What possible budget control strategies are out there for me?
Traditional Approach: Create an obligation
The traditional way of structuring a benefits program is to have the management team go through the annual exercise of obtaining insurance quotes. Many employers would prefer not to have to provide it, but it becomes a major part of a compensation package and how to attract employees.
No one wants to say it, but everyone knows companies would celebrate when employees waived coverage.
And perhaps the most frustrating is that despite offering this benefit, while costs go up - employee satisfaction with health plans has fallen.
Innovative Approach: Give employees choice
Today, don't celebrate when coverage is waived, but celebrate when they take coverage because employees have a higher level of engagement. Compared to the cost of turnover, having someone select the right benefits plan for them that is at a manageable cost for the employer is far less expensive.
The concept of a “defined contribution” employee benefit is not new; most employees are familiar with the defined contribution approach through their retirement benefits. However, recently there has been an increased interest in the defined contribution approach to health benefits.
The heightened interest in “defined contribution” health plans is mainly due to the increasing costs of health coverage and changes made by the health care reform law, or the Affordable Care Act (ACA). As a result of the ACA changes, private exchanges have emerged as marketplaces for employees to select a health plan from an array of available options.
One advantage of the defined contribution model is increased cost awareness on the part of employees. Converting to a defined contribution model, the employer can achieve a greater perceived value for contributions of similar amounts. Employees will regularly be reminded of how much their employer “provided” for their health care as opposed to how much it “cost” them. Their cost will be assessed according to the plan “they chose,” but the model may be perceived more positively by employees.