In Sickness and in Health
If you are an employer facing a prospective employee at an interview, the first thought that would cross your mind would be how to control costs and yet offer attractive employee health benefit packages. According to a research, 34% of HR personnel believe that cost control is their biggest and only challenge. Healthcare benefits is one of the main areas where employers have been traditionally spending bulk of their money. Unfortunately, healthcare costs have been increasing at double-digit rates annually for the past five years. The economy has been tough on employers in the last two years. Revenues have declined in most sectors and this has in turn put massive pressure on employers to control or reduce expenses. Healthcare costs however are out of their control as they are increasing at an alarming rate globally. Employers are thus at the mercy of their health benefit plans, and continue to bear the costs until one day they feel they can’t.
DOLLAR VS COVERAGE
As an employer, determine how you would like to compensate the employee in case of medical liabilities. Generally companies provide coverage to employees in case of unforeseen medical emergencies- disability, death, critical illness. But there are many other medical emergencies where the employee would have to incur some spending like a dental operation, a cataract surgery, therapy, drugs etc which traditionally are not covered by companies. Ultimately, the employers are at a loss as they have to set aside funds for coverage as well as reimburse employees’ other medical emergencies. Would it not be a good idea to create something like a Health Spending Account for each employee and allot a certain amount of cash for each of them per year. That way, employers would do away with the coverage system which depends on healthcare costs heavily and increases every year along with it. Employers can have a fixed amount allotted to employees to be spent within a year as part of their medical needs. That way, not only will the employers be able to control their costs, even the employees will be able to manage their healthcare spending. And since it would be a blanket cover for all kinds of medical requirements, employers would be freed of the need of reimbursing their employees with additional expenses in case of non-critical medical emergencies.
SHARING VS CONTRIBUTION
Premium contribution is the traditional payroll deduction approach where the employee contributes to the premium of the health plan. However, employees contributing to this premium would obviously want to claim it afterwards. If all employees started claiming their amounts costs would shoot-up drastically. But if the employee shares a portion of the cost of the claim at the point of sales this would help them develop awareness of cost of benefits leading them to make wiser health decisions. Many companies are now shifting to this system of co-payment instead of monthly contribution. Under the co-payments arrangement, the employer pays 100% of the premium but the plan only reimburses 80% of the eligible expenses. The employees still pay 20% but they do so at the point of purchase. They thus pay a portion of each claim and not the premium itself.
LONG TERM PLAN
Employers must take the future into consideration before setting up a health plan with the employees. For instance if the present plan is about covering a healthy person, what happens to the employee benefits in case of disability? Would the employee continue receiving his benefits after disability? Many a times disabled employees sue the employers for not being transparent about their disability plans. Even if you, as an employer want to discontinue employee health benefits after disability, put that in writing on a legal document. The best way to deal with such tricky situations is to be proactive and transparent. There should be no room left for error. If your intent is to discontinue health benefits for a disabled person after 10 years, it is always better to arrange for a system of notification around the 8-9 year mark. If you are planning for termination packages, make sure that the employees receive them at their due date.
Following these simple proactive measures would not only help an employer manage health care costs but also establish a healthy and transparent relationship with the employees that would lead to an overall conducive work-environment.
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