Healthcare costs are on pace to increase at record lows this year. That’s the good news. The bad? This trend won’t last.
In fact, there are a number of trends – increasing drug costs, the ACA’s Cadillac Tax, etc. – that can have drastic effects on unprepared employers.
At the Mid-Sized Retirement and Healthcare Plan Management Conference in San Diego, benefits consultant Marybeth Gray spoke about the necessity of developing a long-term plan to prepare for these costs drivers.
Here are some of the best practices Gray cited in her presentation:
The big picture
1. Only offer a CDHP. Nearly half (48%) of employers offer a consumer-driven health plan (CDHP), but just 7% of firms offer this plan as their only option.
In 2014, CDHPs coupled with a health savings account cost 18% less than a PPO, and 20% less than an HMO.
Plus, these plans can help employers avoid triggering the Excise Tax. Reason: Because high-deductible premiums – the determining factor for excise-tax calculations – are generally lower than other plans.
Making the switch to a CDHP-only workplace is a lot easier when employers make the move gradually over a two- to three- year period.
Gray suggests beginning the process with a letter from your company’s CEO, listing the total costs of benefits and spelling out the reasons for the move.
2. Control rising drug costs. Pharmacy drugs account for 25% of employers’ health cost increases, and it’s only likely to get worse with the surging growth of specialty drugs.
By 2016, eight out of the top ten drugs are expected to be specialties, which don’t offer identical generic alternatives. To prevent drug costs from spiraling out of control:
- Look to join a purchasing coalition, which exerts pressure to improve quality and reduce employer and employee spending.
- Always start with step therapy where lower-cost therapy is tested before using expensive options like specialty drugs.
- Stress quantity control, where workers ask for a small dosage of a new drug before committing to a 90-day supply.
3. Add a spousal surcharge. In 2015, 39% of employers are adding a surcharge. Over the next three years, 61% of firms will use this tactic.
4. Focus on chronic conditions. A very small percentage of employees (around 20%) account for 80% of employers’ healthcare spending. So preventing and managing chronic conditions (obesity, diabetes, etc.) must be a top priority
5. Review your life and disability plans. According to Gray, this is a huge opportunity. Based on the current market, most employers should be able to negotiate lower premiums for life and disability insurance. Those savings can then be used to help cover medical spending.
6. Link disability data to your wellness strategy. When employers use the info about disability claims and employee absences to design their wellness programs, those wellness programs are more effective.
7. Use your data. Between medical and disability claims and biometric data, employers have a wealth of info at their fingertips. Healthcare providers should be able to format this data in a way that will be easier to budget for your healthcare costs moving forward.
Based on “Top 10 Strategies to Keep Medical Trend Under 5%” by Marybeth Gray as presented at the Mid-Sized Retirement & Healthcare Plan Management Conference in San Diego.