Insurance Premium

While you may not think that reviewing the topic of employee benefits falls under risk management, the costs associated with these plans could be quite substantial. At my company, employee benefits add 35% on top of salary. In 2017, the national employer-sponsored average family health insurance premium was $18,764 and single premium was $6,690 (Kaiser/HRET Survey). Consider the employee benefit costs to a company like Home Depot or GE.

Most U.S. employers provide health, life, and disability insurance. They could pay 100% of the premium, or have the employee share the costs (transfer the risk). The employer could increase the co-payments and deductibles (again, transferring the risk). Here in the U.S. we’ve seen double-digit increases in health insurance; and we’ve seen many employers reducing benefits. Even Medicare and Medicaid are reducing benefits.

Prescription drug coverage is a significant cost factor to the health insurance premium. Many companies have increased copayment amounts and added more tiers (e.g., $10 generic/$20 brand name in formulary/$40 brand name not in formulary; the formulary is a list of medications that a health insurer gets a higher discount from the pharmacy benefit manager). The goal is to move patients to purchase using generic over brand due to the cost savings (and there is significant cost savings). I read an article earlier this year in “Medical Benefits” about companies that are applying $0 copays for generic scripts because of the price differentials.

Other non-insurance employee benefits also cost the company money and resources: vacation leave, sick leave, FMLA (which is required by the Federal government), and even holidays.

Question

Visit with your benefits representative and inquire what steps your company has taken to reduce their financial risks when it comes to employee benefits. For example, my company is looking to change their 2-tier prescription drug plan (generic, brand) to a 3-tier plan (generic, preferred brand, nonpreferred brand) with an increase in the copay’s. The company should see an immediate 15% decrease in prescription drug costs, which is quite important since the company self-insures the health insurance risk.