Employee Education Is Key to Navigating Shifting Health Care Costs

Health insurance costs are a significant portion of total compensation ranging from 5.9 percent to 12.6 percent.

It's no secret that health care costs are increasing across the board. According to the Kaiser Family Foundation, deductibles rose 12 percent in 2016. The trend toward higher deductibles has been especially pronounced among employers with fewer than 200 employees, where 65 percent of workers are now on high-deductible plans.

This trend has significant financial repercussions for both employers and those they employ. Businesses who focus attention and resources on effective employee communication while attempting to align their interests with those of their workforce will be most successful in managing this fundamental shift in health care financial responsibility.

The Bureau of Labor Statistics notes that health insurance costs are a significant portion of total compensation, ranging from 5.9 percent to a whopping 12.6 percent, depending on public vs. private industry, and yet historically, individual engagement in health care decisions has been low.

As recently as 2013 more than half of employees (54 percent) reported they didn't want more control over their health insurance because they lack the time and knowledge to manage it (Aflac WorkForces Report, 2013). But now employees are responsible for an increasing percentage of health care costs and out-of-pocket expenses (OOPs) and are therefore more likely to engage in dialogue about their benefits. With this new structure, it's essential to encourage proactive health expense management and improve benefit satisfaction by proactively educating employees.

As an employer, the general lack of knowledge around health care pricing and the financial implications of that knowledge gap presents a significant opportunity to strengthen relationships with employees. By staying informed on the health care landscape and relaying that information in a digestible and actionable manner to your staff, you can effectively improve worker satisfaction, productivity and retention. There are factors that consumers can and should control in regards to their benefits and it's essential they have professionals to coach them through it.

One tangible example is price variance. Many Americans aren't aware that health care pricing varies and that there are factors that influence it. As a plan sponsor, it's your responsibility to not only be informed on health care pricing but also to be proactive in sharing that knowledge with employees.

The most notable driver in price difference is geography. The Health Care Cost Institute noted the startling differences in common medical procedures by location in their annual study:

The average price for a knee replacement in South Carolina paid by one of the three large for-profit insurers was almost $47,000; yet the average price of the same bundled procedure in New Jersey totaled only half as much - $24,000.

In Cleveland, the average price paid for a pregnancy ultrasound was $522. But just 60 miles away in Canton, Ohio, the average price was $183, according to the study.  

There are many other factors to consider regarding health care prices, including market size, volume of networks in a region, competition in a given market, and number of research institutions in the area, among others. By doing research and effectively communicating pricing factors like these, employers can build trust and provide real value. It's not only making employees aware that they can and should do things like financially plan for medical expenses and deductibles, research prices prior to receiving care, and identify and resolve errors and overcharges, but it's also giving them the knowledge and tools to do so.

In addition to building that awareness, employers can improve engagement by providing access to tools that will help employees make informed decisions. Such services have the potential to save time and money for employers and their employees, as well as cut down on the utilization of HR's resources.

Pricing is only one component of developing a well-informed employee. By empowering your people with information and providing the tools they need to take control of their financial and physical health, you're contributing to their overall well-being and the contentment of your workforce at large. Health care finance management is a real challenge today, and the challenge will only grow in stature and complexity as financial responsibility continues to shift further onto employers and their staff. Don't underestimate the value of educating yourself and passing that knowledge on to your people.

Ellen FitzPatrick is the vice president of partner development at Copatient, a Boston-based company that reviews medical bills to identify savings opportunities and contain costs for plan sponsors and members.

Tags: Bureau of Labor Statistics, Health Care Cost Institute, health care costs, Kaiser Family Foundation

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