Around the country CEOs are looking to hire top talent, CFOs are looking to bring certainty and predictability to the budget, and HR professionals are looking to provide an all-star benefits package to the workforce. All difficult tasks in today’s economy and all significantly impacted by rising healthcare costs. If leveraged effectively, the healthcare budget can serve as the centerpiece to acquiring the best “free agents”, stabilizing expenses, and granting employees access to world-class healthcare. However, this hasn’t been the story for most organizations. Year after year, employers face a healthcare budget that is striking out in its efforts to provide a successful financial outcome. Why is that?
In part III of Why Is My Healthcare Budget Striking Out you will uncover the toughest fundamental challenge you face in controlling your health insurance costs. The healthcare system is throwing your employees curveball after curveball, but if you can help them identify the spin, you can help them make effective decisions leading to better outcomes and reduced healthcare expenses.

You Are Giving Your Employees an Unlimited Company Credit Card

The decisions employees make inside the healthcare system are the driving force behind your ability (or inability) to control the healthcare budget. Unfortunately, these decisions continue to be a big reason behind the ballooning SG&A costs of far too many Profit & Loss statements. This is the biggest challenge to curbing rising healthcare costs and here’s why:

The medical ID card you hand out every year is nothing more than an unlimited company credit card.

Think about this. If employees stay within the health insurance plan’s network of doctors and hospitals, they can go wherever they want and they can spend whatever they want while your organization’s checkbook continues to pay for these decisions.

Price Variance Leads to Unlimited Spending

If your health plan allows employees to freely navigate a large network of doctors and hospitals, you are giving them the ability to buy healthcare services from a network of providers where gaps in price are significant. For example:

  • One imaging center can charge $500 for an MRI while another facility can bill $3,000 for the same MRI
  • One surgery center can bill $7,000 for rotator cuff surgery while another, less efficient facility, can charge $25,000 for the same procedure

Now, it would be logical to assume a higher price means higher quality but that’s not how healthcare works. The best care tends to come with an affordable sticker price while low quality is often accompanied by unreasonably high costs. When the purchase price is not made available to the buyer, it becomes easy to see how spending habits can get out of control as employees unknowingly swipe the “company credit card” as they please.

You Must Put Effective Controls in Place

Controlling the healthcare budget requires you to place effective controls on the utilization of the medical ID card. No, I’m not talking about restricting access to the healthcare system. However, I am talking about driving employees to high-quality, reasonably-priced healthcare services by eliminating deductibles and out-of-pocket expenses. The best way to change buying behavior is to make the right decisions easy and free. Wouldn’t it be great to know that your employees are getting world-class care while you’re putting money back into their wallets and your organization’s bottom line?
The top companies have learned that the most effective way to reduce healthcare costs is to improve the quality of the health plan. Cost-containment is no longer a matter of increasing deductibles, out of pocket limits, and employee premium contributions. It’s about bringing a strategic focus to the purchases employees make inside the healthcare system. It’s impossible to throw a strike when you’re aiming at a target you can’t see. However, when you have a better understanding of the fundamental challenges your healthcare budget faces, you’re able to bear down, focus on the right target, and strike out the status quo!