September 8, 2020 | By Wendy Katz
Healthcare costs continue to soar. High premiums and strict governmental regulations affect the bottom line for thousands of companies across all industries.
In response, many organizations decided to cut costs by reducing employee benefits. Unfortunately, this strategy often backfires on employers. Some 70% of employees report that as their benefits decrease, so does their job satisfaction. Three out of five job candidates say that they weigh benefits and perks above nearly everything else (save wages) in deciding whether to accept an offer. Companies that reduce benefits will likely see an exodus of valuable employees and a shortage of new talent with which to replace them.
The good news is that there are alternatives to cutting costs that don't involve cutting benefits. The following will discuss 5 such strategies. The advantages associated with these methods are compounded when partnering with an outsourced HR provider, such as a Professional Employer Organization (PEO).
One recent study found that telemedicine could save up to $6 billion annually in U.S. healthcare costs. When you consider the logistical and administrative "hoops" that employees and businesses often have to jump through just for one visit to the doctor's office, it makes sense that participation in virtual appointments would save a significant amount of time and money for both parties.
Partnering with a PEO allows companies to receive full access to telemedicine offerings without going through the hassle of juggling multiple providers or coordinating independent services. With a lower administrative burden comes lower costs and often better results for employees.
It's estimated that half of adult Americans have a chronic illness, and those diseases account for 85% of healthcare costs. In the context of cost savings, the old maxim holds true: "An ounce of prevention is worth a pound of cure."
When employees take advantage of preventative medicine, they are less likely to struggle with chronic disease. Employees that use preventative medicine instead of leaning on healthcare plans solely for emergencies will enjoy a higher quality of life. At the same time, employers will save on insurance premiums and related costs.
A dedicated benefits expert helps employees make better choices when it comes to using their benefits. In turn, the employees' good decisions will save their employer money. If employees unnecessarily over-use benefits, it costs employers money.
Granted, it may be difficult for employers to offer expert benefits advice in-house, since HR professionals aren't necessarily specialists for particular plans. PEOs offer practical help in this area. Part of a PEO's basic service offerings includes giving companies access to benefits specialists who can do everything a Third Party Administrator (TPA) can do.
Companies that offer their employees prizes, awards, or other incentives for the achievement of wellness-related goals typically enjoy increased cost savings. In fact, one study found that medical costs may fall by $3.27 for every dollar spent on wellness programs.
A large portion of healthcare costs is behavior-driven. In other words, when employees have healthy habits, healthcare costs decrease. By encouraging such habits (the cessation of smoking, eating healthier foods, etc.), employers can increase the happiness of team members and simultaneously cut costs.
Many of the more comprehensive benefits packages on the market are cost-prohibitive for employers. At the same time, such benefits are highly attractive for both current employees and job seekers. In this matter, many companies find themselves "stuck between a rock and a hard place."
In contrast, partnering with a PEO enables companies to access Fortune 500 level medical insurance and other benefits that are usually only accessible to large companies. These plans are negotiated by experts at scale, and allow PEO clients to enjoy the advantages of falling under the PEO's large "umbrella" network of clients, insurers, and providers. More affordable benefits mean a greater variety of options for employees, higher worker satisfaction, and reduced healthcare costs for the employer.
The five measures discussed above have a proven track record of cutting costs without sacrificing employee benefits. While companies can tackle each measure piecemeal, all five methods can be combined into one unified strategy when working with a PEO. For instance:
Companies that partner with an experienced PEO typically find that they are able to offer their employees best-in-class benefits packages without taking a massive hit to their bottom line. The end result is that their employees are happier, more engaged, more productive, and less likely to leave.
Wendy Katz is the Chief Financial Officer at Questco Companies. Wendy is aiding our clients’ drive for profitability and compliance by providing pragmatic insights and sound financial solutions to constantly evolving HR challenges.