Do You Have a Multi-Year Strategy for Controlling Healthcare Costs?

Originally Published in RMP Advisor, March 2010

by David Edman

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Do you know of any successful business that doesn’t have a well-designed business strategy and financial plan? Since health benefits represent one of the largest expense items in your budget, why wouldn’t you have a healthcare-spending plan? You can and you should!

Think back to the level of health benefits and costs to your company from 3 years ago in comparison to today. Can you afford the same levels of benefit reduction and cost increases over the next 3 years? Knowing where you want to be in the next 3 to 5 years and developing a plan for getting there is important.

Is a Multi-Year Strategy Even Possible?
The answer is yes, but only if you are willing to change your thinking and your approach to purchasing health benefits. Do you wait until 3 months before your renewal date to start evaluating your options? This is what the insurance carriers want you to do, so they typically won’t produce renewal quotes for you until 2 to 3 months before renewal. At that point, it becomes much more difficult for you to consider other options and a potential change in carriers. So you have to be prepared and take control of the process.

Implementing a Multi-Year Strategy
At RMP, we have concluded that it is necessary to change the basic paradigm of health-insurance purchasing. Looking at your health-insurance purchasing in only 12-month increments isn’t possible. Begin to implement a multi-year strategy that generally incorporates the following elements:

1. Education, education, and education: Employees, business owners, and key managers should understand why healthcare costs so much.
2. Change the financial incentives by giving your employees “skin in the game.”
3. Install plan designs that encourage personal responsibility for one’s health and healthcare decision-making with financial incentives and rewards.
4. Establish mechanisms—typically Health Savings Accounts (HSAs) or Health Reimbursement Accounts (HRAs)—that allow employees to build balances in personal accounts and reward them for good decision-making.

Change the Balance of Power
At renewal time, are you trying to survive financially for the next 12 months and subject to the whim of your insurance carrier? Do you feel in control of the situation? If you are faced with a large increase in premiums, do you have an alternative strategy other than to cut benefits or increase employee cost-sharing? We have developed a strategy called “carrier agnostic,” which seeks to commoditize the purchase of your health insurance and shift the balance of power in your favor. You have options, and insurance carriers are required to compete for your business if they want to get and/or keep you as a customer.

Choose a Trusted Advisor
My friends at Charter Partners coined the phrase, “Insurance is a trust business that is completely lacking in trust.” They’re correct, so don’t accept the status quo. There are new, better, and more efficient ways to purchase healthcare. To properly understand your options at renewal and begin to implement a multi-year strategy, we recommend that you have a true “trusted advisor” for your health-insurance purchasing. If you need to change advisors or replace your broker, do so at least 6 months before your planned renewal. Read our Case Study for Horsham Veterinary Hospital and ask how we can do it for you. Let the education begin!