Dive Brief:
- Smaller employers are not doing a very good job at managing healthcare costs, according to a recent survey reported by Employee Benefits News.
- The study, from insurance brokerage Hub International, of more than 400 senior HR and finance executives from employers with 50-1,000 employees, revealed that 70% believe their strategies for “reining in costs” are successful, but only 16% are using narrow networks, 18% are self-funding, and 31% are using pharmacy benefit carve-out strategies – all effective, and growing, cost managing measures for smaller employers.
- For instance, potential cost reductions include 9% from self-funding to 20% when using a pharmacy carve-out, according to EBN.
Dive Insight:
Too many HR and benefits leaders, according to the survey, are missing out on those three savings opportunities. Self-funding, for example, used to be a non-starter for smaller employers due to risk avoidance, but that's changed today as measures are now in place that can reduce the perceived risk of self-funding – in part due to changes brought out by the Affordable Healthcare Act (mainly higher costs of group health premiums and taxes).
Also, according to HUB International, "carving" pharmacy benefits out of healthcare really can reduce costs, with prescription drug benefits hovering around 20-25% of healthcare costs and showing no signs of slowing down. In the carve out strategy, aggressive case management and utilization review are more readily available and have the most dramatic impact on costs, compared to say, negotiating lower prices.