How to Provactively Manage Employee Health Benefit Costs
Sponsoring an employee health benefits plan is an important investment for any business. The problem is, you don’t have an unlimited budget and the cost of sponsoring a plan must be affordable for your business. The best way to keep the plan affordable is to be proactive in how you contain costs. There are many ways you can do this while still supporting employees with comprehensive benefits.
Many Reasons to Sponsor a Plan
Most employers begin sponsoring an employee health benefits plan for one or both of two key reasons: recruitment and/or to support employees.
Sponsoring a plan to support recruitment and retention is a good business strategy. Attracting the best employees and keeping those employees working for your company has a tremendous impact on your company’s success. We know that it is a competitive labour market, and that employment is a lot more mobile than it used to be (before work-from-home arrangements were so common). We also know that the presence or absence of an employee health benefits plan can influence a prospective employee’s decision to accept or reject a job offer. It becomes clear that employee health benefits do matter to employees, and they are in fact an important element of the recruitment process.
Sponsoring a plan to support employees is the other main reason to offer employee benefits. Giving employees support for their physical and mental health leads to fewer absences, more productive employees and higher employee engagement. This too is a good business strategy. It also feels good to help others.
Balancing Sustainability and Support
While it’s clear that there are good reasons to support employees with benefits, it’s also necessary to manage the costs of the employee benefits in order to protect the long-term sustainability of the plan. The challenge is finding the right balance between containing costs and supporting employees. It’s necessary to introduce plan safeguards now before costs become unmanageable.
Unfortunately, the possibility of costs becoming unmanageable is a valid concern. One of the biggest cost drivers in employee benefits is prescription drugs. Prescription drug spend has been steadily increasing for years, largely due to science and innovation. New prescription drugs and new treatments can have life-changing effects on employees, but their price tag can cripple a benefits plan.
Disability claims are another cost driver that could threaten the sustainability of your plan. It’s important to support employees through an absence, but containing claim costs is also necessary.
Proactively Managing Costs
The key to protecting the sustainability of your employee benefits plan is to be proactive. Take steps now (while the plan costs are still manageable) to ensure that they stay that way in the future.
1. Target prescription drug costs
Prescription drug costs are one of the biggest cost drivers for employee health benefit plans, but they also have a number of ways that they can be contained without compromising health outcomes. Ideas include:
- Mandatory generic subscription – Why pay for brand-name prescriptions drugs when there are safe, equally effective generic alternatives that cost a fraction of the price? Generic drugs contain the exact same active ingredients as the innovator drugs, but the patent on the brand-name drug has expired. This means generics are sold at a reduced price. Ensuring your plan only covers the costs of generic drugs can have a dramatic impact on plan costs. According to Telus Health, in 2021, the average brand-name drug claim was $121 while the average generic drug claim was $20.29. It’s difficult to comprehend while all plans don’t have this in place.
- Bio-similar switching – High-priced biologics and specialty drugs are often made from living cells, so it’s not possible to replicate the exact chemical formula of the innovator drug to create a generic (as with brand-name drugs and generic drugs). Instead, when the patent expires, a “similar” drug can be created at a much lower cost. Because it does not contain the exact same ingredients as the innovator drug, bio-similar switching requires collaboration between doctors and pharmacists in order to make the switch to a bio-similar. The cost savings can be substantial; B.C.’s provincial drug plan has introduced bio-similar switching to control costs with very positive results.
- Prior authorization programs – Prior authorization programs target higher cost drugs and ensure that only the most necessary drugs are prescribed. It usually involves a standardized, unbiased review of the prescription drug and the employee’s condition.
- Step therapy – Step therapy means, in order to be covered, employees must utilize/explore lower-cost prescription drugs first before moving on to higher cost drugs. This can really help contain drug costs especially when it comes to maintenance medication for conditions like diabetes or hypertension.
- Virtual pharmacy – A “virtual pharmacy” is just a pharmacy that has a limited number of central locations where it dispenses and ships medication from. Lower overhead costs mean these pharmacies can offer more competitive pricing, and the service can also help improve medication adherence. Many employees already utilize virtual healthcare, so a virtual pharmacy makes sense. It’s safe and convenient for plan members and it helps protect the sustainability of your plan.
2. Manage long-term disability costs
Long-term disability claim costs are another significant cost driver for your employee benefits plan. The best way to proactively manage these costs is to utilize professional disability management services.
Disability management services support an ill or injured employee during an absence. This includes both practical support for things like filling out paperwork or navigating medical appointments, as well as emotional support during a difficult time.
When the time is right, the disability management case worker then creates a customized return-to-work plan to get the employee back to work as soon as they’re able. The focus is on what the employee can do, not what they can’t do. It may mean modifying duties and/or hours to effectively transition the employee back to the workplace.
Research shows that the sooner an employee returns to work after an absence due to illness or injury, the more likely they are to return to pre-disability health. From a financial standpoint, helping employees return to work as soon as they’re able shortens the length of the disability claim, which minimizes plan costs.
3. Focus on prevention
Without a doubt, prevention is always good medicine, and proactively managing employee health benefit plan costs means helping prevent negative health events to begin with! This means putting in place incentives, support and benefits to encourage employees to pursue a healthier lifestyle.
Including wellness components in your benefits plan and your workplace can be accomplished in several ways. First off, including an employee and family assistance plan as part of your benefit plan can give employees support for mental health. Short-term counselling and other supports can help employees work through mental health challenges before they escalate.
Pursuing a healthier physical lifestyle can be incentivized through subsidized gym memberships, a wellness spending account, lunchtime walking clubs or personal training sessions. Developing a workplace culture that celebrates and encourages better health is a powerful way to prevent negative health events which impact employee health benefit plan costs.
Good advice is key
Does your employee health benefits plan contain proactive cost control measures to protect the sustainability of your plan? Are you looking for a provider who can help you find the right balance between supporting employees and controlling costs? Review your options with one of our licensed advisors on the phone or in-person or contact us for a comparison quote.
Whether you’re looking for extended health and dental coverage, disability coverage, or life and critical illness coverage, GroupHEALTH has affordable benefit packages that work as hard as you do.
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