August 16, 2023
As the Fed continues to do battle with inflation, and with fears of a recession not quite going away, companies have been keeping a close eye on the costs of their health insurance and pharmacy coverage. If you’re facing higher costs for health care benefits this year, it probably doesn’t come as a big surprise.
According to the National Survey of Employer-Sponsored Health Plans, issued by HR consultant Mercer in 2022, U.S. employers anticipated a 5.6% rise in medical plan costs in 2023. The actual percentage may turn out to be even higher, which is why cost containment should be one of the primary objectives of your benefits strategy.
Really get to know your workforce To succeed at cost containment, you’ve got to establish and maintain a deep familiarity with two things: 1) your workforce, and 2) the health care benefits marketplace.
Starting with the first point, the optimal plan design depends on the size, demographics and needs of your workforce. Rather than relying on vendor-provided materials, actively manage communications with employees regarding their health care benefits. Determine which offerings are truly valued and which ones aren’t. If you haven’t already, explore the feasibility of a wellness program to promote healthier diet and lifestyle choices. Invest in employee education so your plan participants can make more cost-effective health care decisions. Many companies in recent years have turned to high-deductible health plans coupled with Health Savings Accounts to shift some of the cost burden to employees.
As you study your plan design, keep in mind that good data matters. Business owners can apply analytics to just about everything these days — including health care coverage. Measure the financial impacts of gaps between benefits offered and those employees actually use. Then adjust your plan design appropriately to close these costly gaps.
Consider expert assistance Now let’s turn to the second critical thing that business owners and their leadership teams need to know about: the health care benefits marketplace. As you’re no doubt aware, it’s hardly a one-stop convenience store.
Many companies engage a consultant to provide an independent return-on-investment analysis of an existing benefits package and suggest some cost-effective adjustments. Doing so will entail some expense, but an external expert’s perspective could help you save money in the long run. Another service a consultant may be able to provide is an audit of medical claims payments and pharmacy benefits management services. Mistakes happen — and fraud is always a possibility. By re-evaluating claims and pharmacy services, you can identify whether you’re losing money to inaccuracies or even wrongdoing.
Regarding pharmacy benefits, as the old saying goes, “Everything is negotiable.” The next time your pharmacy coverage contract comes up for renewal, explore whether your existing vendor can give you a better deal and, if not, whether one of its competitors is a better fit.
It’s doable … really Cost containment for health care benefits may seem like a Sisyphean task — that is, one both laborious and futile. But it’s not: Many businesses find ways to lower costs by streamlining benefits to eliminate wasteful spending and better fit employees’ needs.
We can help you identify and analyze each and every cost associated with your benefits package. © 2023
BG Advisors CPA, LTD. is a full-service CPA firm committed to helping growing businesses reach their goals. Combining decades of diverse corporate finance and tax experience allows us to bring world-class expertise to every client we serve.