“Competition is the keen cutting edge of business, always shaving away at costs.” Henry Ford
Health insurance is a huge expense for your beer business, and it keeps getting bigger. You need to offer this benefit to recruit and retain great employees, but you feel helpless as you watch prices constantly going up.
However, there is something you can do to gain control over health insurance expense: Teach your employees to shop for health care services and then give them a piece of the cost savings when they find it.
We live in the greatest country in the world. We have a free market and capitalism abounds. Let’s use some of that capitalist spirit to drive down health insurance costs for employees, and your beer business.
In this article, we’ll review why teaching your employees to shop for health care might be the biggest cost-saving move you can make. When they shop and save on health care, everyone saves money.
- Health Insurance – What it costs, what you can save, what’s at stake
- Avoid These Health Expense Savings Traps: The usual approach to saving isn’t working
- Use the Free Market: Teach employees to comparison shop and let them share in the savings
Health Insurance – What it Costs and What You Can Save
According to the Kaiser Foundation, the average cost of a family health plan is $18,000 per year and rising. This is big bucks for a marginal plan with high deductibles and limited provider options for employees.
If you have 100 employees, and cover 60% of the cost, this expense adds up to over a million dollars per year. That is a lot of money for a mediocre benefit plan.
As I’ve written about in previous articles, a self-funded health plan can provide huge savings and a superior benefit for your employees.
In my experience with self-funded health insurance, a family health plan cost ranged from $4500 to $6000 per year. The deductibles were very low, and the provider network was wide. Compare this to the $18,000 average noted above and you can see how much money can be saved with this type of plan.
Health insurance goes up and up because no one in the system has an incentive for it to go down. Doctors, hospitals and other providers are getting paid. It’s up to you and your employees to try a new approach so that you can reduce this huge expense in your beer business.With a self-funded plan, you can create a system with built-in incentives to drive down costs for everyone.
Avoid these Health Expense Savings Traps
Many companies take a soft approach to healthcare savings. There are reimbursements for gym memberships, free flu shots and hand sanitizer around every corner. These are all good things, and done with the best of intentions for employees. However, they barely scratch the surface when it comes to saving any money on health costs.
Some companies pay employees to leave the health plan. The idea here is that the best way to reduce health costs is to have fewer employees in the plan.
In this scenario, if an employee can be covered on another health plan (like their spouse’s plan) they are offered an amount to do so. This is typically a voluntary move which the employee needs to agree to, and they are paid a few thousand dollars as an incentive.
The employer wins because there is one less person in the plan, the employee wins because they pocket some cash. Ideally, the employee will have compared plans, done the math and determined which health option is best for their family. But usually they don’t. They take the cash and run.
This option seems interesting on the surface – I will pay you to go get health care somewhere else. However, this is akin to kicking the can down the road. Nothing is done to fundamentally change the total costs in the system.
Teach Employees to Price Shop for Health Care
The single best way to reduce health care costs is to teach employees how to price shop for services and let them share in the savings when they find it.
When you think about it, this makes a lot of sense. You ask employees to shop and compare prices for everything in your beer business – office supplies, freight charges, warehouse equipment and so on – shopping health care costs should be no different. Especially when these costs are among the biggest expense items on the income statement.
So, why isn’t this done all the time? Why isn’t price shopping for health care services a mainstream, generally accepted way of doing business? There are a few reasons.
- Lack of Price Transparency – There’s no value menu for health insurance
- Lower Cost Health Care Equals Lower Quality – Perception vs. Reality
- We Trust Our Doctor – Why Take a Chance on Somebody else?
- There’s no Incentive to Shop Around for a Better Deal on Health Care
Lack of price transparency. Hospitals and health care providers don’t readily share information about what services cost. There’s no menu of prices that you can look up online to compare prices and no easy way to figure out whether Hospital A is over-charging vs. Hospital B.
This lack of price transparency makes it difficult and time-consuming to figure out the best price and the best deal for your money. You can find out, but it takes some effort.
Lower Cost equals Lower Quality. We don’t want to shop for health care because we fear that it will lead to lower quality care. There is a perception that if something costs less, it might be inferior. No one wants to take a chance on inferior health care.
However, there are many circumstances where a procedure costs less and the quality of care is superb. We found this to be the case with Boston, Massachusetts area hospitals as compared to our rural hospitals in New Hampshire. The Boston hospitals offered lower prices and superior results for their patients. Why? Competition.
The Boston hospitals employed doctors that performed the same type of surgeries hundreds of times. They were experts. They were also competing against other area hospitals for the business. This drove down prices while providing excellent care.
We trust our doctor. Why take a chance on somebody else? Consider a circumstance where you need to have knee surgery. Your doctor refers you to a surgeon at the local hospital, and talks you through the process. He tells you what to expect, and how long the recovery period will be. You trust your doctor and trust his referral. The easy approach is to simply follow your doctor’s recommendation.
However, your doctor really doesn’t care how much the procedure costs or whether it’s cheaper somewhere else. Their job is to get you fixed up, not to save money. Saving money is your job.
There’s no incentive to shop around for a better deal on health care. If you give employees a reason to compare prices, and let them share in the savings, they will find a way to overcome all the resistance points noted above.
With an incentive to shop around, employees will figure out how much health care costs at different providers. They will find the lowest price and the best service.
Wrap Up + Action Items
Your employees shop for everything – toothpaste, a loaf of bread, a new car. However, they haven’t yet been taught how to shop for health insurance.
This action item is simple: Teach your employees how to shop for health care and give them a piece of the savings when they find it. The power of the free market combined with the employee’s incentive to save money will drive down costs for everyone – especially for your income statement.
