Many CFOs realize their company’s benefits program is bloated and expensive, but they lack a plan to fix it. Worse, many struggle to find a way out because they feel like they’re stuck on an island. They are afraid of tapping the CEO because the CEO relies on them to manage the company’s finances, and they can’t go to their finance team because the team relies on the CFO for guidance. They’re stuck, but they know that the only solution is to change the plan itself.
But change is scary, especially on a scale as complicated and daunting as benefits. Stockholm Syndrome convinces them it is better to remain with the devil they know than to branch out and develop a new plan. After a little analysis, however, CFOs will realize that change is possible, and the right changes can dramatically reduce annual costs.
Case Study: Finding $400,000 in Wasteful Spending
One of our clients approached us after spending $1.5 million in a year on health benefits for 140 employees. The CFO was desperate for a solution that would dramatically slash costs without sacrificing the quality of care the employees received.
We started our strategic review by focusing on two elements in their plan: pharmaceutical claims and medical claims.
Analyzing Pharmaceutical Spend
Pharmacies are notorious for wasteful spend, and these businesses can employ dozens of methods to generate extra costs for patients. When we review pharmacies, we primarily focus on two areas: transparency and vendor quality. For transparency, we check that the pharmacy is open and honest about pricing practices—in addition to offering competitive prices. For vendor quality, we verify that the pharmacy protects the employees’ best interests, both medical and financial.
To work through this process, we reviewed our comprehensive 32-question checklist to gauge the pharmacy’s overall quality and assess other potential vendors. In our analysis, we unearthed $130,000 in potential savings for the client in pharmaceutical spend.
Analyzing Medical Spend
Once we were through with the pharmaceutical data, we shifted our attention to the medical data. As with the pharmacies, medical facilities often charge more than what’s fair or reasonable.
When we work through medical data, we use another long list of questions to identify wasteful plan practices, including:
- Which hospitals are employees using for surgeries and emergency visits?
- What are these hospitals charging for different procedures and treatments?
- Which surgeons are operating on employees?
- Which doctors do the employees visit for checkups?
With these and other questions answered, we identified another $270,000 in savings opportunities for the client.
$400,000 in Savings
By following our guidance, the client saved a total of $400,000 (26%) on health benefits, knocking their annual benefits spend down to $1.1 million. While costs are down, the quality of care is up because we found access to better doctors, facilities, and pharmacies through our research. The best part for the CFO: With a healthier workforce and an extra $400,000 to spend each year, the CFO is the company’s new hero.
Health benefits costs seem complicated and frustrating, but they’re manageable under the right lens. With the proper strategy, you can analyze your plan and implement the necessary changes to reduce costs while eliminating wasteful spending.