Unless your Broker is reducing frequency & severity of your claims what are you paying them for, busy work? By managing the healthcare supply chain, which are the actual costs of the items utilized like office visits, surgeries, imaging, hospitals and drugs. Buyers are then able to pay attention to the cost and quality of each unit of healthcare, then collectively they are able to lower costs together and improve the predictability of outcomes. Reduce the healthcare costs, and you reduce the health insurance costs.
Benefits are typically the largest expense item in a company’s budget next to payroll. Traditionally, managing the benefits budget hasn’t been like managing other business expenses, as employers have had little to no transparency into these costs. While most employers would be averse to accepting annual increases of 10 or 15 percent on other business expenses, they have never been able to apply the same level of scrutiny to their health care spend. But things are changing. As health care spending continues to rise, maintaining the “Status Quo” is simply no longer an option. Fortunately, action steps similar to those you’d take in other parts of your organization are available for your health plan.
At a recent event we explained how small and mid-sized company leaders MUST manage their benefits like a CFO does with other capital expenditures. Companies must manage their healthcare spend like they would manage any other part of their supply chain. Would you have a non-profit & loss (P/L) employee managing your company’s second largest expenses? Too often I see HR managing the company’s benefits, when a manager with P/L experience should manage the company’s healthcare value chain along-side HR. Whenever I ask a CFO if they would let a non P/L manager, manage their company’s second largest cost center, they all say…heck no! But this is what 90% of companies are currently doing. At Blackrock Benefits we change that paradigm from viewing benefit spend as a variable OpEx buried in the SG&A to a manageable CapEX that produces ROI.
Employers’ health care problems won’t be solved with a traditional insurance solution!
When faced with a big premium increase at renewal, the natural next step for many employers is often to look at other carriers and shop for a better rate. However, moving from carrier to carrier doesn’t address the issues that are actually driving up health care costs for employers. In particular, rising and often inaccurate claims are contributing to higher costs for employers in fully-insured health plans.
Are insurers in the best position to drive down claims? Insurance costs can be broken down into two parts — administrative costs and claims spending. Most employers would like to do a better job of containing their claims spend, but fully-insured health plans offer little to no transparency as to where the employer dollar is actually being spent. Further, a piece of the Affordable Care Act may actually be incentivizing insurers against helping employers reduce their claims spend. The medical loss ratio requires insurers to spend 80 percent of all premiums collected on claims, with the remaining 20 percent put toward administrative costs, marketing, and profit.
In other words, the maximum profit insurers can collect is 20 percent of premiums. As a result, the avenue to profit growth is to increase premiums altogether, especially for those not surpassing the 80 percent threshold. Employers are left to question whether insurers are best positioned to help employers lower medical claims, and what really drives annual premium increases of 10 percent, 15 percent, 20 percent or more.
To get out of the status quo of premium increases, employers who are frustrated with rising costs may have to change how they look at their health plan and how it’s financed. In order to get better insight to an organization’s health care costs and to deploy strategies to contain them, the group has to move away from the fully insured model. The major difference between fully insured and self-insured plans are that the employer pays the claims up to a certain stop-loss threshold. The benefit of self-insuring is better control over health care costs and the cost-savings potential of lower-claim years.
When you make this move, healthcare starts to feel a lot more like other parts of your business, you can actual manage the value chain, and have data to make better decisions. Healthcare and benefit costs can be contained long-term, but you need the RIGHT BENEFIT CONSULTANT.
Call Blackrock Benefits today and let us develop a customized solution for your organization: www. BlackrockBenefits.com