Now that renewal season is over, some business leaders are beginning to feel the weight of their decisions. Employees grumble at the health plan’s complexity and leadership strains under its financial impact, but these plans are locked in place until the contract runs out later in the year. To overcome these challenges, dig deep into your plan details as you would the rest of your business to uncover new savings opportunities.
Before digging into your plan costs, realize an important truth: You run a health care business. As author Dave Chase explains in CEO’s Guide to Restoring the American Dream, many companies spend more on health care every year than they do on raw materials for the products they manufacture. GM, for example, spends more on health care than steel and Starbucks spends more on health benefits than coffee beans. When we step back and evaluate the size of our health spend, we realize that Chase is right: We all have a health care business.
With that in mind, we should approach health care as strategically as we do the larger businesses surrounding them. In evaluating our health expenses, we create new opportunities to attack the biggest costs in our supply chain. From this starting point, we can generate enormous savings for our business and our employees before the next renewal cycle.
Where to Find Savings in Your Health Benefits
If your benefits expenditures are too high for your health care business to sustain itself, there’s hope. By systematically reviewing your plan details, you uncover opportunities to lower overall costs for both you and your employees before your contract expires. With an improved strategy, both of your businesses—the one for health care and your primary business—can thrive under the reduced costs.
1. Audit Your Contract
Review your benefits contract to look for misaligned incentives. Your contract likely favors your provider in unfair ways. For example, many of the contracts we review allow the benefits provider to charge extra for corrections to a mistaken billing charge. Other contracts make it difficult to cut ties by requiring a six-month notice before canceling the plan.
By auditing your contract, you can uncover these and other strategies your provider uses to earn extra money. If you catch something that seems unfair, contact your representative to dispute it. Although they may resist updating the contract in your favor, you do have a chance to revise your agreement and remove unfair charges from future bills.
2. Demand More Data
Ask for your plan data, including the data on pharmaceutical and medical expenditures. If your provider is unwilling to hand it over, you have a clear sign that you should consider leaving for another provider as soon as your contract expires.
Once you have your data in hand, analyze your expenses to see where the biggest charges appear. With this information, you can develop plans and strategies to systematically lower costs over time, like educating employees on the best pharmacies to use within the plan.
3. Analyze Your Pharmaceutical Spend
Your pharmaceutical spend is your low-hanging fruit when it comes to slashing costs. In a recent client audit, we removed a single drug from the plan to ultimately save the company $100,000 a year.
Pharmaceutical Benefits Managers (PBMs) have many ways of pushing employers and employees into overpaying for services. These include:
- Not paying on over-the-counter rebates, even though they benefit from them
- Not paying on certain prescription rebates, including insulin and non-formulary drugs
- PBMs may charge an administrative fee on reversed claims
- PBMs may dispense 90-day supplies of medication while charging for 100-day supplies
- PBMs may reclassify generic drugs as brand drugs, paying the generic price but charging the client the brand price
By catching these issues in your own plan, you give yourself the opportunity to dispute unfair charges.
4. Analyze Your Medical Spend
Look for opportunities in your medical spend to generate new savings. A good starting point is to review where employees decide to receive medical treatment. We notice among our clients that employees frequently do what is most convenient when it comes to health care. Instead of receiving surgery in a facility that offers low prices and better care, they are willing to receive treatment at higher prices for a more convenient location. Consider discussing facility choices in your region with staff members so they can make informed decisions.
5. Partner With an Advisor
The ideal advisor is one who embraces a cost-savings philosophy. A dedicated advisor sifts through your data to find new opportunities for savings in your current plan. With the right guidance, you reduce the plan’s financial burden until the contract expires. In some cases, you may even find ways to make your current plan financially viable for years to come.
Being locked into a health benefits plan that works against your company does not mean you have to continue paying unfair practices. In analyzing your plan, you may unlock solutions to reduce costs while maintaining the quality of care your employees receive.