It’s no secret that healthcare insurance expenses are on the rise. Even in the current inflationary climate, the cost of healthcare coverage has outpaced core inflation and wage growth. Prescription drug costs, in particular, are a significant driver of this increase, impacting employers significantly.
For companies required to provide healthcare coverage, these rising costs are a severe challenge. Not only do they affect the bottom line, but attempts to reduce benefits or increase employee contributions can strain employee relations. This is especially problematic for small and medium sized businesses (SMBs) competing for top talent. However, there are reasons for optimism. Market forces are spurring innovative approaches tailored to the needs of SMBs.
Challenges of Offering Employee Health Benefits
Understanding the distinction between the rising cost of healthcare and the rising cost of healthcare insurance is crucial. Insurance is driven by financial factors, many of which are complex and beyond the scope of this discussion. Nevertheless, employers are feeling the financial squeeze.
Healthcare costs are consistently a significant expense in any family’s budget, making employer sponsored healthcare coverage critical for many families. This, in turn, pressures employers to offer competitive benefits to retain talent.
Employers have limited options to stabilize or reduce healthcare and prescription drug costs. Shifting deductibles or coverage exclusions can complicate plan selection and often place more burden on employees. Additionally, as the marketplace consolidates and specialty medicines increase, prescription costs continue to drive overall coverage costs. Consequently, healthcare benefits often represent one of the largest expenses for employers, sometimes surpassing the cost of goods sold.
Common Ways to Reduce Employer Healthcare Insurance Costs
If you’re an employer sourcing coverage for your employees, consider revisiting some common strategies:
- Shop Around: Compare as many plans and carriers as possible. Consider direct-to-provider options, which can cut out insurance carriers from both pricing and care delivery. Blending direct-to-employer solutions with traditional carrier-based options can also be beneficial.
- Add Wellness Components: Including wellness check-ups and lifestyle coaching programs in your coverage can lower premiums overall. These programs encourage healthier outcomes, reducing the total cost of care. Educate employees on the benefits of these programs and encourage participation.
- Optimize Provider Choices: Ensure employees are accessing the right provider, at the right time, in the right place, and at the right price
PEO.com’s Solution: Beyond Financial Band-Aids
While healthcare insurance premiums are a common issue, solutions can vary. PEO.com vendors work with major carriers to offer variations on core policy strategies. One effective solution is obtaining coverage under a Master Plan. PEO.com vendors administer payroll and benefits for 2.26 million worksite employees. This large risk pool can lower premiums and reduce administrative overhead for SMBs.
For some SMBs, a Fully Insured plan can offer greater savings, depending on their risk profile, employee pool, and claims history. PEO’s scale and expertise provide additional negotiating leverage in managing these programs, benefiting clients significantly.