Most employers have two overall goals when shopping for benefits. First, they want an appropriate level of coverage to protect employees. Second, they need coverage that they and their employees can afford.
When healthcare costs are continually rising, achieving this balance is no easy feat.
In response to marketplace demands, insurers have introduced benefit options expressly designed to contain costs while also providing quality care. The concept behind these products is that they limit choices and/or shift costs. Limiting choices injects an element of control for insurers, and control creates economies that insurers can pass along to subscribers.
The three cost-controlling options we’ll look at in this blog are Tiered Plans, Pharmacy Benefit Managers (PBMs) and Spousal surcharges/charging dependents more.
A tiered plan divides medical facilities and/or providers into bands with differing out-of-pocket expenses. When care is needed, patients are encouraged to use a facility or provider that offers the deepest discount and highest quality care for a specific procedure or service. For example, in many networks, these facilities exist for cataract, knee, kidney, and spine surgery. When a patient chooses one of these facilities, they pay the least and get the highest ranked quality care. If a patient opts to use another facility in-network, they will have a higher out-of-pocket expense, but no balance billing. A patient going out of network will pay the most and may be balance billed — usually a high amount.
A pharmacy benefit manager (PBM) is a third-party administrator that manages prescription drug programs. What happens is that companies do a carve out, meaning they separate the pharmacy benefits administration from the company that’s administering the medical coverage. The PBM handles the formulary, negotiates with drug manufacturers for rate reductions, contracts with pharmacies, and pays prescription drug claims. Assigning responsibility for prescription drug benefits to an outside provider reduces costs, because administration is streamlined and larger networks have more clout to negotiate for lower prescription drug rates.
Spousal surcharges and dependent charges also help reduce costs. A spousal surcharge means that if a spouse has access to coverage through their own employer, a company may impose a surcharge to underwrite the cost of the spouse’s additional premium. Another tactic is to charge for dependents. Companies using age-banded plans can reduce costs by charging older dependent children more if they are over 18 or 21.
We all know how important it is to choose the right benefit plan. There are real consequences, human and financial, when the wrong decision is made. That’s why Creative Benefits takes our role in the process so seriously. Experience, knowledge, and exceptional attention to detail means we design health benefits packages that hit the sweet spot, optimizing benefits and controlling costs.
Call now to discuss how we can help you find your delicate balance.
About the author: Macee Keelan is Vice President of Creative Benefits, Inc. She has been with the company for more than 13 years and specializes in employee benefits.