Small and mid-sized businesses are facing multiple challenges today. Inflation, cybersecurity, and supply-chain issues are affecting nearly every business. And the tight labor market is forcing every company to rethink how they are attracting and retaining one of their most important assets, their employees.
Employees drive sales, clean up operations, keep customers happy, and make sure the lights stay on and the business runs smoothly. So we are seeing many companies today start benefits conversations with some form of “We need to improve our benefits or we won’t survive.”
Here are three ideas to apply to your own employee benefits as you seek to recruit more prospective employees, reduce turnover, and grow your business.
Employees are willing to make tradeoffs – if they’ll save
When we speak to HR leaders, they are often juggling various competing interests. Ownership is concerned about costs, a few employees have asked about HSAs, one employee has an expensive drug, another employee has a specialist they need to see, and a number of employees are concerned about the cost of adding their family. But despite all these considerations, prospective employees overwhelmingly care about one thing: price.
So given these various interests, we are going against the grain when we suggest that an employer actually cut certain plan features. Here’s why:
Nearly 75 percent of employees will swap health insurance plan features for significant savings
We’ve cited surveys from Centivo on healthcare and affordability in the past, but I’m going to bring it up again, in part because company leaders need to really listen to what employees are saying about health insurance. Click here to download the Centivo Healthcare and Financial Sacrifices, 2021 survey.
Respondents to that survey said they would accept changes to their health plan if they resulted in significant cost savings. Don’t confuse this with making slight cuts to the plan so premiums stay flat or an increase is reduced; employees need to see significant savings for them to feel cuts to the plan are worth it.
This means that offering a narrow network so a renewal is just a 3 percent increase instead of a 12 percent increase won’t cut it. Employees need to see tangible results or else they’ll see a plan cut in a negative light.
Better doesn’t have to mean more expensive
Since we’ve established how employees actually view the presence/absence of plan features, let’s move on to a common misconception about health plan economics, which is that to get more, employers think they have to pay more.
I understand if your idea of casual reading does not usually involve economics, but I’m sure you’re familiar with the relationship between price and quality. If we want a nicer car, we pay more. If we want to save on dinner, we go to the less expensive sushi restaurant (within reason, don’t take chances!).
But once we move into healthcare, things change.
We’ve used this space before to talk about how cost doesn’t equal quality in healthcare and benefits, so I’m just beating that same drum again. In fact, healthcare prices are notoriously detached from quality.
Don’t think that you have to spend more in order to better recruit and retain employees.
We often see SMB employers in a position where we can change their funding strategy for their health plan for significant savings. The transition to a self-funded health plan is beyond the scope of this article but we’ve addressed it previously (Here, here, here, here, and again here).
In fact, self-funding or other forms of a transparent health plan allow employers to pay for quality in various ways. This means that you are able to direct your spending in ways that help your employees live healthier lives.
Hospitals want you – You should work with them
Finally, employers should understand their role in the $4 trillion healthcare industry. Frankly, you’re the mark at the poker table. You have the deep pockets and they charge you more than anyone else, per research by RAND. Commercial payers pay, on average, 247 percent of Medicare rates. And California is worse above the mean – our commercial payers are paying 269 percent of Medicare, on average.
That research demonstrates how hospital executives see commercial payers (that’s you, versus Medicare, Medicaid, and other public payers) as their margin or surplus (if they are “non-profit”).
In fact, Elizabeth Mitchell of the PBGH recently highlighted a quote from one hospital executive:
“2022 is like 2020 without the Cares Act. We’ll have to look to commercial purchasers to make up the difference”
Understand this: hospitals want your business, but they also love that you don’t know what you’re spending and what other employers are spending. Asymmetrical information or simply a bunch of smoke and mirrors helps the seller, not the buyer.
So turn the tables around on hospitals and put them up against each other for your business. Tell a hospital “we’ll direct our employees to your doctors and facilities if you give us better prices.” It’s what big employers like Boeing, Disney, Walmart, Activision, and more are doing and it’s called Direct Contracting.
By setting up a direct contract with a local health system, we get lower prices for literally every healthcare service. We then turn around and give those savings to employees in the form of things like no deductible health plans and no employee contributions.
As we established above, employees are willing to forego plan features if there are significant savings at hand. We’re encouraged by how employees (current and prospective) have been responding to options like no deductible and fully-paid health insurance. I think it’s something every employer should consider given the climate we’re in today with the pressures of the labor market.
After all, what would that mean for your recruiting conversations to lay out how your health insurance is free and has no deductible?
Do you think an employee would think twice about leaving their job if they would be giving up free health insurance? If they were going to be leaving a no-deductible plan for one with a $1,500 deductible instead?
It’s something to consider.