Top companies know that a competitive benefits package is foundational to a strong talent management strategy.
According to Unum’s Benefits Buyers Study, 78 percent of workers base their acceptance or rejection of a job offer in part on the benefits package. For current employees, nearly half say that they would stay with their employer because they are satisfied with their benefits.
It’s clear: comprehensive benefits packages offer employers a prime way to distinguish themselves from their competitors. But with rising costs, how can employers stay in the game without breaking the bank?
Benefits represent a major component of an employee’s overall compensation. According to the December 2016 Employer Costs for Employee Compensation report compiled by the Bureau of Labor Statistics, benefits can represent between 30% and 37% of overall compensation spending in both the private and public sector.
With employee benefits comprising over a third of compensation spending, it’s critical that employers understand how they can manage those costs while still offering competitive benefits that attract great employees. Here are five practical ways to save on benefit costs.
1) Select a Broker
A good health insurance broker can be a tremendous asset to an employer that’s interested in saving money on the cost of benefits in the long run. Trying to understand the details and complexities of employee benefits can be confusing for even the most seasoned HR professionals, so relying on an experienced broker can not only help you understand benefits, but they can often identify savings and cost control tools.
According to the National Association of Health Underwriters, brokers will do the following on behalf their clients:
- Identify your individual and unique needs and requirements for health insurance;
- Research the market for available plans to fit your budget and your needs;
- Identify plans that include desired medical providers, hospital networks or specific prescription; drugs
- Assist you through the enrollment process;
- Assist you with service or claims issues that occur after you’ve enrolled;
- Review options, changes in your needs and pricing for annual re-enrollment.
Each one of these actions addresses your benefit savings in some way. While some are obvious, such as working to find the right plan for your needs and your budget, others can also save you money in the long run.
By assisting clients with enrollment, a broker takes some of the administrative burdens off the HR department, allowing HR professionals to remain productive and avoid being bogged down. A good broker will have systems and technology in place to make the process as easy as possible for their client.
2) Invest in Technology and Systems
The availability of technology and systems to manage and maintain benefit information and employee records can also boost the productivity of your HR department. By going paperless wherever possible and investing in systems to maintain benefit information electronically employers can reap significant savings over time. In fact, by one estimate going paperless can save $500 per person per year in terms of paper, ink, toner, and printing costs. Going paperless can also help an organization avoid losing critical documents and sensitive employee information, by securing that information in the cloud.
Apart from the immediate savings on printing and the security features of a paperless system, there is technology that can help organizations connect benefit enrollment to payroll, and can even integrate enrollment into the onboarding process for new employees. This type of automation can save an HR department valuable time in the enrollment process as well as make it easier to manage important employee data.
3) Stay Compliant
Sometimes cost savings involves avoiding risky practices that could result in fines and penalties for an organization. For instance, the Office of Civil Rights (OCR) within the Department of Health and Human Services has been stepping up their enforcement of violations of the Health Insurance Portability and Accountability Act (HIPAA), a 1996 law dealing with private medical information.
In fact, from 2012 through 2014 alone the OCR went from settling 9,407 HIPAA related complaints to 17,748. This type of private data that may be a part of an employee’s file could be at risk for cyber-attack or physical theft depending on how your organization manages it. There have even been OCR investigations into some employers for not conducting appropriate risk management.
Another compliance exposure almost all employers face is failing to properly share key benefit information with their employees. Under the Employee Income Retirement Security Act (ERISA) employers must provide important plan documents to their employees, including a Summary Plan Description. The failure of a plan administrator (often the HR professional) to provide an employee with a Summary Plan Description within 90 days of becoming a participant (or 120 days of a new plan being established) could result in a fine of $147 per day.
HR professionals are responsible for making sure that their organization is following applicable state and federal regulation when it comes to employee benefits. It can seem overwhelming, but it is an area where a broker can offer valuable insight and guidance, as can implementing policies and procedures that create consistent practices within an organization. Smart HR departments know that by practicing risk management they’re saving themselves and their employer much bigger headaches.
4) Engage Employees with Clear Communication
Let’s say an employer works with a great broker, and together they create a value-based health care plan, and the company invests in all of the latest and greatest technologies for storing and securing employee data. All of that hard work and effort is diluted if you aren’t communicating effectively with your employees. For any of these cost-saving efforts to be effective, the HR department needs the buy-in from employees and their supervisors.
A good example of the importance of employee communication to your organization’s bottom line is low participation rates in a wellness plan; if your organization has decided that a wellness program is going to be a part of your efforts to introduce a value-based health care plan, you need strong enrollment in order to make the program a success.
