A CFO has one major responsibility: manage the company’s financial health and direction. While this leads to exploring new revenue streams and reducing expenses when possible, CFOs often ignore their fiduciary responsibility to manage company medical plans. Since medical benefits are a top-three expense, controlling costs can directly influence a company’s financial success. By applying supply chain management principles to a medical plan, a CFO can deliver better health care outcomes with less risk at a lower price and create greater value for the entire company.
5 Steps You Can Take To Generate Value
As you look ahead to the new year, consider these 5 strategies for creating additional value around your medical benefits plan:
1. Become the fiduciary you are. According to Gartner, 62% of CFOs will make SG&A cuts due to COVID-19-related disruptions. If you’re a CFO, you’ve likely already reviewed your company’s finances and cut costs almost every way possible. Remember your benefits plan. By customizing your plan to align interests, eliminate waste & reduce expenses, you can unlock capital for other areas of your business—what the military calls a “Force Multiplier.”
2. Beware the binder. Many CFOs struggle with runaway health benefits costs year after year, often absorbing 10% rate hikes (yet another negotiated “less bad” renewal) because they are told they have no other choice. The perception that Benchmarks and Big Data deliver value are rearview analyses of past incurred and paid claims. Carriers rely solely on claims utilization of the past, which gives little insight into meaningful and reliable information in predicting costs. Today’s custom medical plans actively manage your health care supply chain so CFOs can see forward to review active and emergent claims and drive costs down. Several strategies, like reference-based pricing and analyzing your pharmaceutical spend, deliver better optics to eliminate waste and reduce costs while often improving the quality of care your employees receive.
3. Acknowledge that the current model isn’t working to build trust. The COVID-19 pandemic has panicked many workers, and research shows that many now value their company benefits package more than ever. Now is the time to evaluate whether or not your medical benefits plan can protect your employees should they become sick and endure an extended stay in the hospital. If your plan can’t match the demands of COVID-19 or the other diseases and injuries your employees manage, it’s time to reevaluate your plan. As you actively work to improve medical plan performance, communicate updates with employees so they’re aware of the relentless pursuit of positive change.
4. Focus on what you can control. All controllable medical and pharmacy claims should be avoided, transferred, or evacuated whenever possible in a manner that is suitably managed to a fiduciary standard. With a traditional fully-insured medical plan, your options for control may be limited. But when you customize a self-funded or partially self-funded medical plan, your opportunities increase significantly. With a relentless pursuit of positive change, you have the freedom to slash costs and deliver better care from top medical providers and seek fiduciary style pharmacy benefits managers to align interests for the benefit of your human capital.
5. Consult an independent advisor who is actually building custom plans that perform. When a CFO takes his/her fiduciary responsibility seriously, company medical plans must receive the same scrutiny as any other P&L line item. CFOs who analyze a medical plan from OPEx to CapEx can manage a major expense into an affordable, optimized tool for their employees. An experienced Next Generation independent advisor will show social proof he or she actively works to align interests and develop strategies to slash costs on your company’s behalf. If your advisor doesn’t regularly assess your plan delivering monthly reports and track to a 3-5 year goal, demand more. Today’s companies shouldn’t feel locked into a traditional “Black Box” medical plan. A dedicated advisor delivers options that support your mission to your fiduciary standards for business.
Create Value Today
Take action and reevaluate your approach to your company’s medical plan. Use fiduciary standards as the call to action to generate value for your entire company. Use an experienced independent consultant to align goals and build custom medical plans to give your employees a benefit they are proud of and can rely on. Improve retention and gain a competitive edge in sourcing new talent. Reduce costs associated with one of your biggest annual expenses to generate EBITDA. Pursue excellence to pump new life into a company’s sagging profit centers with extra money where it is needed most. CFOs are the jumpstarters of their firm’s economic engine and have the solutions to power through today’s economic uncertainty and beyond.