Medical and pharmacy benefits are an increasing cost for most employers. At Aldrich, we were no different and wanted to control our employee healthcare cost. Fortunately, we have our own employee benefits consultants and were able to take a serious look at how to change our approach and make a lasting impact.
In 2011, we began planning our employee benefits strategy to move away from a traditional fully-insured model. Looking at current trend increases, we determined that in 10 years, it would cost more than $3,000 per month per family. Since this would not be sustainable as the firm continued to grow, we evaluated a self-funded program and the associated risks. The decisions we made over the next few years created an annual cost savings of more than $250,000.
For most large employers, the cost of their health insurance renewal is based on claims expense. We had our fair share of large claims, some of which were unavoidable conditions. However, the majority of our employees led a fairly healthy lifestyle but lacked the information and tools to make informed decisions.
In the first year of our transition to a self-insured plan, we provided an increased contribution to participating employees’ health savings accounts (HSA). We also reduced the premium contributions for employees to enroll in our HSA plan. We suspected that employees would make different spending decisions when they viewed the dollars as their own.
In 2012, with this minimal adjustment to the plan, we were able to reduce our employee healthcare cost as Aldrich spent $683 per employee per month for medical benefits. We offered a qualified high deductible HSA plan and a traditional deductible/copay plan. Employee enrollment was split evenly between the two plans.
The following year, we added a new wellness component that included biometric testing for all employees participating in the benefit plan. Our research showed that 25% of our population made no regular visits to their doctor, and we felt there could be preventable conditions lurking. We hired an external company to provide health coaching and education to employees with biometric results that exceeded the health guidelines.
For the next few years, our medical expense began to decrease. By the end of our 2016-2017 plan year, the expense per employee per month had dropped to $572. To encourage a healthy mindset, we continued the biometric testing and added fun wellness programs for all employees that included walking challenges, healthy eating and informative articles.
Many companies our size typically experience a six to eight percent increase in premiums each year. For our plan, this would have translated to a cost of more than $900 per employee in 2016-2017. Instead, with our focus on wellness and educating our employees through biometric testing, our costs decreased to $572 per employee. With steady improvement, our costs had dropped to $385 per employee per month by 2018. These employee healthcare cost savings came without reducing benefits, and the employee premium contributions have remained the same. In this time, we’ve seen a significant migration to enrollment in the HSA plan. Now, more than 80% of our employees are enrolled in our HSA option and only 20% in our traditional deductible/copay plan.
Reducing our employee healthcare cost per employee did have significant additional expenses. Incorporating the annual biometric testing incurred a hard dollar cost, but it was well worth the expense. These tests help raise awareness end even help identify some previously undetected health issues for employees. Some business owners or financial decision makers may note that biometric testing won’t catch all expensive illnesses like breast cancer, but it might catch others and balance the cost versus the claims later. Our results prove that biometric testing helps manage expenses.
Another important aspect in managing employee healthcare cost is the addition of care coordinators. These individuals act as a resource to all participating in the plan and guide our employees toward the most effective source of care. While adding these coordinators increases fixed costs, having them helps reduce the overall claim costs.
We regularly analyze claim data to make informed decisions for our company and clients. Our role is to help educate companies and their employees about these spending decisions. We recognize that some companies don’t have the time, resources or expertise to uncover ways to use the benefits data to influence behavior and lower costs. That’s where we come in.
We’ve found that employees in companies that care about their wellness lead more productive lives. If an employer is not willing to invest in employee benefits and is simply buying the cheapest plan, taking this approach to managing costs won’t be effective. While every employer will experience unexpected large claims, we believe in managing the areas that can be controlled.
When Aldrich faced this problem, we invested in resources to help our employees lead healthier lives and make more informed healthcare decisions. This resulted in a drastic decrease in our health insurance costs and a more predictable variance in insurance claims.
For more on driving efficiency with your benefits, get in touch with the Aldrich Employee Benefits team.