Healthcare Cost Containment: Solutions You Can Implement Now

A recent survey reported that 41% of employers cited healthcare cost as the most serious challenge facing their organization. Healthcare benefits have become one of the largest, fastest-growing, and most significant expenses for American companies.

With no end in sight to crippling increases, it stands to reason that employers are seeking more innovative and effective strategies to keep costs in check.

New Trends And Solutions for Employers
Traditional strategies, like cost shifting to employees and increasing co-pays, deductibles, or lifetime limits, have ruled as the key methods used by most employers through 2007. Many industry experts see more innovative systems as the best way to control rising medical costs in the long run. Moreover, many employers have reached the saturation point with cost shifting. As a result, many are turning to more effective approaches believed to offer solutions for the long term.

Key trends reported by healthcare consulting firm Watson Wyatt Worldwide (Washington, DC) provide insight into what employers are doing to realize these long-range goals. A growing number of companies are utilizing the following cost-containment ideas:

1. Incentives/penalties for healthy/unhealthy behaviors. More companies are offering financial incentives to employees who have healthy lifestyle behaviors or participate in wellness, fitness, and weight-reduction programs. Be sure to consult with your legal counsel prior to implementing a reward/penalty program.

2. Full coverage for preventive-care benefits. Employers are covering preventive medical care and not subjecting them to a deductible. Included in these fully paid benefits are vaccinations, exams, and screenings for early diagnosis and intervention in breast, colon, and cervical cancers.

3. Health coaches/on-site health centers. A growing number of employers offer access to health coaches, nurse hotlines, and health advocates. Individualized advice is provided to workers on personal healthcare needs to educate employees about the best care and what questions to ask their providers. Many health insurance carriers' Web sites provide extensive online tools to support healthy lifestyles and change behavior.

3. Health savings accounts/fewer plan options. Consumer-driven health plans continue to grow in popularity, especially in areas with heavy PPO participation. Health savings accounts (HSAs) and health reimbursement accounts (HRAs) continue to grow in popularity.

4. Voluntary benefits (paid by the employee) to meet individual needs. More employers are offering employees a variety of benefits such as: homeowners, automobile, group life and long-term care insurance, fitness memberships, chiropractic care, and weight-management programs.

5. Web-based personal healthcare management. Employers are providing online tools to help employees evaluate and estimate their healthcare expenses and needs.

While some employers have been using wellness programs and disease management as a means to contain costs and improve productivity, nutritional marketing giant Herbalife (Los Angeles) initially started a wellness program to "motivate and educate," according to George Fisher, Herbalife's vice president of worldwide corporate communications. The three-year old wellness program was designed with a "walk the talk" philosophy and offers employees a full fitness center, personal trainers, and subsidized meals at their organic restaurant.

Herbalife has built a wellness program based upon the ideals of its founder, and the input of employees, which is key to the program's success. According to Fisher, core program values are flexibility and openness to change.

Consumer-driven health plans have recently been introduced to cut costs, according to Debby Luhan, Herbalife's vice president of benefits and compensation. With more than 20% of employees participating, she cites face-to-face communication as the key to the program's high involvement levels. Financial incentives for healthy behavior will be phased into the program in the future.

Experts advise employers to be sensitive to their company culture to minimize resistance to new programs. Human resource professionals need to know what employees like and what their hot buttons are. A new study by the Employee Benefit Research Institute (Washington, DC) found that employees' discomfort with new ideas will not prevent them from considering a better option. The same study found half would be extremely likely to take part in the program if it meant a 10% discount in premium.

Health insurance premium audits are emerging as another way to cut healthcare costs. If a company audits every other significant expense category, why not conduct an audit of one of the largest expenses, health insurance?

In a typical healthcare insurance audit, a third-party auditing firm will be retained to conduct the audit. The consulting firm's fee is based on a percentage of the overall savings found. There is no cost to the employer if savings are not identified in the auditing process.

Common-Sense Savings Tips

1. Check employee eligibility. Employers should regularly audit their medical invoices to make sure they are only paying for eligible employees and their dependents. At any given time, 10% of dependent members are ineligible, according to HR Best Practices (Franklin Lakes, NJ), a third-party administrator that works with employers to control healthcare costs.

     a. Secondary eligibility. A common-sense check of employee enrollment applications may reveal clues. For example, dependents with birth dates less than nine months apart, or deceased retirees and their spouses on the retiree medical plan may be discovered.

     b. Nonsubscriber eligibility. Nonsubscriber eligibility refers to family members receiving benefits they are not paying for. For example, nonsubscriber eligibility audits compare coverage to the relationship code. These audits reveal ineligible spouses and dependent children.

2. Encourage generic prescription drug utilization instead of brand-name drugs when appropriate.

     c. Prescriptions account for up to 21% of the premium dollar. For most people, prescription costs are at the top of the list when considering health plans.

3. Educate employees about convenient 24-hour nurse help lines. The help line can be useful to determine if a visit to the emergency room or even the primary care doctor is necessary.

4. Consider financial rewards for employees that enroll on their spouse's medical plan. Require proof of coverage to be sure the employee is covered and is not trading health coverage for extra money in their pocket.

5. Keep on top of claims and charges by conducting regular audits of the bill. One audit reflected more than $200,000 in recoveries related to several erroneous claim payments (for treatment of kidney failure) that were made in conjunction with a Medicare-eligible case.

6. Be sure that workers who are injured on the job are directed to the industrial medical center or occupational care center for treatment rather than to their primary care physician.

Employers have a myriad of tools available to help them take control of healthcare costs and efficiently manage health care expenditures. In today's business environment, no firm can afford to stand on the sidelines and ignore active management of their health insurance program.

By employing new and innovative methods, company executives can feel confident they are doing everything possible to contain healthcare costs, maximize the value of their healthcare expenditures, and increase company profitability.

Barbara C. Oberman is the founder and CEO of Barbara C. Oberman Insurance Services Inc. (Calabasas, CA), a professional employee benefits insurance brokerage and consulting firm serving employers in Southern California. Barbara also serves as Secretary of the Consultants Association for the Natural Products Industry (Clovis, CA), www.Cani-consultants.org. For more information contact: barbara@bobermaninsurance.com, or visit her Web site at www.bobermaninsurance.com