Although the Affordable Care Act (ACA) ushered in more opportunities for individuals to access health coverage, it has not stemmed the inflationary trend that continues to drive up health insurance costs. Because the health reform law has not slowed the rise in health insurance-related expenses, employers will have to look for ways to do so themselves.
Not-for-profit organizations, which often have tighter budgets than public or private corporations, must be particularly vigilant in how they approach their benefit offerings. Wellness programs and planning might provide some much needed options to reduce health insurance costs.
Employers that use self-insured plans outsource certain administrative services, such as enrollments, claims processing and provider networks, to third-party administrators rather than purchasing a fully insured plan from an insurance carrier. Self-insured plans offer cash flow advantages, plan design flexibility and the ability for an employer to manage and address its own health risks. They also come with more operational considerations. Employers that opt for self-insurance take a greater fiduciary responsibility for their employees’ benefits, as well as additional requirements for administrative and financial management. Stop-loss insurance is recommended with all self-insured plans to mitigate risks, as financial considerations can come into play if a plan is not managed properly.
Entities have options for how they set up a self-insured plan. In a level-funded program, the employer creates a legally self-insured plan that resembles a fully insured commercial plan. It pays conventional, equivalent rates each month and accounts for the potential dividend as part of its year-end reporting. The level-funded design is especially appealing to the employer that is not comfortable with internal budgeting.
A High Deductible Health Plan (HDHP) combined with a Health Reimbursement Arrangement (HRA) offers another route for those considering self-insured plans. The employer in this scenario would provide a fully insured plan with a lower premium, and the savings from the lower premium could be used to fund the HRA.
Not-for-profits also might want to consider working with a private health insurance exchange. In a private exchange, a third party administrator gathers a select number of plan designs from commercial health insurance carriers on a single administrative platform. Employees enter the exchange and choose the plan option that works best for their health needs.
Drawbacks from the exchange include a limited offering of plan types. It’s also a newer model for delivering health insurance and elements of the private exchange such as renewal pricing are largely untested. We anticipate that private exchanges will become more popular as the ACA continues, so it’s worth monitoring how they take shape.
Make a Robust Wellness Strategy
Even if your not-for-profit opts to stay with its current provider, it should consider its employee wellness initiatives. The National Institute for Health estimates that 60-75 percent of healthcare expenses in the United States come from lifestyle and behavior risks, such as having a high body mass index (BMI) or using tobacco. Wellness programs can help contain costs while holding employees accountable for addressing their lifestyle choices, such as exercising, following a healthy diet and taking their medications as prescribed.
Employers can elect to set up wellness programs using one of two models.
In activities-based employee health initiatives, employees receive benefits from completing required activities and goals. Activities can include preventative screenings appropriate to the age and gender of the employee and goals in which the employee is permitted to set his or her own milestones.
There are also results-based programs where employees can be rewarded for completing five biometric targets: BMI, LDL, cholesterol, glucose, blood pressure and being tobacco-free. These are the only five measurements that can be used for the rewards program, and the employees receive rewards for hitting pre-set targets in those categories.
Leave No Stone Unturned
The best option for not-for-profits to lower their healthcare expenses likely comes from a combination of plan re-evaluation and improving their employee wellness programs. For more information about how to lower the costs of your benefits offerings, please contact us.
Jim O’Connor is the president of Employee Benefits Services in the Manasquan, N.J., office of CBIZ MHM. He can be reached at firstname.lastname@example.org or 732.223.0070.