Employer Survival Tactics in Times of Economic Downturn Submitted by: Flash Media Services
2009-02-23 13:49:40
(OPENPRESS) February 23, 2009 -- Healthcare benefits make up nearly one third of a company's total payroll expense. As employers face challenging economic times, there are ways their businesses can get a handle on this ever growing cost – while still keeping employees engaged and productive despite potential benefit cuts. Here are some basic ways to keep healthcare costs down while still satisfying the needs of your employees.
• Have a plan: Define how your workforce is made up today and project what it will look like five years from now. Many benefits programs are still based on a basic template that was first developed years ago and tweaked only marginally to help alleviate the impact of cost increases. However, it's likely your workforce has undergone many changes over the years and employees now have different needs and priorities. Understanding your employees helps you make strategic - rather than wholesale - cuts, targeting the areas with the least impact on employee morale and productivity. Base your decisions on a realistic forecast of what healthcare benefits will be used for the next three years.
• Focus on key talent: With layoffs and hiring freezes, it may seem that employee retention will not be an issue. That may be so for some job types, but many seasoned key talent positions are still in jeopardy during times of uncertainty. Losing such talent, along with the knowledge base it carries, would hurt your organization even more now, when the focus on each employee's productivity is greater than ever. Make sure your benefit program is designed to specifically focus on retaining your key talent and keeping these individuals productive and engaged.
• Communicate effectively: Make sure you have an effective employee communication strategy in place. It is the foundation of organizational stability in uncertain times. Intensive corporate communication is key to settling fears and keeping employees engaged and productive. Offer well-crafted employee surveys to show employees that you care about their feedback. Effective communications that educate employees about the value of benefits can actually do more to improve employee satisfaction than richer benefit plans.
• Beware of increasing claims: History has shown that medical, Rx, dental and disability claims spike when the economy is down. Workers compensation claims and absenteeism will also increase. Employees afraid of losing their job or anticipating benefit cuts take advantage of medical services now while they have benefits coverage. Also, the general increase in stress level has an adverse effect on the health of the population. Sometimes there may even be an uptick in fraudulent claims. Make sure to factor this into your cost analysis to present a realistic forecast of benefit utilization.
• Formulate a long-term benefits strategy: Now more so than ever, employers have to be proactive in formulating benefits strategy, rather than just reacting to internal budget cuts and increasing external cost pressures as they come. The key to having a solid strategy is valid analysis. Forecast your medical claims and costs for three years ahead and then track plan performance to the forecast and to industry norms. When making decisions during renewal time, look at actuarial models of different funding scenarios, plan design alternatives, and the true impact of possible layoffs on medical costs. Finally, if such analysis is being done, make sure it's based on sound actuarial principles and is yielding data that you can truly rely on to make decisions impacting millions of dollars of premiums.
• Test cost-reducing solutions: Some new benefits can help reduce costs. But make sure to consider the short-term cost increase along with the long-term cost benefit. Health Risk Management (or wellness) is one solution that can have a positive long-term impact on medical costs. Automating benefits enrollment through an online system may also result in some savings over a period of time. However, neither of these solutions are a quick fix. These are areas that employers should invest in to reap the benefits over several years. Therefore, if your organization is cutting back substantially, evaluate which aspects of such programs might need to be delayed.
• Consider flex time and telecommuting: Introducing flexible work options may have far-reaching positive effects, including offsetting negative feelings about cuts in traditional benefits, improving employee loyalty and morale, and lowering the company's overhead costs. Evaluate your workforce to help pinpoint how much value adding or expanding such benefits may help you leverage.
• Turn over some stones: Conduct benefits eligibility audits to make sure that no ineligible dependents are on the company plan. In addition, consider auditing your insurance carrier to check to make sure claims are being properly paid.
• Focus on your core business: This is a proven business strategy that especially helps you weather tough times. Organizations have to shift resources to support the core business functions and outsource non-essential duties, such as benefits administration, to a reliable specialized vendor that can do it more cost effectively. This may be especially important if your COBRA administration load has increased and/or if you have a hiring freeze.
During these challenging economic times, take the time to drill down into how your benefit plans best fit your workforce to keep employees happy while at the same time reducing costs.
(Nancy Kokenge is a senior consultant with Gallagher Benefit Services, Inc., in Eastern Washington. Gallagher Benefit Services offers health employee benefits consulting and administration to companies of all sizes. She can be reached at 509-965-6000 or go to www.GBSwa.com for more information.)
