Employers cited the high costs of medical services, prescription drugs and specialty drugs as their top three health care cost-management challenges, according to Gallagher’s latest Best-in-Class Benchmarking Analysis.
Organizations that scored among the upper 25% in controlling health care costs offer a competitive benchmark for employers interested in taking a more proactive and structured approach, according to William F. Ziebell, president, Gallagher Employee Benefits Consulting and Brokerage.
Best-in-class employers excel by focusing on helping employees get the right care at the right place, time and price. To better understand how they do this, Gallagher measured three-year trends for health premium increases and decreases, as well as the priority placed on managing health benefit costs and the perceived success of the underlying strategy.
The analysis found best-in-class employers tend to shift fewer health care costs to employees through premiums, deductibles and copays. Instead, they’re making coverage more affordable to increase the likelihood that employees will seek the care they need and follow treatment plans.
“While there are a variety of valuable tactics employers have at their disposal to contain health care spend, some can have unexpected consequences and may actually weaken an employer’s ability to manage important health outcomes, like physical and emotional wellbeing. An example is an employee who responds to cost shifting by avoiding the expense of medical care. At worst, the employee could end up in the hospital for an untreated condition. And at best, the employee may have escaped that outcome or the employer would have paid less for the hospital stay—if the plan incentivized regular care,” says a human capital insights report based on the benchmarking analysis.
The best-in-class employers are more likely to offer only one or two medical plans. Gallagher says narrowing the health plan platform concentrates buying power to rein in employer expenses, and consolidates efforts to communicate and measure employee wellbeing for clearer results.
“Data helps take the fear out of making big benefit decisions. Understandably, employers often shy away from choices that disrupt employee expectations and cause pushback, but that reluctance hinders innovative thinking. Data analysis can model the impact of possible benefit designs and pave the way for changes that have lasting value,” the insights report says.
The report goes on to explain that benefit trends sometimes entice employers to jump on board without using data analysis to guide their decisions. Disease management programs that focus on high-cost conditions like asthma provide an example. Targeted data analytics help employers sift through their cost drivers to understand not only the condition’s prevalence, but also whether costs are high enough to warrant a more robust disease management program.
The benchmarking analysis also found that for a better perspective on how to actively manage and lower overall spending on drugs, without directly affecting employees, best-in-class employers are more inclined to carve out pharmacy benefits from the health plan. The analysis shows 14% of employers are doing this now, but that is projected to increase to 25% in two years.
More insights from Gallagher’s analysis can be downloaded from here.
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