Employee Benefits Blog

With healthcare costs continuing to rise, small employers that aren't obligated to offer health/medical insurance per the Affordable Care Act’s (ACA) “employer mandate” have been dropping group coverage. This is a trend that started in 2009 during the recent recession. Some larger employers have also considered doing the same (though, they must pay steep ACA penalties if they do). At first glance, it might seem like this would bolster the health and stability of the individual insurance market. Despite the numbers of insured rising, however, increased costs and fewer options have put a serious squeeze on what was once a very healthy marketplace.

Group Health Insurance and Individual Health Insurance by the Numbers

Occasionally, a news piece predicts major shifts in the health insurance landscape, including dire predictions about employers dropping group health plans due to their high costs. However, it’s important to look closely at these numbers, as well as the size of the companies cited in the statistics.

It seems like the only thing we can talk about these days is the rising cost of healthcare. Whether it’s in the news or in the boardroom, healthcare costs are a major topic of conversation — and with good reason. Healthcare costs have been increasing for decades with no apparent end in sight. There are many differing opinions on how exactly to decrease costs and even more debate as to the cause behind them. What is the reasoning behind the drastic increases?

While that question may have many answers, one of the most impactful is the effect of chronic conditions, which require constant care from medical professionals. Chronic conditions range in severity and attention needed to manage them, which can dramatically affect the healthcare costs associated with them.

A recent study by the RAND Corporation, a nonprofit, nonpartisan research organization committed to making “the world safer and more secure, healthier and more prosperous,” looked into chronic conditions in the United States and their effect on healthcare costs. Their findings were both surprising and disheartening — but they do help explain at least one reason why overall costs are increasing so dramatically.

What Is a Chronic Condition?

A chronic condition is an illness that lasts for a prolonged period, but most definitions do not specify an exact period of time. For the purposes of the RAND study, they defined the term as a “physical or mental health condition that lasts more than one year and causes functional restrictions or requires ongoing monitoring or treatment.”

By this definition, we could assume that the term “chronic conditions” includes ailments such as heart disease, high blood pressure, asthma, anemia, diabetes, arthritis, cancer, and mood disorders, among many others.

What Causes (and Contributes to) Chronic Conditions?

According to the CDC (Centers for Disease Control), there are four major health risk factors that “cause much of the illness, suffering, and early death related to chronic diseases and conditions.” They are:

As the cost of healthcare continues to rise with seemingly no end in sight, employers of all sizes across the entire country are looking for ways to cut costs without compromising the quality of care. Many employers have already moved toward consumer directed healthcare, but another strategy some employers are turning toward is value-based insurance design (VBID).

While value-based insurance design is far from a topic discussed at the dinner table, it isn’t a new concept. In fact, one state adopted this plan design in 2008 and some principles of VBID, such as low-cost preventative care and wellness visits, were incorporated into Section 2713 of the Affordable Care Act (ACA).

VBID takes a very different approach than HDHPs (high deductible health plans)  when it comes to trying to save employers and employees money, so if you’re thinking of making a change to your employer-sponsored health insurance, it’s important to understand exactly what you’re signing yourself (and your employees) up for.

What Is Value-Based Insurance Design?

Value-based insurance design is a cost containment strategy being adopted and tested by some employers. This plan structure is different from traditional health insurance plans in that its purpose is to decrease costs for medical services deemed as “higher value,” while increasing costs for those considered to be “low value.”

More and more, employers are looking for innovative ways to increase the value of their employee benefits packages without breaking the bank. Oftentimes, this comes in the form of unique employee perks which attempt to depart from the tried-and-true. 

While this quest for creativity should be commended, no matter how well intentioned, sometimes the best laid plans wind up backfiring in spectacular fashion. To keep this from happening, it’s a good idea to vet your ideas with a representative cross-section of your workforce before introducing them to the entire company. Role playing worse case scenarios as an HR team might also help mitigate any disasters. Here are five examples of good employee perks gone bad.

Penny Wars for a Good Cause

“At a previous employer, we had a ‘penny wars’ competition to raise money for a good cause. It was part of a lot of fun activities for the annual workplace giving campaign and employee engagement (which was a good idea). Employees donated coins in jars labeled with each executive’s name. The executive whose jar collected the most money would get a pie in the face. When the CEO won, the penny jars quickly disappeared as it didn’t seem like a good idea to pie the CEO in front of employees — and no one wanted to be the one to actually do it.”

• Amanda, Chief Marketing Officer at Health Charities

As the third or fourth largest line item on most business’ profit and loss statements, employee benefits have been under pressure for years. Rising costs have impacted both employers and employees, but cutting benefits or pushing more of the financial burden onto employees will only exacerbate hiring and retention struggles. And as employers have figured out by now, relying on a once a year negotiation with their medical carrier is by no means an effective or sustainable way to curb costs.

While putting all your eggs in one basket by attempting to contain employee benefits cost via an annual renewal negotiation is still more mainstream than the exception, employers would realize far more sustainable savings if they sat down with an employee benefits broker who is dedicated to year-round cost saving strategies. Additionally, renewal negotiations, which are still very much a part of cost containment, should not only be focused on price, but also on the multitude of contractual issues which, when thoroughly reviewed, can yield substantial cost savings.

The three areas we consider of greatest importance to sustainable employee benefits cost savings are 1) wellness through the identification and management of chronic conditions within an overall health plan, 2) high-dollar claims intervention, and 3) the effective purchasing of healthcare in the open market.

Wellness Through the Identification and Management of Chronic Conditions

When designed effectively, with targeted population health data to guide the way, wellness programs can be very effective in bringing down the overall cost of your employee benefits program. But wellness programs should not be solely focused on modifying behavioral health patterns such as smoking, lack of exercise, and poor eating habits. In fact, by promoting age appropriate screenings, preventative care participation, and medication adherence for chronic conditions, wellness plans can really pay off in the long run.