Without employees participating the possibility that you’ll see a strong return on your investment goes down significantly. A study by the Employee Benefits Research Institute found that communication was a significant factor in employees who chose not to participate in a wellness plan- either they didn’t think the program was something they needed or they felt as though they didn’t have enough information on the plan. This reflects on the failure of their employer to a) explain to them how the wellness program could be advantageous and b) offer a clear explanation of the procedures for enrollment.
If an employer wants or needs strong participation in the benefits program in order to make it successful, they have the duty to communicate that to their employees. Fortunately, this is an area where a strong broker relationship can help an HR department devise communication strategies and assist with enrollment.
5) Move Towards Values-Based Health Care
Annual family premiums for employer-sponsored health insurance rose an average of 3 percent to $18,142 in 2016, a slight increase at a time when workers’ wages (2.5%) and inflation (1.1%) also grew modestly. But consider where premiums were just over ten years ago. Premiums for family coverage have increased 58% since 2006 and 20% since 2011. Organizations are finding that even as costs for health plans rise (for both employers and employees) patient outcomes aren’t necessarily changing.
Value-based benefits are programs and plans that focus on succeeding in better employee outcomes and lower costs for employers. There are a number of options that employers can take to implement value-based health care plans, including employee health screenings, wellness programs, disease management, and utilizing a high-performance network of providers.
According to the 2016 Kaiser/HRET Survey of Employer-Sponsored Health Benefits, large employers (200 employees or more) are amplifying their savings strategy specifically with:
- Health Risk Assessments. Early detection of the risk factors for certain health problems can lead to lower disease rates, reduced employer health care costs, reduced absenteeism, and increased productivity. A health risk assessment includes questions about medical history, health status, and lifestyle. Nearly 60% of large employers offer health risk assessments and 54% of these employers offer a financial incentive to encourage employees to complete the assessment.
- Biometric Screenings. Over 50% of large employers offering health benefits offer employees the opportunity to complete a biometric screening. A biometric screening is a health examination that measures an employee’s risk factors such as body weight, cholesterol, blood pressure, stress, and nutrition. Among large firms with an incentive, the incentives include: lower premium contributions or cost sharing (52% of firms); requiring a completed biometric screening to be eligible for other wellness incentives (32% of firms); and cash, contributions to health-related savings accounts, or merchandise (56% of firms).
- Wellness Programs. An employer-sponsored wellness program is another way employers can move towards a value-based health plan. A wellness program that encourages employees to become more physically fit, to change their diet, or even quit smoking can help create a healthier workforce that is more productive. Over 80% of large employers offer some form of a workplace wellness program.
- High-Performance Networks. Choosing a plan that offers a high-performance network of providers may sound, at least at first, like it may be a more costly option, but it may not be. High-performance networks are made up of providers that are shown to deliver better patient outcomes, which can be a benefit to both the employee and the organization. High-performance providers also offer newer less intrusive options for care. For example, a patient who has a laparoscopic appendectomy may only be out for a few days, while a patient that has “open” surgery to remove an appendix may have a much longer recovery period.
Disease prevention and intervention efforts can be amplified with an employer-sponsored clinic. Whether located onsite or near-site, employees and their families have access to no-cost primary care and generic medications. The result is lower health care costs and improved employee health.
Over time this value based approach- spending a little on medical screenings or wellness- pays off by shaping a workforce that has fewer visits to the hospital, where chronic health issues can be managed and treated before they become seriously detrimental to the employee, and where providers are more carefully selected for results.
Managing to control costs while maintaining a benefits package to recruit the best people in your field is a challenge, but not an impossible task for the HR professional who follows the steps above. By investing in relationships with benefit professionals, cost effective and value-driven health care plans, the technology to increase productivity, all while avoiding risk, your organization can stand out from your competition.
-  “EMPLOYER COSTS FOR EMPLOYEE COMPENSATION – DECEMBER 2016” https://www.bls.gov/news.release/pdf/ecec.pdf March 17, 2017
- THE BROKER ADVANTAGE http://www.nahu.org/consumer/BrokerAdvantage.cfm
-  Ten Benefits of Going Paperless http://community.aiim.org/blogs/dennis-kempner/2014/07/29/ten-benefits-of-going-paperless
-  Why 2016 could be banner year for health-care data breach fines http://www.cnbc.com/2016/08/05/why-2016-could-be-banner-year-for-health-care-data-breach-fines.html
- DOL Increases Penalties for ERISA Compliance Violations https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/erisa-penalties.aspx July 21, 2016
-  What Motivates Wellness Program Participation? https://www.ebri.org/pdf/ff.263.wellness.9jan14.pdf January 9, 2014