Back Button
Menu Button

Clueless on Health Care Costs?

David P. Lind BenchmarkEver try to figure out what your health care providers actually get paid?

I didn’t think so. As a patient, you probably check to make sure that the doctors, hospital and pharmacy are considered “covered” by your insurance plan. Why? That keeps your out-of-pocket expenses down because of discounts your health plan negotiated with these providers.

But as patients/consumers, we’re clueless about the negotiated discounts with any given health care provider. We’re out of the loop. Discounts are negotiated privately between insurance companies and health care providers. They’re not posted anywhere, and no one is required to share that information.

But here’s the rub for you, the employer:

Negotiated discounts can vary greatly between insurance companies and will affect your underlying costs.  So which carrier has the deepest discounts?

Competition between insurance companies for pricing purposes is a good thing, but the level of competition needs to be transparent to employees and patients for market forces in health care to flourish—and eventually hold costs down.

True market forces are hindered by the current confidential pricing process.

Enter Consumer Driven Health Plans. Under this concept, an employer allocates a sum of money annually to offset employees’ portions of a high-deductible plan (health savings accounts are part of a consumer-driven plan). Employees are motivated to get the best health care deal they can find.

That’s good, but consumers are most effective when they understand the true cost of a given product or service BEFORE the purchase is made. Encouraging employees to become better consumers is not enough if they don’t know the true cost and value they receive.

We are far from a patient-centered market in health care. This needs to change—and until it does, we as consumers, will be kept in the dark.

Employee Trust…Do You Have It?

David P. Lind BenchmarkTrust can be an over-used word in today’s world, but sadly is difficult to find…as it must be earned.  Trust, it is said, is the new currency in our shrinking world (thanks in large part to social media).  Trust sounds good in theory, but it is the elusive butterfly for many of us.  Why?

For starters, we live in a world that changes BEFORE we can ever get comfortable with the latest status quo.  In many ways, we really don’t have a lot of time to develop a secure level of trust, and because of this, we experience broken promises, vanishing hope, and unfortunately, unfulfilled dreams.  Employers, however, have a unique opportunity to offer a more secure environment that can foster a deep sense of trust to their employees.  This can be such a powerful asset with immeasurable consequences for employers.

According to Great Place To Work, the definition of a great workplace includes three interconnected relationships.  Through such relationships, employees in a great workplace will:

 1) trust the people they work for,      

2) have pride in what they do, and      

3) enjoy the people they work with

Great Place To Work® developed the Trust Index©, which has found that organizations with high trust score well in three categories:  credibility, respect, and fairness.  This is stuff that you don’t have to purchase from a vendor, such as an insurance company, but rather develop practices, policies and behaviors that foster these key categories internally for long term success.

So why is this important to you?  It’s very simple.  By building a reputation based on trust, you not only give the market what it so desperately wants and needs but you also establish a unique and sustainable value proposition for your organization (employees).  The organization that owns the trust niche will own its marketplace destiny.  This is a win-win proposition for both the organization and its’ employees.

Be that elusive butterfly…create a culture of TRUST in your workplace!

Small Employer? Here’s another SECRET

David P. Lind BenchmarkAre you hiding your head in the sand? Iowa’s small employers are walking away from some serious pocket change—for both the employer and the employee. What gives?

They aren’t taking advantage of a well-known section of the Internal Revenue Code (Section 125) that provides tax advantages for premium conversion plans (PCP) and flexible spending accounts (FSA). Hard to say why. Look at the tax advantages.

PCP advantages*:

  • allows employees to use pretax dollars when paying their share of premiums for welfare benefit plans (i.e. health and dental insurance)
  • reduces employees’ out-of-pocket costs for premiums
  • reduces employees’ federal income taxes and Social Security contributions (FICA) and possibly state and local income taxes
  • saves employers the 7.65% they would otherwise contribute to Social Security taxes

FSA advantages*:

  • allows employees to use pretax dollars when paying for certain qualified medical expenses
  • reduces employees’ out-of-pocket costs for eligible medical expenses
  • reduce employees’ federal income taxes and Social Security contributions (FICA) and possibly state and local income taxes
  • saves employers the 7.65% they would otherwise contribute to Social Security taxes

PCPs and FSAs are easy to communicate and cost little to administer. Simply:

  • have a plan document in place
  • notify employees of the option
  • make payroll deductions on a pretax basis rather than an after-tax basis.  Consider hiring an outside flex administrator for FSAs due to protected health information laws.

Seems like a no-brainer. PCPs and FSAs save money for employers and ease the financial burden employees’ face as a result of higher premiums, deductibles, copayments, etc. They cost little to set up and administer. Yet every year without exception in our Iowa Employer Benefits Study©, we find that the smallest employers (those with 2 to 19 employees) don’t take advantage of these tax savings. 

Don’t leave money on the table. If you aren’t utilizing the benefits found within Section 125, it’s not too late to start taking advantage NOW!

*This is not intended as tax advice.  Visit with your Tax Advisor for more information.