From My Benefit Advisor
For a large number of employers, the exceptional economic pressure placed on them during 2020 has only heightened the annual challenge of managing costs relating to their company’s benefit programs. Although various vaccines and treatments are on the near-term horizon, the long-term impacts of the COVID-19 pandemic remain largely unknown. Virtually everyone expects health care premiums to increase in the months ahead, but the severity of increase is less known. Of course, even if health care premiums remained relatively flat, employers may still not be able to comfortably fit them in their budget with revenues mostly down over the past several months.
With so many uncertainties, many business owners are struggling to come up with a way to prepare for the coming year. From our perspective, the following three strategies can prove pivotal for employers when developing effective, long term strategies in the current climate:
- Incorporate a painstakingly thorough approach to employee benefits
- Take advantage of any available digital healthcare technologies
- Incorporate new and creative strategies will be best able to manage the predicted volatile trends in health care costs and their impact on insurance premiums.
INCORPORATING A THOROUGH APPROACH TO EMPLOYEE BENEFITS
Begin the process early of investigating and learning about the different approaches to employee benefits. It is not recommended that you wait until the open enrollment process, so that you have time to educate yourself and your employees on possible options.
Look into fully insured employer sponsored plans, self and level-funded plans, individual HRA’s and if available group medical captives and PEOs.
A fully insured, employer sponsored plan is the traditional route of insuring employees where a company pays a premium to the insurance carrier. The carrier then handles healthcare claims based on coverage benefits that have been established by the employer. The benefit of this type of plan are:
- Fixed monthly premium rate, revisited annually or if there is a change in the number of enrolled employees, whichever comes first.
- Employees and dependents are responsible for paying deductibles and co-pays for healthcare services that are covered under the fully insured policy.
- Employer administration of the plan instead of the insurance company.
- Premiums are collected by the insurance carrier who then pays healthcare claims based on the coverage benefits outlined in the company-purchased insurance policy.
A level-funded plan is a plan that combines cost savings and customization aspect of a self-funding plan with the financial safety and predictability of a fully insured plan. This type of plan is a form of self-insurance because the employer pays a steady fee each month but take on more of the financial risk. These plans provide cost predictability, little to no risk to the employer, exempt form ACA mandated requirements and flexibility in plan design.
A self-insured plan, the employer is using their own money to cover the employee claims. Employers contract with an insurance company or third party administrator to administer the plan. Typically, large employers have interest in this type of plan.
Individual HRA is an individual health reimbursement arrangement offering an alternative to traditional group health plans. It’s a specific account-based health plan that allows employers to provide defined non-taxed reimbursements to employees for qualified medical expenses, including monthly premiums and out-of-pocket costs, like copayments and deductibles. Employees must be enrolled in individual health insurance coverage to use the funds.
UTILIZING DIGITAL TOOLS IN A WORKPLACE HEALTH STRATEGY
The integration of digital tools in the corporate environment is moving at a rapid pace and changing the way companies implement their wellness strategies. Employers and many of the insurance carriers they work with have inserted technology into their benefit offerings as a way for individuals not just to monitor their general physical fitness but also to address concrete wellness needs and improve health outcomes.
Through the use of these digital tools, employees are empowered to take greater control over their well-being through the tracking, managing and analysis of critical health data. Digital health tools also increase the efficiencies of healthcare by improving access, reducing costs, increasing quality of care and making medicine more personalized and precise.
Implementing digital health into your wellness strategy will usually include a variety of tools, including:
- Health Information Technology… utilizing a platform or application to manage the exchange of health information between patients and medical personnel in a secure, computerized environment.
- Mobile Health… allowing medicine and care delivery through mobile phones, tablets and other wireless technology.
- Telehealth… providing the remote exchange of data and care between a patient and their medical advisor.
- Wearables… clothing and accessories that integrate advanced electronic technologies to assist in providing more personalized health data.
TRENDS THAT MAY IMPACT FUTURE INSURANCE PREMIUMS
Although the severity and extent of the COVID-19 pandemic has been unprecedented in modern times, there are safeguards built into the structure of the insurance industry that are designed to maintain stability during significant loss events. Two key elements provide protection against large financial loss for insurance companies and provide some stability in premiums:
- Claim Reserves
Insurance regulations require carriers to maintain a claim reserve account at specified levels (based on the company’s size and risk profile) that provides a safety net if claim expenses are larger than anticipated. These reserves are funded through a part of the premiums charged to policy holders.
Reinsurance is coverage purchased by an insurance company from a third-party insurer that is designed to insulate them from major claims events. If claims, either individually or collectively surpass designated levels, the reinsurance carrier would reimburse the insurance company for a part of the claim cost.
IMPACTS FROM EMPLOYER-RELATED EXPENSES:
Insurance carriers are also employers and as such, have experienced some of the same pandemic-related business costs as any other business. Added cybersecurity costs, outlays for equipment and software to facilitate their employees alternative work arrangements, etc. will impact their financial bottom line during this event. Even the downturn in equity markets will affect the expected level of return on their investment portfolio.
There is also the potential that some recent virus-related development will positively impact insurance costs, such as the more widespread use of tele-health services. In addition to providing access to care with lower costs, on a long-term basis this development could allow healthcare providers extend their reach to more remote or less affluent groups of people to expand access to care and improve overall population well-being.
Considering all of these pandemic influences, it is likely that future health insurance premiums will be affected, although the expected range of impact probably won’t be clear until later this year. Working with your broker to be aware of the trends as well as being forward-thinking towards new and innovative strategies will provide you with the tools to mitigate costs and provide a benefit plan for your employees.
The Chamber offers a unique insurance platform called ChamberChoice. It offers members access to My Benefit Advisor as a solution for employee benefits. For more information about My Benefit Advisor, contact Jim Pitts at 610-324-6291 or email him at [email protected]