There are a number of important reasons to build cost containment into your employee benefits plan; the primary reason is sustainability. Cost control is an important factor influencing the future of your employee health benefits plan.
Skyrocketing Employee Health Benefit Plan Costs
COVID 19’s impact means much of the world is now dealing with rising costs and inflation. Canada is no different – these days it seems like the cost of everything is rising. Turns out, employee health benefit plan costs have already been steadily rising for years.
There are a couple of reasons that plan costs have been rising. One of the biggest cost drivers is prescription drug claims, specifically specialty drug claims. Specialty drugs are a relatively new category of drugs which were created to treat complex health conditions. They typically require special storage, handling, monitoring and administration. Sometimes they are created from living cells, so they cannot be duplicated as a generic once the patent on the original drug has expired. As a result, these drugs are extremely expensive. Just one employee claim for specialty drugs can have a devastating impact on your rates. Traditional prescription drug claims can also drive up plan costs. Brand name drugs and expensive dispensing fees can really add up.
Another significant cost driver for employee health benefit plans is disability claims. If not properly managed, a disability claim can last far longer than necessary. Because a disability claim pays out a percentage of a person’s earnings for the duration of the claim, they are expensive for the benefit plan. COVID 19 has had a significant impact on the population’s mental health – this has been reflected in increased disability claims due to mental health.
Finding the Balance
As an employer, your benefit plan needs to remain affordable so that your business can be successful, but it also needs to support your employees. It can be challenging to find the right balance. In a perfect world if you had unlimited finances, you wouldn’t have to contain costs or make decisions on benefits and coverage; you would simply focus on offering everything possible to support your employees.
In reality, you need to contain costs to preserve the sustainability of your benefit plan. If you were to offer a benefits plan that quickly became unaffordable for your company (as rates rise) you’d have to scale the plan back. Or worse yet, you’d have to cancel the plan and offer your employees no support and coverage. Not only would this mean your employees wouldn’t have the support they need to be productive employees, morale would also suffer. Employees would likely develop negative feelings about your company and their job. Whichever way you look at it, this scenario would not be good for business.
There are a number of ways to contain employee benefit plan costs while still supporting your employees. Creativity and innovation are the two key ingredients to controlling costs; this means finding ways to target cost drivers while still offering employees benefits to improve their health and wellbeing.
1. Prescription Drug Costs
Prescription drug coverage is arguably the most high-profile and widely used of all the employee benefits. Unfortunately, this is an area with a large potential for waste. Monetary waste occurs when the employee benefits plan pays out more money than is necessary to deliver the same standard of care. Containing costs means cutting the waste out of the plan.
At GroupHEALTH, we target prescription drug costs by eliminating waste associated with brand name drugs, large markups and high dispensing fees. Our Smart Rx suite of products encourage employees to purchase lower cost or generic drugs in order to receive full coverage. If employees choose brand-name drugs when there are lower-cost but equally effective alternatives, they receive less coverage.
Some of the Smart Rx products also require maintenance medications to be purchased from a central dispensing pharmacy. This contains costs associated with dispensing fees and markups; we have negotiated competitive rates for these costs which help the plan. Best of all, these drugs get delivered right to your employee’s door – no need to visit a pharmacy.
We also have options to limit the effect that specialty drugs have on the plan’s experience. This means requiring special authorization to receive coverage and limiting the coverage amount.
In these ways, employees are still supported with the prescription medication they need, but cost containment is built into the plan.
2. Disability Claim Costs
As one of the main cost drivers for employee benefit plans, controlling disability claim costs is essential. The best way to control disability claim costs is to include professional disability management services alongside disability coverage.
Disability management services are third-party professionals that work with your organization and the ill or injured employee after a disability occurs. The disability case manager provides your organization with non-confidential updates to assist in labour planning during the absence and return-to-work. They also work with the ill or injured employee to support them in completing paperwork, accessing services and support and creating a customized return-to-work plan. These services help the employee get back to work as soon as they are able. The duration of the disability claim has a direct impact on the cost of the claim. By providing disability management services, the employee receives support, and claim costs are minimized.
3. Mental Health Costs
The mental health of your employees can have a far-reaching impact on many areas of your business. Employees struggling with their mental health can be absent more often, make more prescription drug claims, exhibit lower productivity and display a propensity for presenteeism. The best way to control costs associated with mental health is to be proactive. Give employees and their families support for their mental health by providing access to an employee and family assistance program.
An employee and family assistance program (EFAP) supports employees with confidential access to free short-term counselling, along with other resources such as: articles, tools and podcasts. Employees can access the EFAP 24 hours a day, 7 days a week, 365 days a year. It can help employees address mental health concerns in regard to finances, divorce, childrearing, eldercare, anxiety and more. This way of supporting employees also helps control costs because employees are more likely to get the help they need before their mental health deteriorates. This has a positive impact on prescription drug costs, disability claim costs and employee morale.
In many circumstances, cost control mechanisms are also of benefit to employees. For example, employees with access to a central dispensing pharmacy get the convenience of having their prescription drugs delivered directly to their door. Disability management services can also be crucial for employee well-being: statistics show that the sooner an ill or injured employee gets back to work, the more likely they are to return to pre-disability health. It’s a good reminder that cost containment doesn’t have to mean cutting back the level of support you give your employees – it can actually mean better coverage.
Good Advice is Key
Is cost containment built into your employee benefits plan? Does your provider innovate to create new ways of cutting costs while offering excellent benefits? If not, it’s time to look around. 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 benefits packages that work as hard as you do.