Managing Future Employee Medical Plan Costs
Written by Victor A. Deksnys, Alliance Partner, Aligned Growth Partners, LLC
Given a certain set of facts and circumstances, 'planning' is a valuable instrument Human Resource professionals and Finance teams utilize to make appropriate decisions regarding their company's future employee medical plan costs. But what about facts and circumstances that employers must ponder with increased frequency, such as:
- Proposed HRA regulations offering another employer funding mechanism.
- Proposed regulations to eliminate prescription drug rebates.
- The Fort Worth Federal District Court ruled 'Obama Care' is unconstitutional.
- Changing carrier participation in Marketplace programs.
- The Cadillac tax is delayed, but will it change again?
- The Health Insurer fee is suspended for 2019.
- DC Federal District Court vacates the maximum 30% incentive Wellness plan provision.
- Limited guidance available approving Association Health Plans.
- SHOP Health Insurance Marketplace changes reduce functionality.
- Increased focus on HIPAA audits.
A few things have not changed over the years. Employee benefits are offered by employers to attract and retain employees in conjunction with a coordinated total compensation plan. Having employees at work every day, being attentive, and enthused about their career/employment is critical. So, medical benefit plans need to be affordable to both employees and the employer.
So, is planning now relegated to a "hope for the best" strategy? Not necessarily. Step one is to determine whether adequate benefits expertise exists within the organization. If not, then partnering with a professional broker or advisor is highly recommended.
Let's examine each of the basics. Look to your local labor market and regional differences to determine the breadth and scope of your employee medical plan or plan options. Can you attract local clerical and manufacturing staff, or is there an issue with highly compensated professional staff recruitment? Developing multiple plan options with different contribution strategies may serve the organization well. If the proposed HRA regulations are approved, many smaller employers will have a mechanism to effectively manage cost. Under the proposed regulations, employers could allocate $1,800 annually to employees to 'buy their own insurance' at state Marketplaces thereby financially fixing the employer cost expenditure and avoiding future carrier rate increases.
And what of your corporate culture? Are mental wellbeing, financial security, and health awareness addressed adequately? A smaller employer will likely see less 'savings' on their insurance premiums compared to large employers wherein large employer's claim costs directly impact premiums. However, smaller employers benefit through low turnover, the ability to attract key employees, and reduced absenteeism.
There are a number of decision points to consider when looking at whether an employee medical benefit plan is affordable to the employee and the employer. It goes beyond looking at the actual employer premium cost, better recruitment, lower absenteeism and workers' compensation rates, and reduced turnover, all factors that impact decisions about employee medical benefit plan cost.
Smaller employers may be relegated to state-filed plans and rates (cookie cutter options), but choosing the right combination is critical while concurrently creating engagement for employees and their families to enjoy healthy lifestyles and financial security. Addressing minimum wage workers is equally important. Large employers have much more flexibility to design employee benefit programs, but the core issues are very similar to smaller employer needs. The primary difference is larger employers deal with cash management issues, cash flow techniques, and risk tolerance wherein many times self-funding is the key mechanism.
In final analysis, successful employers are partnered with competent professional brokers or advisors. We encourage employers to start there – ask yourself, is my broker or advisor helping to make my company more successful at this time of regulatory uncertainty. Our next article will assist you with how to select your broker or advisor well before your current plan contracts expire.