08/04/2011

Three Points to Consider Before Altering Your Employee Benefits Plan

Just like most employees, most businesses start to look at ways they can cut their expenses during difficult economic times. One common focal point of such is employee benefits programs, especially in the area of health benefits. Considering that health benefits are frequently the most expensive aspect of a company’s benefits program, this may seem like a reasonable, logical place for an employer to take cost-cutting measures. However, employers should carefully consider what the consequences will be from making cuts to their employee benefits programs; whether or not there are any alternative cost-cutting options available; and, if benefits cuts are a must, how they can lessen the impact.

The Consequences

Let’s say you, as an employer, decide to target your employee benefits program and make some significant cost shifts toward your employees with the idea you’ll cut costs and save money. If the cost shift involves higher deductibles and/or co-pays for employees, then they may procrastinate seeing a physician when they’re suffering symptoms of illness or injury, forgo or delay filling vital prescription medications, and do without wellness care. If the cost shift involves premium increases, then many employees, especially young and relatively healthy ones, might decide to drop coverage altogether. The exodus could leave your plan with a larger and more undesirable risk pool.

These types of cost shifts can very well cost the health plan more money over the long run. Furthermore, it can negatively impact your company’s financial bottom line when it comes to employee morale, productivity, disability costs, and absenteeism.

What’s The Alternative?

An alternative to cost shifts would be to focus your benefit dollars on the measures that will enhance employee well-being and overall health. Some ideas would include:

* Using incentives to motivate employees to participate in wellness activities, such as weight loss and fitness programs, tobacco cessation classes, and nutrition education and counseling.

* Using incentives to motivate employees to participate in activities that can screen and detect serious medical conditions, such as glucose level testing, blood pressure screenings, cholesterol testing, and completion of health risk assessments.

* Providing extensive preventive care coverage.

* Having an employee assistance program (EAP) available to your employees can be especially helpful during poor economic conditions since it can provide resources and/or referrals for things like financial counseling, crisis intervention, and stress management.

If You Must…

Despite the negative consequences, you might feel that cost-shifting is your only feasible option. If so, make sure that you do everything possible to soften the blow to your employees. Here are some ideas:

* Offer voluntary benefits to your employees. This will cost you little, if any, money. While the employee will be responsible for most to all of the cost, they’ll benefit from group rates, convenient payroll deductions for the premiums, and the ability to personalize their coverage selections to meet their own unique needs.

* Offer flexible spending accounts (FSAs), which will let employees pay for health care expenses with pre-tax dollars and get the most of their health care dollars.

* Offer employees consumer-directed health plans (CDHPs). These plans can be combined with reimbursement plans such as HRAs and HSAs for an overall savings.

All of the above options have a commonality in that they each require an employee to get more personally involved in their own health and the management of their health-related benefits. Whether the change makes the employee more vigilant in scheduling preventive care visits, participating in wellness activities, or budgeting future health care expenses, the employee is assuming more responsibility for their health care and its management. Individual responsibility on the part of the employee can be one of the best long-term cost-management tools available to an employer.