It will come as no surprise to anyone who deals with healthcare insurance expenses that those costs are going up. Even in the latest inflationary environment, the rise in the cost of healthcare coverage outpaced virtually every metric, including core inflation and wage growth. Prescription drug costs alone are responsible for a massive increase being felt by employers.

For those companies who are required to provide healthcare coverage for their employees, these increases are a particularly severe blow. Not only do they hit the bottom line, but remedies that reduce benefits or increase employee contributions run the risk of straining employee relations. For small and medium-sized businesses (SMBs) competing for top talent, this can be devastating.

But there are reasons to be hopeful. Market forces are driving innovative approaches designed specifically to address the needs of SMBs.  

Challenges of Offering Employee Health Benefits

First, it’s important to understand the cost of healthcare is not rising so quickly. The cost of healthcare insurance is rising. Insurance is a financial business, not a medical one. A range of financial factors are driving up the costs – too many and too complex to examine here. But employers are feeling the squeeze and paying the price.

Regardless of the rate of change, healthcare costs are consistently one of the single greatest expenses in any family’s budget. That’s why employer-sponsored healthcare coverage is so critical to those families. This, in turn, puts additional pressure on employers to provide competitive benefits to retain the talent they need.

Employers have very few levers to pull to stabilize – much less, bring down – healthcare and prescription drug costs on their own. They can shift deductibles or coverage exclusions and limitations. But these moves often just complicate the plan selection process and don’t appreciably control the total cost but only place more of the burden on the employees.

In many ways, even these options are shrinking as the marketplace of carriers consolidates. And, while the range of specialty medicines expands, the associated costs of prescriptions drive up the overall costs of coverage. As a result, healthcare benefit costs tend to be the largest expense for employers, sometimes even more than the cost of goods sold.

Employee benefits remain one of the top expenses for businesses today. Because so many of these challenges are constants in the market, the solutions to address them often remain the same. 

Common Ways to Reduce Employer Healthcare Insurance Costs

If you are an employer tasked with sourcing coverage for your employees, you may have seen this list before. But if you haven’t considered all these yet, now may be a good time to give them a second look.

The first, most obvious solution is to shop as many plans and carriers as possible. At the same time, consider a direct-to-provider option. This cuts out the insurance carriers from both the pricing and the care delivery process. This could also mean a blend of both direct-to-employer solutions alongside of traditional carrier-based solutions. Depending on your risk pool, these contracts can be much more favorable, though they can add some administrative chores to planning and ongoing management.

Regardless of how you address routine coverage, adding a wellness component will lower premiums overall. Wellness check-ups and lifestyle coaching programs are proven to lead to healthier outcomes and help drive down the total cost of care. If such options are available to employees, help them understand the benefits and encourage them to participate. This can result in a win for everyone.

Ensuring that your employees are going to the right provider, at the right time, at the right place, and for the right price is critical.

VensureHR’s Solution: More Than Financial Band-Aids

VensureHR has taken a step back to look at the problem from different angles. As one of America’s largest PEOs (professional employer organizations), VensureHR clients are predominantly SMBs in industries of all kinds with a variety of risk profiles.

While the healthcare insurance premium problem feels the same to most such businesses, potential solutions can vary considerably. VensureHR also works with virtually every major carrier. Each offers variations on a few core policy strategies. This highlights the gaps in devising plans for those businesses positioned to address their premium costs more directly.

One solution is to obtain coverage under a Master Plan. VensureHR administers payroll and benefits for 2.26M worksite employees. When anyone SMB places their employees into such a massive risk pool, their resulting risk profile can go down, and the premiums come down with it. In this scenario, VensureHR also handles the benefits election and claims management processes, further trimming an SMB’s administrative overhead.

However, some SMBs are in a position to cut premium expenses even further. For them, a Fully Insured plan can yield even greater savings, depending on the risk profile of their business, their employee pool, and their claims history. Such a plan is a traditional insurance program. But, because of their scale and expertise, PEOs have additional negotiating leverage when they manage such a program on their client’s behalf. This is especially true for VensureHR, given its size and reach.

Potentially the most cost-effective solution is VensureHR’s Max Funded Benefits program, a variation on a traditional self-insured model. It builds its cost structure on reference-based pricing (RBP). This is more of a cost-plus model than the traditional top-down model carriers use to discount off a maximum allowable fee.

As a result, the total costs tend to be considerably lower than traditional carriers. This model also allows for some highly desirable options like $0 deductibles and $0 copays which can be extremely attractive to employees. These savings may also appear in prescription drug costs and other medical services.

This can be an ideal solution for companies with 25-150+ employees. A health plan must have critical stop gaps and measures to identify and mitigate medical and drug cost exposure. Most small businesses don’t hire a full-time HR professional until around 100 employees and are not looking into the deep layers of medical and prescription drug spend. In the case of Max Funded, VensureHR handles all necessary administration.

Necessity Drives Invention

The healthcare coverage pressures that employers are feeling will only continue to grow. The good news is that such pressure forces all participants in the healthcare ecosystem to look for better ways to fund and deliver the necessary services.

This is of special value to SMBs who rely on top talent to keep their companies competitive in their respective industries. By offering attractive benefits packages, they can attract and retain the talent they need. But that only works if they can afford plans that work for them. This is the inspiration behind VensureHR’s innovation in devising the insurance programs SMBs need.

If this looks like a potential solution for your company, let’s see if there’s a fit. Schedule a call with a VensureHR representative.