Does this sound familiar?
You receive your group health renewal. Your premium is increased by 5% to 20%.
You react by reducing benefits or raising deductibles to lower your costs.
Your employees complain a little but go on using their health care.
You don’t know what’s driving your health care costs. You just hope you get better numbers next year.
The year goes by, and you receive your next renewal.
Your group health costs go up again.
And on and on.
You just can’t seem to get ahead of the game!
If you’re tired of this endless cycle, I’m here to tell you there is another way.
You can take an active role in managing your group health claims!
To do so, you need to know these two things…
#1 Claims management is hands-down the most effective way to reducing your group health costs.
#2 Claims management is the most underused strategy for reducing group health premiums by employers today.
In this article, I answer the most pressing questions about managing your group health claims to take control of your group health costs. I will answer three critical questions.
- Why should I manage these costs? How does it benefit our company?
- Is there a strategy to effectively manage our claims?
- What are the biggest roadblocks to succeeding? And what can be done about them?
How Managing Claims Benefits You…and Your Employees
The more employees you have, the greater the impact that claims management will have on your bottom line. So, if you have over 51 employees or are self-funded, your company would benefit from proactively managing your employee’s claims.
How does it benefit you?
Your group health premium is based on your business’s past medical claims.
If your employees have high-cost claims, your next group health renewal will reflect those claims. Your insurance carrier will expect to pay out a similar amount toward high-cost claims.
Similar to high-cost claims, if your employees have ongoing claims due to chronic illness, your group health costs will reflect that as well.
With chronic illnesses such as diabetes or Crohns disease, your employees will tend to have more frequent claims. These claims add up, and insurance companies use these claims to arrive at your renewal rates.
When you help your employees choose less expensive high-quality health care options, you will lower the costs of your employee’s claims. When this approach is taken consistently, you will reduce your group health costs.
Because insurance companies rely on your employees’ past claims to determine your group health premiums, lowering the cost of their claims will have a significant impact on your premiums.
How does it benefit your employees?
Upfront, it may look like you are the only one who truly benefits from managing claims. But the reality is that when employees make informed and wise health care decisions, everyone benefits!
Keeping Group Health Costs Lower
When your employees make wise lower-cost choices about where they receive their care, their claims end up being lower. This reduction in medical costs ends up being passed on to them when your group health premiums remain low.
When group health premiums increase, most often employers offset that cost by passing it on to their employees. They end up requiring their employees to make a greater contribution to their insurance costs.
Employers also pass it on in the form of higher deductibles. Then employees end up paying more out of pocket for their care.
Maintaining or Increasing Benefits
At the beginning of this article, I mentioned that group health can become a cycle of high renewals leading to reducing your employees’ benefits. Reducing benefits is the easiest and quickest way to lower your group health costs.
But employees want a robust benefits package. Reducing benefits can lead to employee dissatisfaction.
If you manage your claims, and thereby manage your costs, you won’t need to decrease your employees’ benefits.
This is significant when you consider that many employees consider their benefits as a considerable factor in whether they stay in a job or take a new job. Think about this:
- Nearly 60% of employees who are extremely satisfied with their benefits are also very satisfied with their job.
- 78% of employees say they are more likely to stay in their current work situation because of their benefits program.
- More than 60% of employees say that they would take a job with a lower salary to get better benefits.
All this to say, your group health benefits are a big deal! Your benefits can make a huge difference in hanging on to great employees and attracting new talent.
You certainly don’t want to be decreasing your benefits!
The How-To Manual
So, as I mentioned, one of the biggest problems employers face in managing their claims is that they can not conceive of how this is even possible. They don’t have a clear game plan for how to approach claims management.
Here are three great ways to help you get started down the path to managing the cost of claims.
1. Don’t Go to the Hospital!!!
The first rule of thumb to teach your employees is, “Don’t go to the hospital!”
Now, I’m not talking about going to the ER if you have a medical emergency. What I am talking about is using the hospital for tests, lab work, procedures, and even outpatient surgery that can be done at a standalone clinic.
Many employees don’t realize that they can choose where to have a procedure done. But they can!
If they need an MRI, ultrasound, or other advanced imaging, many clinics will perform these procedures for a fraction of what it costs to have them done at a hospital.
In terms of lab work, encouraging your employees to go directly to Quest Diagnostics or Lab Corp will save money. Even going to their primary care doctor for lab work will cost less than using the hospital’s lab.
Today, there are also many outpatient surgery centers where your employees can have simple procedures done.
Many employees go to the hospital for these types of medical procedures just because they have not been educated in their choices. They don’t understand the benefits of choosing other places to have their medical tests and procedures done.
For procedures at the hospital, extra fees get added to your bill. Most of these fees are listed as facility fees. These fees can easily add 20% to 50% to the total of your medical bill.
