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The cost of providing health insurance for employees continues to rise with no end in sight. In a survey conducted by Business Group on Health, employers said they expected their total health benefit costs to rise by more than 5% in 2021.
Meanwhile, the total annual cost of healthcare (including premiums and out-of-pocket costs) was expected to reach $15,500 per employee in 2021. Employers cover about 70% of these costs on average while employees cover about 30% of the costs.
One way to lower these costs is to encourage employees to shop for high-value healthcare services. Or in other words, to look for high-quality healthcare at the lowest possible price.
The fact is, prices for healthcare services vary widely even within a region or market area. Prices vary by an average of 650% for the same procedure in the same market, according to Healthcare Bluebook data. And the cost is usually driven by the location where service is provided or the healthcare facility itself, not the physician or provider.
In other words, paying more for healthcare doesn’t necessarily translate into higher quality service or outcomes. The problem often is that many healthcare providers are opaque when it comes to their pricing, making it difficult for consumers to find out how much services cost until they’re at the facility — or worse, when they start getting bills in the mail weeks later.
Recognizing this problem, the federal government is starting to take steps to make healthcare pricing more transparent. New rules became effective early last year requiring hospitals to post pricing online for hundreds of different services and procedures. And starting next year, health insurers will have to share their negotiated prices with the public.
However, some hospitals have been slow to follow the rules. And even among those who have, the data is often confusing and hard for consumers to decipher.
A number of third-party administrators and health plan partners are now offering tools to make healthcare costs more transparent for employees, thus making it easier for them to shop for services. For example, these tools allow price comparisons among local service providers and benchmark data showing how different providers’ prices compare to the overall market. Some tools also provide quality data for different providers and facilities.
It’s estimated that employees who don’t use price transparency tools overspend on routine healthcare services like MRIs, x-rays and blood tests by more than $4,500 per year. For a company with 100 employees, that’s nearly half-a-million dollars in healthcare overspending per year.
For many employees, the idea of shopping around for healthcare services isn’t exactly top of mind. In a survey conducted by HealthEquity, nearly half (48%) of healthcare consumers said that it’s too hard to find reliable healthcare pricing information while about a third (32%) said that healthcare pricing is too complex and difficult to understand. Meanwhile, about a quarter (26%) said they don’t have time to do the research required.
To get these employees to buy into the idea of shopping for healthcare, you need to explain the value of doing so to them. Educate them about how their healthcare service and provider choices impact the company’s financial well-being and potentially their own health insurance costs in the future. And show employees how making smart choices can potentially result in direct out-of-pocket savings for them and their families.
Also consider offering incentives to employees to shop around for healthcare services and use price transparency tools. Reward programs are one type of incentive. For example, you could create a system whereby employees can earn wellness points for certain healthcare shopping behaviors. Points could then be redeemed for Health Savings Account contributions, reduced cost-sharing (like zero co-pays or deductibles) or even cash rewards.
You could even offer employees a percentage of the savings realized by selecting high-value healthcare services and providers. The goal should be to make the incentives and rewards enticing enough to get employees to participate while ensuring that they add up to a small share of the total savings. Companies that take this approach realize an average of $10 in savings for every $1 they spend in rewards, according to Benefits Pro.
Some companies create interactive games to try to get employees to shop for high-value healthcare services. One example might be a “The Price is Right” game in which employees try to guess the market price of different healthcare services and procedures. Or you could create a game that challenges employees to find the highest value service providers in your area using a cost transparency tool.
According to the Healthcare Bluebook, employees are 11 times more likely to shop for healthcare services when playing a game like this.
It’s doubtful that health insurance premiums are going to start decreasing anytime soon. Therefore, it’s up to employers to be proactive in reducing their healthcare costs — this includes encouraging employees to shop for high-value healthcare services.
We can brainstorm with you ways to accomplish this. Give us a call at (803) 791-1111 or send us an email to schedule a consultation.
Resources & Disclosures
Information is provided by William Amick & Blake Amick and written by Don Sadler, a non-affiliate of Cetera Advisor Networks LLC.
This post is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.
https://www.businessgrouphealth.org/en/who-we-are/newsroom/press-releases/large-us-employers-accelerating-adoption-of-virtual-care-mental-health-services-for-2021
https://www.benefitspro.com/2021/03/10/4-strategies-to-encourage-employee-health-care-
shopping/?slreturn=20211128115951
https://talonhealthtech.com/your-employees-are-wasting-12-49-a-day-by-not-shopping-for-healthcare/
https://blog.healthequity.com/5-tools-to-help-employees-become-better-healthcare-price-shoppers
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Investment Advisory Representatives offer advisory products and services through Longleaf Advisory Services, LLC, a Registered Investment Advisor.