicians won’t prescribe it. The resulting negotiations lead to manufacturers paying rebates to the PBM based on the volume of drugs dispensed to health plan enrollees. PBMs typically share some portion of their rebates with their health plan partners, but not all these discounts.
5. Reference Based Pricing (RBP)
Reference-based pricing limits costs by setting a fixed amount your health insurance will pay for specific health care services. These services would otherwise have wide cost variations. This fixed amount is typically based on a multiple of an industry benchmark such as Medicare’s reimbursement rate.
Through reference-based pricing, employees get to bypass traditional insurance carrier contracts and pay service providers directly. Avoiding these contracts allows employees to receive more transparent and cost-effective care. The potential advantages of utilizing RBP include:
- Less health care spending for employers
- Reduced employee out-of-pocket costs
- Protections for employees
- It can be combined with other cost-containment strategies
- Additional price transparency
4. Financial Wellness
According to the Financial Fitness Group, over 80 percent of employees have been affected by financial stress. Furthermore, per a 2018 survey from Bankrate, 46 percent of employees consider finances their primary source of stress, and 48 percent with financial stress are distracted at work. Moreover, this financial stress has an enormous impact on your organization and its health care costs.
Financial stress alone costs U.S. businesses close to $300 billion a year in unscheduled absenteeism, reduced employee productivity, higher employee turnover, and increased health care claims. A quality financial wellness program can help combat the adverse effects of this financial stress.
3. Integrate Ancillary/Voluntary Benefits
Having a quality health insurance plan is the foundation for any successful employee benefits program. That being said, one of the best ways your company can reduce health care costs is through integrating ancillary, or voluntary, benefits into your overall program. It’s easy for employees to dismiss the impact of these offerings if they don’t understand them.
Still, ancillary benefits such as vision, dental, and disability coverage, are critical to your firm, reducing your health care spend. These offerings work to support your health insurance plan and maximize the effectiveness of every health care dollar you spend. Additionally, combining medical and ancillary benefits under a single program gives your firm a more comprehensive, in-depth range of data.
You can use this data to facilitate proactive outreach and clinical support for employees. As previously mentioned, the better your health plan data is, the better your company can guide employees to the best possible quality, lowest-cost providers.
2. Incentives for Comparison Shopping
A major yet straightforward way to decrease your company’s health care costs is to get your employees to comparison shop for medical treatment. Yet, according to a recent study by HealthMine, 70 percent of health care consumers don’t do any price shopping.
So, how do employers get their staff to do more price comparison for medical care? One of the easiest ways to push your employees to comparison shop is to incentivize them. There are now multiple tools consumers can use to comparison shop.
But, if you want to maximize the effectiveness of, and engagement with, these tools you need to incentivize use. Every time an employee comparison shops before seeking treatment, reward them with a set bonus, or a portion of the savings your company received from that employee shopping for a lower cost procedure.
Health care quality and cost can vary widely within a city or even a neighborhood. So, encourage the use of online and mobile comparison-shopping tools to boost health care transparency and yield savings for both employers and employees.
1. Employee Education
The final method your business can use to lower health care costs is to educate your employees about their plan options. Employee education is a vital yet oft-overlooked part of any quality benefits program. It’s common for large employers to report year-long engagement rates among employees and their benefits plan to be less than 10 percent. Similarly, only 52 percent of employees claimed to understand their benefits in 2017.
These two numbers demonstrate the importance of employee benefits education. The only way to maximize your benefits plan’s effectiveness is to educate your employees about all their options. Empowering employees through education gives the greatest, long-term value your health plan can have, according to Doug Short, CEO of BeniComp Health Solutions.
Similarly, research by Unum has demonstrated the importance of education on your employees’ engagement with their benefits plan. Per the study, there’s a strong, positive connection between the quality of benefits education an employee receives and their perception of their employee benefits package.
Educated employees both value their benefits plan more and have a more positive perception of their workplace as a whole. Unum’s research also showed employees who believe their benefits were effectively communicated are more likely to show higher levels of engagement, morale, and loyalty.
If the $3.5 trillion America spent on health care last year shocked you, just wait. Fitch Solutions predicts health care spending will grow to $3.6 trillion in 2019, a four percent increase. The firm’s analysis also predicts pharmaceutical spending alone will grow 2.5 percent to $370.7 billion.
Health care expenses aren’t going to recede when your firm doesn’t act. If your company wants to decrease its health care costs, you must take a proactive approach to health care. Make your benefits plan more proactive by instituting one, or some, of the above cost-containment strategies. These strategies can help you engage employees with their benefits, maximize the effectiveness of your plan, and lower health care costs for both you and your employees.
Don’t strain yourself over the pain of health care expenses – cost-contain with the 11 strategies above.