Big Picture: Don’t Lose Sight of it as You Focus on Health Care Costs

By Ron Present

May 2013 – Nearly a year has passed since the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA). When President Obama was re-elected in November, reform became a certainty. Since that time, organizations, large and small, have struggled to understand the Act and how to comply.  

A popular theme in discussions about health care reform has been cost. According to a recent Towers Watson report on health care benefits trends among employers, employers will spend an average of $9,248 per employee in 2013. It’s understandable to see why there’s so much trepidation among employers with 50 or more employees. Offering health care coverage can quickly add up to millions of dollars, cutting into profits. Quickly growing organizations on the verge of employing 50 FTEs must also prepare to comply with PPACA to avoid penalties.
An organization’s knee-jerk response to rising employee health care benefit costs might be to discontinue them altogether. This may be particularly attractive to organizations where the financial penalty for not offering coverage is significantly less than the cost to offer employee health care coverage.

Beware: focusing on the financial implications of health care reform alone can increase exposures to your organization in other ways. This is why it’s important to take a comprehensive, strategic approach to assessing health care reform and the implications for your organization.

Include Health Care Reform in Your Enterprise Risk Management Process
The decisions you make regarding health care reform will affect several areas of your organization. To properly assess the risk involved with your options, include health care reform in your enterprise risk management process.

Are You Prepared to Lose Talent?
An unintended consequence of discontinuing employee health care benefits could be loss of experienced talent. Organizations in industries that rely upon hard-to-find, highly skilled talent may put themselves at competitive disadvantage by choosing not to offer health care benefits or limiting employee hours to make certain individuals ineligible for benefits. Competitors could easily win the talent war by offering the highly valued benefits your company decided to do away with. In the short term, this move may save money, but in the long term, it could cost untold amounts in lost profits.

Do You Have an In-House Expert?
Health care reform is a complex issue. Most organizations don’t have an internal resource that fully understands all the implications. An independent advisor puts your best interest first. He or she can help you evaluate information from your insurance provider. In addition, an outside expert can help you devise a strategy to address the short-term and long-term increases and any other developments that arise along the way.

Health Care Costs are a HUGE Factor
Ultimately, businesses can’t escape the cost discussion. If your organization decides to continue offering health care benefits, there are cost-control methods you should consider:

Consider Self-Insuring
If your business is fully insured, you could consider self insurance. This generally means that your business would take on additional risk, but not all of it, for a reduction in premiums. If your business is currently self-insured, consider increasing your stop-loss point and reducing your premium.

Get the Best Price
Have you challenged your provider to give you the best price available? If not, this is the time to do it. Find out what your company can do to qualify for the discounts that are available.

Conduct a Claims Audit
Make sure your insurer is paying your claims accurately and that you are only paying for those eligible for benefits. You could be overpaying. An independent insurance consultant or an accounting firm with specialized services could assist you with this project.

Start a Captive Insurance Company
Captive insurance companies provide a formal method to reinsure, or to develop a fund to reduce your reliance on private insurance. This risk management tool has been used to reduce the cost of property & casualty insurance for many years. Rising health insurance costs make captive insurance companies a great option to help control those costs. Recent developments have made this captive option more accessible for smaller to mid-sized companies.

Form, or Join, a Private Exchange
Another potential solution is to form, or join,  a private insurance exchange. This may be complementary to forming a captive insurance company, in that the entity forming it creates its own marketplace. This may qualify as providing insurance with a defined contribution that may help control costs and be compliant with PPACA regulations.

Ron Present is a principal in the Brown Smith Wallace health care industry services practice. He has more than a quarter-century of experience in the health care industry as an executive and consultant. He can be reached at 314.983.1358 or rpresent@bswllc.com.