With the current bleak economic outlook, it is becoming increasingly important for employers to justify their benefits expenditure, particularly when it comes to healthcare perks, which are often costly to provide and, in some cases, are not always fully used by staff.
Employee Benefits/HSA Healthcare research 2008 shows 26percent of employers do not know what they spend on healthcare, and only 6percent calculate the return on investment. Considering 53percent of respondents spend more than 1percent of payroll costs on health-related perks, this makes little business sense. Glenn Rhodes, head of B2B marketing at HSA, says: “What surprises me is the amount of money that is spent on healthcare benefits but there are no calculations being done on the return on investment.”
For employers, reviewing the healthcare benefits they offer is essential if they are to obtain the maximum value from their strategy. The first step is to ensure they clearly understand their objectives in providing healthcare perks for staff and what they want a review to achieve. Iain Laws, account director at Gissings, says: “Employers fall into two camps. There are those that want to save costs and [those] that want to know their spend is being used effectively. In both cases, it is important to go back to the beginning and decide their objectives and strategy for employee healthcare. They can then move forward onto how schemes need to be redesigned to achieve their objectives.”
Employers can start this process by looking at reconfiguring healthcare perks to maximise their value. One way of cutting costs is to renegotiate deals with suppliers or seek better offers with new providers. Alex Bennett, head of healthcare at Aon Consulting, says: “A combination of plan design and competitive broking will deliver a direct saving. If the economy does take a [downward] turn, that is what businesses will be attuned to. What employers should be looking for [are] gaps, overlaps, and what discounts are available to extend current provider relationships.”
Employers should therefore review exactly what is covered by each of the healthcare benefits they provide. With a number of products having extended the range of treatments and services they include, particularly in the cash plan market, employers may find there is some overlap between the benefits they offer.
Building an element of flexibility into the cover employees are given could also help to maximise a strategy’s value. For example, providing a policy for an employee who is covered under their partner’s private medical insurance (PMI) is not the best use of an organisation’s money. “The one product that suits all may not be the best options. It’s about looking to find the most relevant product and the most flexible platform on which to offer it,” says HSA’s Rhodes.
Some healthcare cash plan providers, such as Westfield Health, have developed products that can be tailored to meet employees’ needs, for example by excluding cover they may have bought separately for themselves or receive through other benefits, such as PMI. Jill Davies, deputy chief executive of Westfield Health, says: “[If] they have got PMI, they don’t want cash back for a consultation, which is traditionally offered as part of a cash plan. They don’t have to have a consultation; they could perhaps have more dental or physiotherapy. They can choose on premiums and on benefits.”
As well as ensuring perks don’t overlap, employers may also be able to cut costs by consolidating all their perks with one provider, says Aon’s Bennett. Some insurers will reduce the price of group income protection premiums if employers also take up sickness absence management and other occupational health benefits.
But, one provider may not always be able to meet an organisation’s entire healthcare requirements, says Laws. He believes a good way of co-ordinating perks is through an absence management system. “Absence management can be used as a co-ordinating point, even if there isn’t an absence problem, so that employees receive the support they need at the point of entering the company’s health programme,” he explains.
Whatever approach employers take, they should ensure they clearly communicate all benefits to the workforce, so employees are aware of what they are entitled to and can make the best use of the perks on offer EBIf you read nothing else, read this…
n By reviewing their healthcare strategy, employers will be able to determine whether they are gaining maximum value on their benefits expenditure.
n Employers could cut costs by getting their benefits from one provider, because they are more likely to be offered discounts.
n Absence management systems can be used to co-ordinate a firm’s healthcare benefits by directing staff to the most relevant perk for their condition as soon as they call in sick.
n Reviewing the design of a healthcare plan and renegotiating deals can help deliver savings for employers.