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Smart Benefits: Controlling Healthcare Costs Through Choice

Monday, August 27, 2012


While healthcare costs are due to rise, employers can provide choices that may please employees. Photo: katerha/flickr.

Nationally, healthcare costs are projected to rise an average of 7% in 2013 and an average of 5% for employers who offer wellness programs. Locally, final rate factors are still not approved, but initial insurance carrier rate filings for 2013 are between 4-7%.

The good news? These projections are lower than the 9-10% hikes we’ve seen the past several years. But employers can do more to control healthcare costs. And it’s all about offering choice.

When it comes to health insurance, Rhode Island employers are recognizing that one size doesn’t necessarily fit all and are providing more benefit options for employees that allow individualized selections to meet the unique needs of their families.

Health Savings Accounts (HSAs) in Demand

Health Savings Accounts (HSAs) provide several advantages over other plan options, including lower premiums in exchange for a higher deductible, tax-free benefits, the ability to use funds to pay for qualified medical expenses, and the chance to save money for future medical expenses – even Medicare expenses after retirement. When offered as a choice, 15-20% of employees typically enroll in HSAs, driving enrollment to 14 million nationally.

Vision Plans Come into Focus

If employers offer the right vision plan, employees can gain tremendous purchasing power – and discounts – when it comes to eye exams, frames, glasses and contact lenses obtained through a network of eyewear providers. Employers can either choose to pay for vision plans or offer them to employees, who are responsible for the entire premium. Even in the latter scenario, employees typically save over retail costs – particularly when multiple family members have eye care needs. And remember: employees with HSAs can use their pre-tax money to pay for vision plan copays.

Wellness Plans are Hot

Employers are increasingly realizing that offering well-designed wellness programs can deliver a measurable value on investment (VOI) by improving employee health, work productivity and morale. The key is to make wellness programs appealing. Make sure it is voluntary. Offer an incentive tied to health plan premiums. And give employees plenty of choice when it comes to activities.

Worksite Voluntary Benefits

A wide variety of worksite voluntary benefits are available, from life, accident and disability insurance to critical illness, cancer and long-term care policies – and even college tuition. With voluntary benefits, the employees pay the full premium, but at a reduced cost than if the employees purchased coverage on their own. As many employers scale back on certain benefits, the popularity of voluntary plans is increasing.

Are Defined Contributions the Answer?

Health benefit costs will continue to increase. And if employees have to pay more, they’ll likely want to decide how to spend their dollars. To meet this desire, defined contribution plans are gaining popularity. With defined contribution, the employer give employees a set amount of money each year and each worker decides what to purchase based on their own interests and needs. Carriers are starting to offer defined contribution options and state healthcare exchanges are considering offering defined contribution models to small businesses.

Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

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