Healthcare spending in the United States continues to rise, resulting in a greater cost burden shifted from employers to employees. According to a recent Willis Towers Watson survey, U.S. employers expect healthcare costs to increase by 6% in 2023, following a 5% increase seen in 2022. With no relief in sight, the need to address employee affordability and reevaluate healthcare costs has never been greater.
Implementing a plan redesign can help organizations lower healthcare costs and ensure that employees have access to comprehensive and affordable benefits.
Rising Health Costs are a Major Challenge to Employee Benefits
In 2021, the U.S. spent $4,255.1 billion on healthcare, according to an AMA Policy Research Perspective. Healthcare spending is spread across many categories, including hospital care, clinical services, physician services, prescription drugs, home health care, nursing care facilities, and other healthcare costs.
With healthcare costs rising, many employers are responding by increasing worker premium contributions, increasing copayments or deductibles, or increasing their own premium contributions while simultaneously limiting wage growth.
The high costs of healthcare have directly influenced employee’s healthcare decisions with many delaying or going without care for fear of incurring major costs.
The Need for Innovation in Healthcare Affordability
Digitalization continues to expand throughout the healthcare industry, enabling innovative medical technologies to deliver organizations with new opportunities to revolutionize patient care.
New technologies allow patients to receive care locally or at home, and support continuous self-care.
Investors play a key role in identifying and investing in solutions that will support technologies for preventative care and early diagnosis, while also delivering affordability at scale. There have been several emerging technologies that have resulted in greater affordability in the last decade, such as telemedicine.
Strategies that Reduce Healthcare Costs Through Employee Benefit Plan Redesign
Before effective changes can be made to lower healthcare costs through plan redesign, it is important to understand what drives high healthcare costs. Most chronic diseases are caused by unhealthy lifestyle behaviors, such as poor diet, lack of exercise, and tobacco use.
Expensive procedures, technologies and drug costs also drive up the price of healthcare. In addition, high administrative costs put a major strain on the industry. According to HealthAffairs, administrative spending accounts for between 15 and 30 % of healthcare spending.
Fortunately, there are some strategies that can help reduce healthcare costs through employee benefit plan design. These include:
Promote Employee Health Behaviors
One of the top ways that organizations can reduce healthcare costs is to promote better employee health behaviors. Consider implementing a workplace health program designed to help workers adopt and maintain healthy behaviors to achieve better health and avoid chronic diseases. Examples of workplace wellness programs that emphasize employee well-being include:
- On-site fitness centers
- Smoking cessation programs
- Yoga classes
- Paramedical services
- Transit options
- Healthy meals and snacks
- Employee assistance programs
- Wellness challenges
The return on investment (ROI) for an employee wellness program can be significant. According to a report by the International Foundation of Employee Benefits Plans, most North American employers experienced $1 to $3 decreases in their overall healthcare costs for every dollar spent.
Align Incentives to Employee Health Outcomes
Incentives can be a powerful tool for employers looking to increase employee health and wellness. While the importance of maintaining good health is obvious, the demands of daily life can make it challenging for employees to focus on their well-being.
While incentives alone are usually not enough to get workers to adopt a wellness plan, they can increase participation rates. According to a Kaiser Family Foundation survey, 77% of employers believe that incentives are moderately or highly effective in engaging their employees in wellness programs.
Encourage the Use of Telemedicine and Healthcare Technologies
The use of telemedicine and similar healthcare technologies has increased significantly over the last few years. According to the Centers for Disease Control and Prevention, 37% of adults reported having used telemedicine in the last 12 months.
Healthcare technologies like telehealth have been proven to be an effective strategy for reducing healthcare costs by motivating workers to get the treatment they need now to prevent unnecessary treatment in the future. Telehealth delivers employees an affordable and convenient alternative to a variety of traditional healthcare services that can result in significant costs.
The Impact of Healthcare Plan Redesign on Affordability and Quality
The affordability of healthcare in the United States remains a system-wide issue. However, industry stakeholders, such as health plan providers, are taking the necessary steps to improve both the cost and quality of healthcare services. Employers can also take steps to improve the cost and quality of the health plans they offer their workforce.
Here are some of the most significant impacts that a healthcare plan design can have on plan quality and affordability:
Employee Cost Savings
In an attempt to combat rising healthcare costs, many employers have started to implement powerful strategies in their employer-sponsored health plans. Some employer health benefit strategies that have been shown to lower healthcare costs include:
- Advanced Primary Care – This strategy involves choosing successful elements of past benefits strategies, such as employee wellness programs and onsite health clinics, to create a more effective health plan and lower healthcare spending.
- Episode-Based Benefits – Some employers find episode-based benefits useful in controlling costs. Episode-based benefits involve identifying all costs of a single episode of care for a specific health event, including the services rendered and the average length of care. With this information, employers can often find ways to adjust cost-sharing within specific episodes of care.
- Integrated Health Benefits – Integrated health benefits can also help lower healthcare costs by engaging healthcare providers to meet the needs of employees. This strategy involves pulling benefits that are typically siloed into a streamlined system.
Improve Employee Health Outcomes
When implemented properly, a well-designed benefits plan can provide employees with the tools, incentives, privacy and support they need to adopt and maintain healthy behaviors. The benefits of these plans are often evident in employee behaviors. Employees that participate in health-related benefits programs often have fewer health risks, resulting in fewer chronic diseases.
Healthy employees are less likely to call out of work, resulting in lower absenteeism. They are also more likely to perform at an optimal level as they feel better and have more energy compared to workers struggling with an illness or chronic condition.
Greater Access to Care
Small networks, shortage of doctors, and long doctor wait times can make it difficult for employees to get the care they need to maintain good health and wellness. It is important for employers to do their part to help their workforce by providing alternative care methods, such as telemedicine options or employee advocates.
Contact New City Insurance to Redesign Your Employee Benefits Plans to Lower Healthcare Costs
Managing employee benefits can be a complicated and costly endeavor. However, when an existing plan is not working, it is up to employers to implement essential changes for the benefit of employees and the organization as a whole.
We offer businesses long-term cost-saving solutions for structuring their employee benefits. Our experienced benefits consultants create efficiency in plans to help plan coverage go up while costs go down. To learn more about lowering healthcare costs through plan redesign, request a consultation or call 888-210-2765.