Employers and Insurance companies…a case of Stockholm syndrome?
Several decades ago, employers became entangled in the provision of healthcare by offering to pay for health insurance and benefits to their employees as an incentive for employee retention. Why a business would want to delve into a market and benefit provision that they know nothing about is a different discussion but now US employers provide 88% of non-governmental health insurance. Over the years, the cost for this benefit has been split between employers, usually paying about 80% of the premium for individuals and 70% for family plans, and the employee. Besides saddling themselves with an ever increasing cost of healthcare, employers have also pigeonholed their employees into a healthcare structure that is taking up more and more of their wages. In fact, as of 2018, healthcare benefit is the largest cost to an employer after wages, accounting for 8.7% of the total cost per employee.
Healthcare continues to be a challenge and reported as the number one concern by employees. Since employees are any business’ more precious asset, it is imperative for employers to address this concern in a meaningful way.
In the current environment, employers are providing a benefit that is hidden behind a wall of every rising premiums as an up-front cost, and then episodic pitfalls of copays and deductibles. It makes sense for the employers to be more creative in addressing the number one concern of their most important asset...after all doing the same thing repeatedly and expecting a different result is the ultimate form of foolishness.
The change in mindset must start with understanding the reality of costs so a proper understanding of benefit/cost ratio can be realized. With the rise of DPC (Direct Primary Care) practices that offer vast and on-demand primary care services costing less than a phone bill at about $50-70/month, the market is ripe with multiple options. When an employer realizes that the cost of providing routine office visits, labs and medications for a 50-year old employee with high blood pressure, diabetes and high cholesterol is under $50 per month, it becomes much clearer that the employer can provide better usable health monies and save over 80% on healthcare costs which can be translated into higher wages for the employees and higher profits for the business.
There are a myriad of IRS regulations to be dealt with so here is a game plan to consider. Small employers (less than 50 employees) who are not required to offer health benefit can allocate $50 per month per employee to be used for health services as needed. You can even do a matching program so the employee is vested in this healthcare option as well. What you don’t get covered in this “cash pay” option are rare but costly emergencies like hospitalizations. To address this, perhaps you allow the employee to obtain a catastrophic coverage plan usually for about $100 per month, or enter a Healthshare contract--more on this in a later blog. So now instead of sinking at least $300 per month on an insurance premium that your employee still can’t really use due to large copays and deductibles, you can provide healthcare where all expenses are covered to a set amount without any out of pocket costs for the first $600, and yet only cost you as an employer half of what you were spending even if you decide to pick up the tab for the catastrophic health insurance plan or assist with cost of a healthshare plan.
Large employers (>50 employees) are currently required to provide health insurance but perhaps keeping in mind the above scenario, large employers can downgrade their current health insurance plan and use a portion of the savings from switching to a cheaper plan to be used by the employee in the cash market, and business itself can retain the remaining amount to add to the business bottom line.
I hope that above examples show how employers can continue to address the number one concern of their employees and yet control costs of their healthcare related expenses by stitching together offerings that take advantage of the discounts and market forces for cheap yet high quality free-market healthcare, and cheaper health insurance or healthshare plans to cover rare but high expense events like hospitalizations. Businesses succeed by being innovative--time to do the same to your healthcare benefits offerings as well!
In our next blog, we will look at the role physicians have played in the opaqueness and high cost structure of healthcare.