Opinion: ACA exchange is not the only game in town

Chase Marable

It’s that time of year again.

Open enrollment is approaching. Health insurance costs are back in the news, and employers across the country are trying to answer a question that sounds simple but increasingly isn’t: What are we going to do about health insurance next year?

According to PricewaterhouseCoopers, medical cost trends are expected to hit 9%, the highest level in 17 years.

A lot of the public conversation right now focuses on the Affordable Care Act exchanges. That makes sense. The exchanges are an important part of the health insurance system and affect millions of Americans.

But for business owners, that conversation misses a huge part of the picture.

For most established employers, health insurance decisions happen somewhere else entirely: inside the employer-sponsored group health plan.

Whether you employ 15 people, 75 people or 500 people, the decisions you make around health insurance can have a significant impact on both your employees and your bottom line. The challenge is that there isn’t one strategy that works for every business.

Take an established company with 100 or more employees. At that size, healthcare is probably already one of the company’s largest expenses outside of payroll. A significant renewal increase isn’t just an insurance problem anymore. It can become a budgeting problem, a recruiting problem and a retention problem. Ultimately, it can have a significant impact on the financial performance of the business.

The easy answer is to shop carriers every year for a short-term solution. Sometimes that works, but I encourage employers to look deeper and understand the root causes of what’s driving their healthcare costs.

What is driving our claims? How much are we paying for prescription drugs? Are high-cost medications affecting the plan? Is our network appropriate for where employees receive care? Are there different funding arrangements we should be considering?

Larger employers may have additional tools available, including self-funded or partially self-funded plans, stop-loss strategies, alternative pharmacy benefit models and other cost-containment programs.

None of these are magic solutions. They all require evaluation, employee engagement and a real understanding of risk. But employers should at least understand what options are available to them.

A growing small business faces a completely different challenge.

Maybe you have 20 employees today and expect to have 40 next year. Maybe you’re approaching 50 full-time-equivalent employees and suddenly hearing a lot more about ACA requirements. Maybe you’ve never offered benefits before, but you’re realizing that recruiting is becoming difficult without them.

That business shouldn’t simply copy what the 500-employee company down the street is doing. The strategy needs to fit the business.

For a growing company, the goal may initially be to build a benefits program that is affordable, predictable and scalable. That could mean selecting plan designs, determining how much the employer contributes, offering employees options or using technology to make enrollment and administration easier.

Then, as the company grows, the benefits strategy should grow with it.

One of the biggest mistakes I see employers make is treating health insurance as a once-a-year decision.

The renewal comes in, everyone scrambles to find a lower price, a decision gets made, and then nobody really looks at it again until the next renewal.

The problem is that your employees use healthcare 365 days a year. The decisions being made during those days help determine what shows up in your renewal.

That means employers should be looking at claims trends, pharmacy spending, utilization and employee needs throughout the year, not waiting until 60 days before renewal to start asking questions.

Employees have a role in this, too.

A benefits package isn’t valuable if employees don’t understand how to use it. Helping employees understand where to receive care, how their deductible works, what resources are available and how to evaluate their options can be just as important as negotiating another percentage point off the renewal.

For established businesses, the opportunity is to become more sophisticated about what is actually driving healthcare spending and the tools to manage it.

For growing businesses, the opportunity is to build the right foundation before benefits become another system the company has to go back and fix later.

In both cases, the strategy starts in the same place: understanding what you’re paying for, why you’re paying for it and what options you have to change it.

Healthcare isn’t getting simpler. That makes asking better questions increasingly valuable.

Chase Marable is managing director – Missouri at Higginbotham and works with businesses and organizations on employee benefits and risk management strategies. He can be reached at
cmarable@higginbotham.net.