Making Benefits Changes in the Face of Uncertainty

BY BEN CONNER Health care benefits are ever-evolving. Policies change. Regulations shift. Whether it’s the Affordable Care Act or a global pandemic, making informed decisions around employee benefits can feel impossible. As we brace for an uncertain future, many business leaders feel tempted to stick with the status quo inside their benefits plan. Although their premiums may increase, they feel safety in the familiar. However, sometimes the best financial option in uncertain times is to pursue innovation instead of the status quo. When examining your health benefits, you have two choices:

• Option 1: Do nothing. You stick with the status quo and hope that it protects you from extreme price hikes. You may continue seeing the same 8%-12% price increases that are typical throughout the industry, but these are predictable increases you can plan for.
• Option 2: Actively assess and optimize your benefits plan. By stepping away from the status quo, you move into new territory that could present significant savings. The strategic decisions you make today can protect your workforce and company budget well into the future.

As we recently discussed at our NextGen Healthcare Summit, we can’t make positive improvements unless we alter what we have always done. The only way to optimize our health plans is change.

The Consequences of Inaction

Although there are inherent risks in pursuing change, maintaining the status quo is an equally imperfect option. Most plans see price increases of 8%-12% every year. When leaders decide to absorb these price hikes each year, the rest of the company suffers. Still, many prospects are held in place by fear. “Your proposal sounds great,” they say, “but I think we’ll wait until next year to make changes.” Waiting even one year can mean significant losses. Imagine a company with 50 employees that sees 8% price increases in their benefits every year. They currently pay about $450,000 for health benefits. Not taking any action means their benefits could cost more than $660,000 a year in only five years, an increase of more than $200,000. If they act now to pursue active plan management, however, they could save nearly $797,000 over those same five years. Waiting even one year to pursue change means missing out on significant savings. By holding off for 12 months, this company misses out on an extra $130,000. That $130,000 is money the company could have invested anywhere else, but they can never retrieve it if they don’t take steps to improve their plan right now.

Case Study: Accepting Change as Constant

One of our clients has accepted change and uncertainty as a constant in business. Instead of allowing themselves to become paralyzed with fear, they consistently push themselves to become as innovative as possible across their entire business, and this extends to their benefits plan. Thanks to their efforts, they retained plan quality while maintaining or decreasing their premiums in each of the last five years. To consistently drive costs down, the company has taken the following actions:

• They’ve addressed pharmaceutical costs and seized opportunities to lower spend.
• They’ve directed employees to high-care, low-cost facilities.
• They’ve focused on employee engagement and communication so they understand the changes to the health care plan.

Our client has used their savings to invest back into their workforce. In addition to slashing employee premiums, they now offer a robust life insurance program. If the company hadn’t committed to addressing their health benefits spend five years ago, the economic downturn would have spun them into financial distress. Thanks to their savings, they have the financial freedom to address spending outside of their health plan and maintain the quality of care their employees receive when they need it most. When faced with economic uncertainty, the status quo feels safest, but that’s a false sense of security. Unfortunately, business as usual rarely creates dramatic results. To protect your business in uncertain times, explore opportunities to evolve. By addressing large company expenses like health benefits, you can free capital for the rest of your company.