When it comes to offering health benefits to employees, every employer has two primary goals: improve coverage and lower costs.
Achieving those goals may help encourage a healthier workforce, while reducing absenteeism and presenteeism, both of which can sap productivity and make an employer less competitive. Importantly, medical care ranks as the second-largest expense (behind salaries) for employers, so it is vital employers maximize the value of their health benefits.
Rather than watching health-plan premiums go up year after year, what if employers could cut costs by up to 15 percent or more compared to their existing benefits package? While that might sound too good to be true, the growing popularity of level-funded plans is making that possible for some employers when they move from fully insured plans. Tellingly, a recent report found that 42 percent of small firms use a level-funded plan, up from just 7 percent two years ago.
To help employers, especially small and mid-size businesses, navigate the transition from fully insured to level-funded (or even self-funded) health plans, here are five steps to consider:
Evaluate your plan options. Historically, employers often selected either a fully insured plan or, as companies grew larger, moved to a self-funded arrangement. That yielded potential savings but came with additional financial risks if medical costs exceeded expectations. A third option some employers have recently adopted more often is a level-funded plan, which offers the potential savings available through a self-funded approach but with less financial risk. In short, employers with level-funded plans pay a fixed monthly fee to cover claims, administrative fees, and stop-loss insurance, which help protect against unexpectedly large claims. If medical claims are lower than expected, the employer can potentially keep some of the surplus refund at year-end.
Request an underwriting analysis. To determine if such upfront savings would be possible for your business, the next step is to request an underwriting analysis to review your company’s previous medical claims and other factors to help determine what reduction may be available. This can be coordinated by an insurance broker or by connecting directly with a health-insurance company that offers level-funded plans. Generally, employers with relatively younger and healthier workforces may save the most.
Invest in wearables and wellness. Once an employer opts for a level-funded plan, it is important to help employees and their families play a more active role in their well-being and adopt ways to save on out-of-pocket costs. For instance, adding a wearable device well-being program can equip employees with a smartwatch or activity tracker, enabling individuals to monitor daily activity levels and earn financial incentives to help cover routine health-care costs. Encouraging employees to get or stay active may help build a culture of wellness while reducing the prevalence of costly chronic conditions, such as diabetes or heart disease.
Leverage other types of technology. In addition to wearables, employers with level-funded plans should include coverage and resources related to virtual care. That’s because virtual care, also known as telehealth, may offer employees a more convenient and affordable way to access medical care, including primary, urgent, and behavioral care, as well as chronic-condition management. With ongoing spread of the virus that causes COVID-19, encouraging the use of virtual care is especially important as an alternative to in-person care. In addition, unlike with most fully insured plans, employers with level-funded can receive detailed monthly data reports to help them better understand how employees are using their health benefits. This can enable tailored clinical interventions and communication campaigns, including to help reduce avoidable emergency-department visits and the use of out-of-network care providers or facilities.
Integrate additional benefits. Importantly, employers moving to a level-funded plan should continue to take a whole-person approach to health benefits, including maintaining or adding coverage for vision, dental, hearing, and behavioral-health services. That’s because research shows a link between overall health and oral, eye, and hearing health, including a connection to various chronic medical conditions. Also, businesses that combine medical coverage with specialty benefits through a single health-care company may in some cases be able to save up to 4 percent on medical premiums, as well as leverage data to help improve health outcomes, flag gaps in care, drive productivity, and reduce costs.
By considering a move to a level-funded plan and adopting these additional strategies, employers may make offering medical coverage to their workforces more affordable and personalized.
Michael McGuire is the CEO of UnitedHealthcare of New York.