HEALTH AND RISK BENEFITS
Five top tips to help companies manage their health and risk benefit costs
Mercer has highlighted five top tips that HR and benefits managers should consider to manage and reduce the cost of employee health and risk benefits in their organisations.
Many employers are experiencing substantial pressure on expenditure in the current economic climate. According to Steve Clements, a principal in Mercer's health and benefits business, a range of cost reduction strategies are available for employee healthcare and other insured benefits. They can be implemented "quickly with immediate savings".
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The five areas of focus recommended by Mercer are:
1. Compare the current market: Conducting a competitive market review of benefit providers can reduce premiums and, by using brokers' preferred provider discounts, these can be reduced by up to half. Some benefit providers are improving service standards and the management of claim costs. Companies can take advantage of insurer "bolt-on benefits" such as employee assistance programmes at little or reduced cost.
2. Benefit remodelling: Decreasing the income protection benefit payment term from the age of 65 to a limited term of five years can reduce premiums by up to 40%. In addition, reducing the claim escalation on income protection could cut premiums by up to 10%. Companies should also consider limiting private medical cover or applying it only in situations where there are NHS waiting periods or where attendance at work is seriously compromised. Wellness programmes should be reviewed and better integrated with benefit plans to manage health risks.
3. Commission/fee structure: Ensuring that fee and commission arrangements are fully transparent, and incentivising the desired outcomes will help to control costs and avoid unexpected expenses.
4. Benefit funding: Sharing the cost for private medical insurance with employees by introducing a co-payment or claim excess can potentially reduce costs by up to a fifth. Removing or reducing paid dependant cover could potentially yield even greater savings. Significant savings can also be obtained by evaluating the merits of self-funding income protection and group life assurance. Employers can also develop self-insured private medical cover for employees through a corporate medical trust.
5. Managing benefit usage: Limiting ineligible membership will help manage costs. Employers should benchmark benefit entitlement and review internal eligibility procedures to ensure that only eligible employees and dependants are covered. Safeguards can be put in place so that employees are not allowed to join only when they need to claim. Additionally, employers could introduce robust procedures to identify opportunities for early intervention in sickness absences to limit the number resulting in income protection claims.
A final word
"Intelligent plan design and use of vehicles like flexible benefit schemes can provide a platform for designing benefits that are more closely aligned to business needs and the personal requirements of individual employees. Plan designs can also be evolved to incentivise and support behavioural changes that will lead to reduced risk for both employers and employees.” - Steve Clements, a principal in Mercer's health and benefits business.
Want to know more?
Mercer is a “leading global provider of consulting, outsourcing and investment services”. Mercer’s 18,000 employees are based in more than 40 countries. To find out more visit: www.mercer.com.