By David Barton
Founder, Shenandoah Valley Group
Most busy companies know two things. They must protect growth and profits and they must provide competitive benefits to retain the best employees.
But managing health benefits sharply is often done with a dull blade. The result? Companies miss out on big savings and wind up with cookie cutter benefit plans that may not match their specific needs.
If companies want to approach benefit plan manage more surgically, then they only have to remember one thing: benefit plan management is simply money management.
Companies have been conditioned to think that the easiest, most risk-free way to provide health benefits is to work through traditional, large insurance providers. But getting educated on the way health benefits really work is one of the best investments a company can make to achieve their goals for growth and profits.
Education is Key
Providing health benefits really comes down to a company’s budget and how much they want – or can – spend each year on providing employee benefits. I always ask my clients the same question – do you want to pay retail or wholesale rates for health benefits? It’s not a trick question and the answer is usually pretty simple.
Paying retail rates to an insurer that calls the shots on premiums and benefit options as part of a packaged deal can seem like the easiest, most practical step. But, the cost of that move is not only paying retail rates for benefits, but also allowing someone else to control your checkbook.
Health insurance is really not that complicated. Health benefit plans are simply a bill paying system. Medical providers charge a certain rate for their services, and they bill for those services and get paid by the patient’s health insurance. Depending on the health insurance benefit plan, the patient might pay a deductible or may pay the amount that their health insurance doesn’t cover – or both.
What most companies and HR managers don’t see is what medical providers charge and what they are willing to be paid.
If you are saying to yourself – I don’t want to know, or I don’t have time, well you would not be the first. It’s hard to argue that HR managers and CFOs are strapped for time. But understanding how medical bills are paid and how you can stay in the driver’s seat is not as hard as you may think.
The Basics
Using what is known as reference-based pricing, you can set spending limits on health benefits and make sure you don’t overpay hospitals and doctors. For companies large to small, that can be done through simple self-funded benefit plans.
Reference-based pricing is a health plan strategy where the employer sets a ceiling on the amount it will cover for a procedure rather than having the provider determine the cost. Providers are then asked to accept the RBP payment, or provide justification as to why their fees exceed reasonable and customary charges.
Medical claims are still going to happen, but how you pay them makes all the difference. With a self-funded plan you can used reference-based pricing to determine how much you pay hospitals and doctors for services.
Still sound complicated and risky? It’s not. With the help of an insurance advisor, you not only set your spending limits, but have the support you need managing benefits and medical claims. You can even automate the claims process, making sure employees get prompt attention and providers get quick payment resolution.
Wait, There’s More
Another area where companies often miss out on huge savings is in prescription drug costs. Again, it comes down to education. Many employers are simply not aware of the prescription drug programs available that can significantly reduce the cost of even the most expensive prescription drugs. In fact, there are programs readily available that can help employees get their highest-dollar prescription drugs for free.
Changing how you pay for providing health benefits is all about changing your mindset. Companies are fully able to control their costs and decide how much they are willing to pay. And they can do that while still providing competitive benefit packages that keep employees happy – maybe even happier.
Staying educated means you have all of the options and the benefits.
At SVG, we have been advising companies on better ways to manage health benefits for 17 years and helping control costs and better deliver benefits. If you would like to learn more grab some time on my calendar. I look forward to helping you stay educated and in the driver’s seat in 2024.
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