Employers Fight Inflation with Cheaper Benefit Plans

Many local business owners are now discovering that the post-COVID economic recovery has a downside – namely, inflation.  As a result, these employers are searching for ways to offset the rising expense of running a business.

According to Jerry Calistri, President and CEO of the insurance brokerage firm Swift Kennedy & Associates, these business owners should consider switching from traditional fully insured employee benefit packages to self-insured plans, such as level-funded policies, in order to control costs.

Reduced Costs

“Level-funded plans can offer employers substantial savings in this inflationary environment because of the fact that they do not include marketing expenses, have lower administrative costs, and are exempt from premium taxes and most state regulations,” said Calistri.

These plans also allow business owners to pay a fixed or “level” monthly fee (based on expected claims) that is usually lower than traditional insurance premiums.  In addition, employers may be awarded a partial cash refund if actual claims are lower than expected.   (If claims are higher than predicted, the employer’s stop loss insurance will kick in.)

Transparency and Versatility

Unlike business owners with traditional insurance plans, those with level-funded policies receive claims activity reports with detailed information about employees’ health care usage patterns throughout the year. 

This transparency of claims data allows employers to take advantage of another cost-saving feature of level-funded plans – the customization of benefits.

“Having access to claims data lets business owners customize their benefit offerings so that they are more cost effective,” said Calistri.  “For example, if their employees seem to be over-using hospital emergency rooms, employers can tailor their plan designs so that workers have incentives to use urgent care centers and doctors’ offices for health problems that aren’t life threatening.”

Employee Engagement

Most level-funded plans offer a number of services designed to engage employees more fully in their healthcare decisions, while maximizing employers’ cost savings,

For example, many plans provide wellness programs designed to motivate workers to pursue healthy lifestyle choices such as exercising, since it is widely recognized that a healthy lifestyle can reduce employees’ medical costs.

Many of these plans also include telemedicine, which lets employees have online medical appointments and is not only a big money saver for employers but is also highly convenient for workers.  Some also offer prescription benefit management programs, which help employees select generic and mail order drugs rather than more expensive brand name products. 

“Because of their transparency, versatility, and potential savings, level-funded plans can be a great fit for many businesses whose owners are concerned about inflation,” said Calistri.