Many employers think that cost containment strategies result in taking benefits away from their employees. The employer would prefer to not do that. The good news is that you don’t have to take benefits away in order to reduce your benefit costs.
The key to success is to engage your employees into making a wise choice in how they use their benefits. Employee behaviour has a direct impact on claims that your insurer pays out. And, at the end of the day, claims have a direct impact on your premiums. Therefore, measures that contain claims can be a powerful tool to reduce your premiums.
Here are some examples of cost containment strategies that don’t require taking away benefits from your employees:
1. Reduce your benefit costs by introducing a wellness program
Workplace wellness programs encourage employees to embrace healthier habits which would positively impact their overall health.
Gather some information from your employees to learn what initiatives they might like to take part in. For example, it could be a smoking cessation program, a weight loss program, common lunch meals, walking, etc. Designating a team member to help champion wellness programs can be crucial to success. Read our blog on educating your employees on benefits for additional tips on how to create a wellness culture in your business, whether your company is big or small.
2. Review the fine details of your drug plan
Your drug plan design could include features like generic substitution, adding a cap on dispensing fees, or cost sharing through co-insurance.
The price of some common generic medications in Saskatchewan can be up to 90% less than their brand-name equivalents. Because drugs tend to account for about 80% of overall healthcare costs, switching to generic substitution could have an impact on your benefit plan costs.
Another significant cost factor when it comes to prescription drugs is the dispensing fee. Dispensing fee is a professional fee that a pharmacy charges every time you buy a prescription. In Regina, these fees generally range between $5 and $15 per prescription. The more prescriptions you buy, the higher the cost.
A powerful way to reduce drug costs is to limit the amount of the dispensing fee that your plan covers. For example, your plan may have a dispensing fee cap of $8. This strategy could encourage employees to seek pharmacies that charge lower dispensing fees.
Lastly, consider a drug co-insurance that is less than 100%. For example, with a 90% co-insurance, insurer pays 90% of the cost of each medication, while employee is responsible for the remaining 10%. When the employees are paying a percentage of their drug cost, they would save money by being a smart shopper when it comes to buying prescriptions.
3. Take advantage of Central Dispensing Pharmacies
Central Dispensing pharmacies tend to have lower drug costs as they purchase in bulk, and they usually offer lower dispensing fees as well. Consider making these pharmacies a part of your benefits plan.
What is a central dispensing pharmacy? A central dispensing pharmacy is a full-service pharmacy that delivers medication directly to customers. Most of them do not have a physical location. Instead they serve patients remotely via telephone, online chats or mobile apps. Some central dispensing pharmacies do have retail storefront in select provinces. Others use robotic technology to dispense prescriptions.
4. Have a plan in place to look after specialty drugs
Specialty drugs are relatively new drugs and they are very expensive. These drugs treat more serious disease such as, for example, cancer, severe rheumatoid arthritis, and multiple sclerosis (MS). It is not uncommon to see a benefits plan becoming unaffordable because it is paying for some of the specialty medications. There are programs to help employees with specialty drugs. Contact your insurer or your benefits advisor to see what programs are available to your company in order to implement a specialty drug strategy.
5. Consider Healthcare Spending Accounts
It is possible to remove certain areas covered by the insured portion of your plan, and implement a Health Spending Account (HSA) to cover these claims. This gives your employees flexibility to use the HSA funds on a greater variety of health benefits that employees may choose. Our blog on health and wellness spending accounts has more information on how to integrate HSAs into your plan.
Other ways to reduce benefit costs
Employee benefits plan is an important investment for employers in Regina. The cost of employee benefits tends to be around 10% of payroll. Therefore, cost containment remains a key priority for businesses. Our next newsletter will feature Part 2 of this article where we will share more tips on how to reduce your benefit costs without taking benefits away from your staff.
Let’s talk about the strategies that your company can use today to reduce your benefits premiums. Get in touch with us, we would love to help you!