Controlling costs a lingering issue for company group insurance plans
It’s the time of year when companies begin making important decisions about the future of the business. Some will be faced with greater expectations, some with shrinking or static budgets. In almost 20 years of supporting employee benefits plans, we’ve found that the biggest, continuing challenge for most companies’ group insurance plans is controlling costs. In fact, this can often be a significant reason for why we might be talking to a business in the first place.
This week, we’re discussing what drives the costs your business can pay for employee benefits, ways you can push back against increases, and what your best option for doing so is.
Medical inflation an important influence on group insurance costs
When it comes to the biggest influence on the cost of insurance, there is no bigger driver than the costs of medical care itself. Medical inflation is impacted by a number of things, and these can include:
- The cost of treatment/medicines
- Claim trends, frequency, and history
- Demand for health services
- Health trends of service users
Earlier this year, we released the International Private Medical Insurance Inflation Report for 2017. The global average inflation rate of private medical insurance in 2016 was 9.2%. It also outlined what we believed to be key factors in influencing the medical inflation of international plans in key expat locations around the world. These key drivers included:
- The introduction of new medical technology
- A continued imbalance of healthcare resourcing
- Higher compensation for healthcare professionals
- Healthcare service overutilization
The problem is that while older drugs get cheaper, the development of more effective ones costs a lot more. A routine surgery may take less time, however surgeons are now reinvesting time and money into learning newer, better ways to heal patients. Governments might be hiring more nurses, yet people are increasingly making bad health choices that place them in the care of hospitals.
All of these added costs need to be met somewhere. Insurers can be some of the first impacted by the increases and, unfortunately, these costs are often passed on to their consumers to pay for. Even holders of group insurance plans are affected; as their plans usually involve multiple lives with potential claims able to be made against them.
No one likes ever increasing prices, though, so both insurers and brokers are keenly aware that being able to control medical inflation increases is extremely important to business and corporate clients.
Cost control measures for holders of group insurance plans
Many businesses still have some choice available to them in order to take better control of the increases of their group health plans. If you’re concerned about the rising costs of your employee benefits, consider these solutions for restructuring your benefits:
Add a co-pay
Where benefits are being frequently used, a good way to reduce your corporate premium is to introduce a co-pay with treatment. A co-pay requires a set amount be borne out-of-pocket by an individual member of a group health plan, and allows the insurer to save a bit more money on the cost of claims. For staff, a co-pay can still be preferable to having to buy their own insurance outright, as long as the amount is reasonable enough.
Removing or reviewing benefits
Some benefits are more costly than others. For example, insuring dependents through group insurance plans can often mean a significant premium increase. While employer-provided insurance that also covers family members is highly attractive, businesses should weigh up how such a benefit impacts the overall cost of their group plan. Is it necessary for you to compete with competitors and attract the talent you need?
There may also be need to determine just how your employees are using their benefits. Some staff, especially in Hong Kong, may be more likely to use Traditional Chinese Medicine (TCM) providers when ill or sick. Covering non-Western medical practices is possible, but you may need to request this with your insurer. If your plan doesn’t cover TCM practitioners, you may see less staff seek help when they need to, leading to a loss in productivity and your company paying for a Western GP benefit your staff don’t use.
Some benefits, however, may just be far too rare and expensive to cover in your plan. Benefits, such as maternity, can cost a lot to include as every member must get the coverage – not just females, and those of a healthy age for giving birth. Comprehensive cancer coverage may also push your group insurance plans premium higher than you’ve budgeted for. The dilemma can be where a long-term, valued staff member requires medical treatment that’s not covered.
Leaving that person to fend for themselves is an option, but it might be one that sends the wrong message to the rest of your staff. The alternative can be to self-insure such situations; that is, providing the coverage for treatment yourself. This allows your company to treat such situations as a one-off, provide support and care for staff members, without paying the unnecessary increased premium for a situation that may or may not occur.
Pooling regional entities
For many corporates with a global presence, group insurance plans can be piecemeal, and provided separately per region. Did you know that you can save by having one insurer provide coverage for all or multiple locations? This can be a massive undertaking; it involves being aware of local insurance laws, local industry trends, balancing global and regional compensation and employee benefits expectations, and a whole host of other factors.
That said, having the opportunity to apply plans from one employee benefits provider across multiple locations can not only make you premium cheaper, it can give your company a strong position with which to bargain and negotiate from with the insurer. This can be a challenging undertaking, but one that can provide significant benefits with a bit of consideration.
Partnering with a group insurance plans specialist
If increasing employee benefits costs are a concern for you and your company, you might need a better solution. Businesses can try and negotiate better cost control measures themselves but, without specific industry knowledge, it can be a challenging ask. Many of the clients we now support found cost containment a significant issue before engaging our services. So how can Pacific Prime Hong Kong help?
Our team has almost 20 years experience in restructuring the benefits of corporate clients, helping them meet the expectations and health needs of their staff, without breaking the bank budget-wise. We do this through using in-depth data and claims analysis to spot areas where we can alleviate claims pressure (which can put the most pressure on your year-to-year premium increases).
When it comes to negotiating, reviewing, or tendering, we’re in your corner. Our focus is always on the client, as we can help you switch and roll out employee benefits packages from any of the world’s top global insurers. We tailor our approach to meet your goals, and will stick with you during the year to ensure that the plan is as successful as it can be. Want to know more? Download a copy of our Corporate Brochure from our Guides page.
Alternatively, contact our team today to arrangement a meeting.