What’s the Real Cost of Your Benefit Plan?
Businesses spend a lot of money each year. While business owners have transparency of what they spend on goods and services, this isn’t typically true for healthcare. This is a problem as healthcare represents the second largest expense after payroll for most U.S. businesses. Another issue, most leaders have very little say when it comes to negotiating their employee benefit plan. This can lead to overspending with little understanding as to why.
Understanding the Real Price of Employee Healthcare
Leaders have many factors to consider when it comes to figuring out the true cost of their health plan. Although many insurance carriers would like employers to believe their annual bundled lump sum premiums make up the total cost of their health plan, there’s more that goes into figuring out this total. Employee health plans are made up of several different components. Each component has its own cost.
The components of an employee health plan include:
- Medical claims
- Pharmacy claims
- Administration costs
- Advisor commissions and fees
For years, insurance carriers have told employers that it’s difficult, if not impossible to control the total cost of their healthcare plan. This benefits no one but the insurance carrier. Unfortunately, employers get very little information regarding what they pay for each component of their healthcare plan.
In 2018, a survey conducted by the National Alliance of Healthcare Purchaser Coalitions (National Alliance) found that 60% of employers estimate that up to 25% of their employee healthcare spending was wasted. Unfortunately, without transparency into healthcare spending, employers can only guess how much money gets wasted each year.
Employers Need Greater Transparency Into Their Healthcare Spending
At MEBO, we believe employers should have complete transparency of the costs of their healthcare plan. Employers shouldn’t blindly accept increases each year without knowing where they spend their dollars and why. Without this information, employers can’t plan budgets or understand how they spend their healthcare dollars.
In order to increase transparency and control over healthcare spend, employers could benefit from changing their approach to purchasing healthcare. All key components must be unbundled and a total cost provided for each area. This allows leaders to fully analyze what areas drive their healthcare costs. They can then use this information to develop a comprehensive plan based on what their employees actually need.
Using a level-funded approach, employers gain visibility, predictability, and greater financial protection over their healthcare spending. However, this approach may not be the best choice for every company. It’s important that employers speak with an experienced employee benefit specialist before deciding on or switching their health plan.
MEBO works directly with employers to evaluate their needs and develop a comprehensive solution custom-tailored to their requirements. Our process puts employers in the lead. This reduces costs and ensures complete transparency. Please contact us to schedule a consultation.
