4 Strategies for Reducing Health Benefit Costs in 2022

January 20, 2022

Health care costs continue to rise each year, and 2022 will likely be no exception. In the new year, experts predict a 6.5% increase in medical expenses alone, according to PricewaterhouseCoopers. In terms of health plan premiums, employers anticipate they may rise more than 5% in 2022, a Willis Towers Watson survey reports.

With these increases in mind, employers will want to strategize methods to rein in benefits spending. This article offers four ways to help.

1. Alternative Plan Modeling

One common method for reducing benefits costs is to increase employees’ share of expenses. This could be done directly through premium increases, but that might generate more problems for an employer; after all, many employees are still struggling financially and are ready to leave their jobs for better benefits options thanks to the COVID-19 pandemic.

Considering this, a more careful approach to lowering expenses may be through alternative plan modeling. Instead of a traditional health plan, employers can think about other plan designs that can still benefit employees without excessive costs. Plan modeling alternatives include:

• Consumer driven health plan models—High deductible health plans with savings options attached.
• Self-funding models—Health plans funded and managed by an employer rather than a carrier.
• Reference-based pricing models—Self-funded health plans with set spending limits on shoppable services.
• Level-funding models—Self-funded health plans where an employer pays a set amount to a carrier for claims, the remainder of which is refunded at the end of the year if there is any leftover.

Each of these plan modeling alternatives has advantages and disadvantages, depending on an organization’s unique circumstances. Employers should reach out to Mike Young at MY-Employee Benefits Plus to learn more about the potential of these and other plan models.

2. Health Care Literacy

Improving health care literacy for employees has seen a significant push in recent years. The idea is that if employees better understand their health care options, they can save money and improve their overall well-being.

Even limited health literacy can go a long way toward keeping health costs down in 2022. Arming employees with questions such as “How much will this cost?” and “Can I be treated in an equally effective but less costly way?” can help them take better control over their health choices and make wiser decisions. Further, employees should also be taught basic concepts such as when to visit an emergency room versus an urgent care, the difference between coinsurance and deductibles, and how to price shop for services.

Ultimately, the more educated employees are about health care topics, the more money they can potentially save. In other words, the education employers invest in now will pay for itself later through healthier employees and reduced health expenses.

3. Telemedicine Solutions

Telemedicine allows consumers to visit their doctor over the internet. Unsurprisingly, that made it extremely popular during the height of the COVID-19 pandemic.

And that popularity isn’t likely to go away in 2022. Rather, more businesses are likely to shift toward offering more telemedicine options. According to McKinsey and Company, only 11% of U.S. consumers utilized telemedicine in 2019, pre-pandemic. As of mid-2021, 46% of consumers were using telemedicine to replace the in-person health visits they had originally planned. Additionally, 76% of consumers said they were interested in using telemedicine going forward, according to a separate McKinsey and Company survey.

Employers who want to test out telemedicine capabilities can think about offering it in a limited capacity. For instance, an employee might see a doctor in person for an annual checkup, then follow up later with a virtual visit. If employees find this useful, employers can consider expanding their telemedicine offerings.

4. Prescription Drug Policy Revisions

Prescription drug offerings are great additions to health plans, but they can sometimes increase costs if not used properly. Specifically, employees will need to be educated about their drug plan, or they might spend money needlessly.

For instance, without adequate knowledge, an employee might opt for name-brand prescriptions each time they need one. The employee might not even know to ask their doctor about generic alternatives, which are equally effective and significantly more affordable. This can raise prices for everyone—individuals and their employers.

Beyond education, employers can help control needless drug spending by revising their policies. This may include requiring employees to request generic medications first before covering more costly alternatives.

Summary

There are many approaches for controlling benefits spending, but not all will work for each organization. That’s why it’s important for employers to closely analyze their health plan data and assess where they spend the most. This will help inform strategy and allow employers to maximize their efforts.

And for a copy of this news brief, click here: 4 Strategies for Reducing Health Benefits Costs in 2022

Reach out to Mike Young at MY-Employee Benefits Plus to discuss cost-saving strategies that will fit your unique workforce.
Contact Mike at 714.716.4060 or mike@my-EBP.com .

5 Strategies for Reducing Health Benefit Costs in 2022

August 27, 2021

For the past two decades, health costs have increased each year. This happens for a variety of reasons, such as inflation or, say, a global pandemic. With that in mind, employers can bank on prices going up in 2022.