And every hospital has different fees. So if you have to use the hospital for a complicated procedure, you should shop around from hospital to hospital.
Hospitals don’t have to match prices. They decide what they will charge. And even if hospitals are in the same network, they don’t have to have uniform pricing.
Key Takeaway: As the employer, you must encourage your employees t0 shop around and compare prices in terms of where they receive their care.
2. Repeated Reminders
To be successful at managing your claims, you will have to repeatedly educate your employees about your expectations regarding their health care. Telling them once each year will never be enough!
Utilizing employee emails, newsletters, and stuffers in employee paychecks can be effective ways to help your employees with their health care choices.
You can also require extra educational meetings or webinars to create a culture of managing health care claims.
Your employee benefits advisor should help you with employee education. Your advisor should be invested throughout the year in helping you manage your employees’ health care costs.
Key Takeaway: A key to successfully managing your claims is continually educating your employees on their responsibilities in terms of your group health program.
3. Outside Help
For most employers and HR departments, directing employees on where to receive their care can become overwhelming! Honestly, it’s one of the reasons many companies would rather receive rate increases than controlling their group health costs.
To overcome this obstacle, you can hire an outside resource to assist your employees with their health care choices. These companies, called transparency companies, charge anywhere from $4 to $10 a month per employee for their services.
Your employee benefits advisor can help you assess if the value of hiring a transparency company. Their help can have an enormous impact on reducing employee health care costs resulting in lower group health insurance premiums.
Your employees can directly consult with the transparency company to find the lowest-cost high-quality health care for their needs.
Key Takeaway: A great solution to the challenge of helping your employees with their medical choices is hiring a transparency company to assist them.
Put the Brakes On…Here’s Comes a Roadblock
As with anything worth doing, you can expect that transitioning to a claims management approach will be met with challenges. For companies bold enough to take back their group health costs, they can expect:
- Resistance among HR staff
- Employee complaints
Resistance among HR Staff
A lot of the work that HR staff engages in is thankless. HR staff end up fielding complaints and delivering bad news to employees.
And employee benefits are most often administered through the HR department. Whenever a benefits change is made, the HR team has to inform, enroll, and educate employees.
Changes in employee benefits often translate into additional work for your HR staff.
With the aid of your Employee Benefits Advisor, you can help make the transition to a claims management approach easier for your HR team. You can use electronic enrollment programs to ease some of their burdens.
Your Employee Benefits Advisor can also work with your team to develop an approach to educating the employees. Your Advisor can prepare educational materials and presentations for your employees.
If you choose to make the switch to a claims management model, you need to be prepared to do what’s in your power to ease the burden of your HR staff.
This will pay off in the long run.
Now, as with any change in an organization, you can expect complaints! Transition is hard!
You will need to explain to your employees upfront that you are expecting ongoing questions about your plan. Making sure they have a process for getting their questions answered will give your employees more confidence about their role in your new model.
By continually educating your employees, you will also keep the importance of making better health decisions top-of-mind.
Your Employee Benefits Advisor should play a role in helping your employees adjust to their new role of actively managing their costs.
And by hiring a transparency company, you can make it much easier for your employees. The transparency company will take some of the leg work out of finding the best quality health options at the least expensive prices.
I wish I could tell you that you can eliminate the roadblocks that make this transition difficult. But I can’t. But by having a plan in place to respond to these challenges will make it less painful for your company.
This is all news to me…I want to start controlling our company’s group health costs!
Maybe you’ve never had this information presented to you before. That wouldn’t surprise me. Many Employee Benefits Advisors are ill-equipped to help their clients manage their claims.
The other big issue for Employee Benefits Advisors is that their income is directly impacted by the amount you pay in premiums.
Most Employee Benefits Advisors receive about 3% of your group health premiums. And while that doesn’t seem like a ton, it does mean that the higher your premiums the more your advisor receives.
You can see how this might discourage your advisor from actively helping you reduce your group health costs.
If your advisor has not discussed a plan for managing your claims, that may be a good sign that you need to consider a new advisor.
The best advisors will take into consideration claims management, tax-advantaged options, and employee wellness as you create your group health insurance plan.
At Baily Insurance, we walk our customers through a six-step process to create and implement a long-term employee benefits program.
If you’re ready to take an active role in managing your group health costs, you can start by taking our Employee Benefits Analysis. This analysis will point out any areas of concern or weakness in your current program along with areas of strength that you already have in place.
This analysis does not require you to change Employee Benefits Advisors. It’s just a good way to get a second pair of eyes on your program to help identify any factors that you might want to address to better control your group health costs.
To schedule an analysis, please let us know that you’d like to plan 15 minutes with our Employee Benefits Advisor. After this short meeting, you will receive a free preliminary assessment of your current benefits program.
And to best prepare for that analysis, it would be most helpful if you read our six-step strategy to creating an effective group health insurance program.