Would you be surprised if we told you that, according to the 2016 Sanofi Canada Healthcare Survey, a staggering two-thirds of employer respondents have faced a rise in health benefits costs? Probably not—you’ve likely been forced to increase your benefits spending, too, in the last few years.
Rising health benefits costs is a serious concern for employers, and it’s certainly not uncommon. Almost every year, premiums go up due to more expensive drugs and more claims being made for traditional drugs, which is largely caused by poor self-management of chronic diseases. The top therapy class rankings for prescriptions filled were, indeed, all for chronic illnesses, such as inflammatory conditions, ulcers/reflux, high cholesterol, depression, hepatitis C, diabetes, asthma, and high blood pressure. Instead of adhering to their drug therapies, millions of people with chronic diseases stop taking their medications, which leads to higher claim costs down the line.
And as health benefits are typically the second largest expense in business, these cost increases can have a significant impact on a company’s bottom line.
Employers in Limbo, Unaware of How to Cut Costs
What makes the problem worse is that employers don’t know how to cut health benefits costs. When they don’t know of effective cost-cutting measures, they keep paying the higher premiums every year or end up cutting the benefits that their employees depend on—both of which aren’t ideal solutions to the problem.
In fact, less than half of employers said they were somewhat knowledgeable about co-payments and annual deductibles, while only 39 percent stated they understood the concept of mandatory generic substitution. And when it comes to managed or restricted formularies, the levels of understanding drop off even further to 17 percent. Even worse, only 13 percent of employers understand case management of high-cost specialty drugs, and only 10 percent know about stop-loss insurance.
Although these types of measures have been in place and available to employers for years, the numbers show that there is a significant lack of understanding. Unfortunately, those who aren’t using these cost-cutting measures don’t even know that they’re available or don’t know enough to put them into action. These low levels of awareness are main contributors to concerns about health benefits costs.
Increasing Knowledge on Cost-Cutting Measures
There’s no doubt that there’s a need to educate plan sponsors and benefit advisors better, as well as improve communications from health insurance providers.
By increasing knowledge on cost-cutting measures, employers can reduce their anxieties when it comes to increasing health benefits costs. By increasing awareness of the solutions available, employers can make more informed decisions that allow them to invest in health, rather just focus on the increases in costs and how to reign them in.
How to Cut Health Benefits Costs without Cutting Benefits
Employers who are more informed on cost-cutting measures know that there’s a better way to reduce premium costs than to cut benefits.
Mandatory generic substitution: By implementing mandatory generic substitution, employers can ensure that all drug claims with a generic version are cut back to the lowest priced equivalent of brand names, but with the same active ingredients. Generic drugs provide the same effectiveness and quality but at the lower cost, which helps manage drug spending.
Annual deductibles: To save on costs, employers commonly increase the annual amount plan members must pay for a prescription before receiving any reimbursement.
Managed drug formularies: An effective way to manage drug costs is to define the list of drugs to be covered or restricted under the benefits plan.
Case management of high-cost specialty drugs: Having a designed case manager engage plan members who take expensive specialty drugs through motivational interviewing, coaching, and goal setting can help improve health outcomes, and thus, reduce this cost driver.
Shopping around: Employers should shop around every year to see if they can get better value for their money from a new insurance carrier.
Working with a broker: Last but not least, employers should consider working with a knowledgeable and experienced broker to ensure they can reduce health benefits costs without cutting benefits.