The Ongoing Struggle to Lower Health Care Costs for Employers and Employees

It’s the human resources dilemma: how to balance what’s best for the business with what’s best for employees.

The place where you feel it the most? Medical benefit costs. With health care costs increasing nationally, HR is stuck in the middle trying to decide between savings for the company and easing the cost burden on employees.

Finding new strategies to lower costs is a constant challenge — one that doesn’t always prove fruitful. Employers that tried 14 or more tactics to curb rising health benefit costs, such as having healthy food choices available or offering onsite fitness facilities, only realized .4 percent savings, according to a recent Mercer survey. That’s a lot of work for little payoff.

Barry Rose, superintendent of Cumberland School District in Wisconsin, cycled through numerous health plans in the last six years, none of which struck the right balance between saving the district money and satisfying employees. “I couldn’t keep taking money out of the budget to spend on health insurance. Our district needs that $2 million for a new high school and teacher salaries.”

One hidden culprit behind the health benefits struggle? High-deductible health plans. Today’s average deductible is $3,000. Yet, many Americans don’t have $400 in savings to cover medical costs.

Deductibles often are preventing people from seeking the care they need. Due to cost, 44 percent of Americans say they avoided the doctor last year when they were sick or injured. In addition to lower company morale, care avoidance is costing businesses a lot of money. Illness-related productivity losses cost employers $530 billion on top of the $880 billion they spent on health benefits in 2018.

When J&E Manufacturing Co., a custom metal manufacturing company in the Midwest, learned from their existing health insurance provider their premiums were set to balloon over 30 percent in 2019 along with a deductible of $6,500, Ha Nguyen, corporate human resources manager, took a hard look at alternatives for their 200 employees.

“I couldn’t stand before our employees and tell them that,” said Nguyen, “It would upset most people, and we would risk some of them deciding to explore the marketplace to find a different job. Manufacturing is in a talent shortage right now, so we can’t afford to lose employees.”

With unemployment at an all-time low, it’s a candidate’s market; they have negotiating leverage and little tolerance for inferior benefits. Recruiters are struggling to offer attractive new incentives — commuter reimbursement, stock options, and personal trainers. Between the 14 tactics to lower costs and the myriad efforts to attract and retain talent, human resource professionals are juggling a lot.

HR managers need solutions that lower everyone’s health care costs and also promote compelling talent acquisition and retention. How can they do that? By giving employees what they want:

1. Clarity on what care is covered.
2. Clarity on the exact cost for that care.

Employees want access to both those things before they obtain care, not weeks after. When employees have access to these things in their health insurance plan, it can drive down costs for the employer.

Both J&E and Cumberland found such a solution in on-demand health insurance, a new model of health insurance that gives employees more control. Instead of a deductible and unpredictable costs, they have simple copays, easy coverage verification, and price certainty before they step foot into a doctor’s office.

“Our employees became better consumers because they see exactly what they’re paying for care,” Rose said. Seventy percent of members on the plan spent less than $500 in total copays — that’s one-sixth the cost of the average deductible.

And they have a compelling new advantage to attract talent.

“Top tier labor is hard to find. When people look at our benefits package and compare it to others, they see our plan is superior,” said Nguyen. “In the past, I just glossed over the health insurance plan during interviews. Now, it’s one of the first things I mention.”

Take some time to evaluate your current health insurance offering. Are you feeling like you are trapped between your employees and your C-suite? You don’t have to be. It’s time to make health care easy and affordable, and it’s time to empower your employees to make informed care choices.