How to Turn Health Care into a Variable Cost

BY RYAN SPENCER Each year, companies all over the country allow the price of their benefits to increase. Though they may not like it, they accept their benefits package as a resource that’s bound to rise in price. But these same companies would fight tooth and nail if their rent or office supply costs increased an average of 5% every year. After all, runaway spend in any area of business is bad financial practice. Though health care is vastly different from real estate and computers, it does have one thing in common: it is a variable cost. When approached correctly, business owners can actually reduce health care costs while simultaneously increasing the quality of care.

Breaking the Fixed Cost Mold

Traditional methods of reducing benefit expenses have fallen short in the past. Tactics like wellness programs may be effective at spurring employees to exercise or quit smoking, but they don’t prevent people from getting sick. Employees still come down with sinus infections, they still get into car accidents, and they still receive a horrible cancer diagnosis. Although wellness programs are a good start, they don’t address the true health care problem is the quality and cost of health care. Treating the sinus infection, tending to the injuries from the car crash, receiving chemotherapy—all of this costs money. But a company can’t slash costs by cutting coverage; this is a surefire way to disappoint employees and push high-performing team members out the door. Fortunately, improved data makes it possible to increase the quality of coverage while reducing overall costs. Data uncovers the details that directly influence patient outcomes and overall price, such as which hospitals provide the highest level of care and which facilities are the most cost competitive. To capture these insights, we regularly analyze enormous data sets to develop plans that empower employees to make cost-effective decisions for their health while still receiving high-quality care. For example, we may determine that the best place to receive treatment for a knee replacement is the special orthopedic facility on the other side of the county instead of the major hospital around the corner. Imagine this: An employee’s appendix bursts on a Saturday afternoon. They rush to the hospital in the next town over for treatment. Because that hospital is a highly-ranked facility, your employee receives greater care, reduced risk of infection, and improved recovery time—factors that directly lead to reduced costs when compared with a larger facility that provides a higher cost of care. The importance of data doesn’t stop there. As the employee recovers, they’ll need prescription medication. Our data can also help us establish prescription programs that emphasize quality, low-cost drugs through pharmacies with special discounts and reduced markups. The employee saved once before at the hospital, but now they’re saving even more. By providing employees with access to the best health choices in the region, business owners can reduce the costs experienced by their company and the employees themselves.

Health Care as a Strategic Decision

Benefits plans should be a strategic decision, as they directly impact your financial and marketing plans. The financial side is obvious: When your plan costs are reduced, you have more money left to make other investments. On the marketing side, your employees become your advocates. When employees receive more for less, they notice. Your company becomes the hero, and they start spreading the word to their family and friends. As other professionals in your space learn about your benefits package, your business becomes a prestigious place to work in your industry. Business owners shouldn’t be fooled by the traditional health care model. Runaway prices don’t need to be the norm. With the right data, health care costs can be treated like any other financial expenditure a company faces. Businesses and employees can receive valuable insights into the industry’s pricing—as well as coaching on how and where to receive the best treatment—as long as they work with a reliable, data-driven adviser.