According to a PricewaterhouseCoopers (PwC) report, medical costs are projected to increase 6.5% in 2022. This is about average for the past decade; although, it is slightly lower than the 7% increase projected this year (as more spending goes toward the COVID-19 pandemic).

Yet, 6.5% is still a considerable increase, especially when so many budgets have been reallocated or slashed due to the pandemic. That’s why employers must think both strategically and creatively about how they can lower their health benefits expenses in 2022.

This article includes five ways to help reduce spending without compromising benefits quality.

1. Control Drug Spending

Drug prices are rising faster than any other medical service or commodity. Prices are now 33% higher than they were in 2014, according to GoodRx. This is a significant problem during inpatient procedures, where individuals aren’t usually given an option to select a generic medication—patients rarely know what drugs they’re given until after the fact. Even in routine prescription scenarios, employees may be prescribed name-brand medications simply due to physician preference.

Employers can educate employees on the price differences between name-brand and generic medications. Doing so can help employees understand that they can save money while still receiving the same quality treatment. Additionally, employers may consider introducing varying levels of prescription drug coverage. For instance, fully covering generic prescriptions or drugs used for chronic conditions. For higher levels (e.g., specialty drugs), employers may cover less of the costs. Ultimately, employers will need to determine the appropriate coverage levels for their unique workplaces

2. Encourage Active Benefits Participation

Beyond drug spending, employers can help limit overall health costs by making employees active participants in their health care. This means encouraging employees to improve their health literacy, research treatments and price shop.

Price shopping, in particular, should be easier in 2022, given the new hospital price transparency rule that took effect Jan. 1, 2021. Employees will now be able to see specific prices for procedures and other services. This incentivizes employees to educate themselves before making costly health decisions.

3. Offer Savings Accounts with Carryovers

Health plans with savings components are becoming more popular each year. That’s because these tax-advantaged savings accounts empower employees to control their own spending and improve their health literacy. The accounts include health savings accounts (HSAs), flexible spending accounts (FSAs) and others.

Many accounts allow for fund carryover from year to year, or allow employers to add that option onto their plan designs. Allowing carryover encourages employees to contribute more funds, since they’re no longer “use it or lose it.” Since many employers match contributions up to a limit, more money added to these accounts means greater tax savings for everyone.

4. Embrace Virtual Health Options

One major takeaway from the COVID-19 pandemic has been that virtual solutions can offer high-quality outcomes. This is so true that many companies are allowing employees to work remotely permanently. Virtual health options are no exception to this trend.

There are countless telehealth services available these days. Individuals can connect with health professionals in just a few clicks—no waiting times or driving to a clinic. Additionally, individuals will not need to take large chunks of time off work, allowing for greater productivity. As such, telehealth solutions are often much less expensive than a typical in-person doctor visit. Even the Centers for Medicare and Medicaid Services (CMS) acknowledges the usefulness of telehealth services, seeking to expand access.

Employers can consider adding telehealth services into their plan designs. In some cases, it may be cost-efficient for employees to schedule a virtual health visit before an in-person appointment, under certain circumstances. In any case, having a telehealth option expands access to care and lowers expenses for everyone.

5. Consider more Optimal Benefit Plan Funding Alternatives

A more drastic option for reducing health costs is restructuring how plans are funded. For instance, a self-funded plan may be more cost-effective than paying a monthly premium for a fully insured plan. Other options include level-funding or reference-based pricing models, each of which carries its own set of administrative rules and legal constraints.

Funding decisions should not be taken lightly and should be based on several factors, such as the size of an organization, risk tolerance, and financial stability. Employee financial stability should also be considered, especially while the effects of the COVID-19 pandemic can still be felt. Employees may not be able to burden large premium increases, constraining some plan funding flexibility options.

Historically, employers have shifted costs onto their employees (usually through higher premiums) as a way to reduce spending. However, that trend is not expected to be widespread in 2022. Considering the tight labor market and how many individuals are struggling financially due to the pandemic, employers will likely be hesitant to shift too much of the burden. Doing so may cause employees to seek other jobs or simply forego preventive care, which can lead to chronic conditions and higher future health care costs.

Conclusion

Employers have a variety of ways in which they can help contain health care expenses. Choosing the right method will depend on unique employee populations and budgets. For a copy of this news brief, click here: 5 Strategies for Reducing Health Benefit Costs in 2021 .

Reach out to Mike Young today for help strategizing your best options at 714.716.4060 or mike@my-EBP.com .