Chronic conditions such as hypertension, high cholesterol, diabetes, depression, back pain, and heart disease represent a significant risk for an overall health program. These conditions present challenges in direct medical expenses as well as indirect costs such as lost productivity and absenteeism. In our experience, members with chronic conditions typically make up 25 percent of the overall population, but are responsible for 75 percent of overall healthcare spending. Programs geared towards disease management, medication/standard of care adherence, and unidentified conditions present the greatest opportunity for cost containment and large claim mitigation in employee benefits programs.

In this day and age, it's critical for Chief Financial Officers (CFOs) and Chief Human Resources Officers (CHROs) to partner together with a shared sense of purpose to ensure a strategic advantage for their organizations. 

Consider the role of each in managing one of the largest costs to organizations today: healthcare benefits.  Due to the increasing cost of employer-sponsored healthcare, employee benefits are now often the third or fourth largest line item on an organization’s P&L. CFOs cannot ignore such a sizable expenditure, and must take a keen interest in understanding the underlying cost factors of providing medical coverage to workers.

CHROs are in a unique position to provide insight into these cost factors. Thus, CFOs and CHROs share the responsibility of managing human capital costs appropriately. Only with solid alignment between the objectives of the CFO and the CHRO will organizations continue to grow and prosper in today’s hyper competitive corporate climate.

We recently released an in-depth ebook which addresses not only the obstacles to creating CFO/CHRO alignment, but also the commonalities the two functions share, and the steps that must be taken to achieve proper alignment and sustainability of both financial resources and human capital resources in the coming years. You can download this free ebook/white paper simply by clicking here. It covers all of the following:

When working on cost containment solutions, many employers completely overlook a critical component that could secretly be costing them tens of thousands of dollars: medication adherence. Medication nonadherence is associated with a higher rate of hospitalization (and at a higher cost) than those compliant with their medication regimen.

It seems simple enough — people are prescribed medications and they take the necessary doses, right? Well no, not necessarily. Medication adherence is a complicated topic with multiple, unrelated causes that are difficult to pinpoint and treat. And unfortunately, this problem doesn’t actually have a simple solution. But nonetheless, it’s important for employers to understand what it is so they know how they can help — and how it affects their budgets.

What Is Medication Adherence?

Simply put, medication adherence is when patients properly follow directions for taking medications as written by a doctor or pharmaceutical company on the label. For example, many over the counter pain medications allow for one or two pills to be taken every four to six hours, but never more than so many in a 24-hour period. Some asthma medications require once daily doses, while others require two (morning and night), and others require four (two in the morning and two at night). In addition, many blood pressure and cholesterol medications are taken once daily.

Some medication requires a change in diet (such as avoiding certain foods, like grapefruit, which can counteract the drug) or have strict instructions on how to take the medicine, like not eating for a certain period of time after consumption. Many times, these food restrictions have to do with a body’s inability to absorb the medication or vitamins if certain foods are present in the patient’s system.

According to the Centers for Disease Control (CDC) there are three different forms of medication nonadherence:

For any employer hoping to contain employee benefit costs, workforce adoption of high deductible health plans (HDHPs) is almost always a critical component these days. Yet this flight to what’s become known as “consumer driven healthcare” comes with a duty to help the workforce become savvy shoppers of healthcare. As the traditional decision makers in this area, employers must keep in mind that many employees will feel overwhelmed with this new responsibility.  If fact, many experts already feel as if we are failing as a nation when it comes to this concept of healthcare consumerism.

Never before have employees had to care much about whether a prescription was brand name or generic; they just had a copay. Maybe that copay was more expensive for the brand name drug, but it was manageable in comparison with paying the full retail price. They also never had to pay more than a copay for a doctor visit, but now they’re on the hook for the whole bill (at least until they reach their deductible). It’s understandable that many people feel confused and frustrated by this change in benefits.

This is not, however, an impossible transition. With more and more companies shifting to HDHPs every year, the education challenge is widespread. Engaging employees in the decision making process will empower them to feel as if they can make good decisions on their own — instead of expecting their employer to do it for them. With some education and a little assistance from your employee benefits broker and internal communications team, employees can gain the confidence they need to control their healthcare spending. Here are a few things employers can do to engage their employees in consumer driven healthcare.

Many employees feel like they have to check-in with work even when they’re supposed to be enjoying paid time off. More often than not, this is a cultural issue within a company. Supervisors might be checking-in and sending emails in the evening or on weekends. This leads their direct reports to believe they need to respond immediately, and they may even start adopting these behaviors themselves. 

Yet, research has shown time and time again that workers need frequent breaks and unfortunately, Americans leave a lot of that paid time off on the table every year. It might seem like workers would be more productive if they aren’t using all their vacation time, but in reality, skipping our vacations actually makes us less productive. To keep employees operating in top shape, we need to encourage them to enjoy their downtime — and perhaps it’s fitting to begin with the July 4th holiday. Here are 5 ways to encourage employees to enjoy their independence...and their paid time off this weekend.

In the November 2016 general election, Arizona voters passed Proposition 206, which instituted an incremental increase in the state’s minimum wage, as well as mandated paid sick leave for all employees — not just full-time, but part-time, temporary, and seasonal workers as well. All HR professionals and business owners should be apprised to the changes this law will bring and what it means for themselves and their employees.

To assist with complying with the new law, we're providing you with sample paid sick leave policies, not only for employers with over 15 employees, but also for employers with under 15 employees. Feel fee to use these new sample policies in posters, updated employee handbooks, and wherever else you post your HR policies. Of course as always, you should consult with your legal council and benefits advisor to ensure accuracy and applicability to your business,*

Here's a recap of the new law.