4 Ways to Combat Rising Healthcare Costs at Middle Market Firms

Rising healthcare costs affect businesses of all sizes. Despite this, a 2013 NCMM report entitled "The State of Healthcare in the U.S. Middle Market" shows that 85 percent of firms believe offering high-quality healthcare results in more productive employees, while over 90 percent of firms feel the offering helps attract and retain employees.

In today's business world, the word "sustainability" is heard on a regular basis. It generally refers to companies managing their environmental footprint; however, the changing state of healthcare in America has brought the principle of sustainability into the realm of people. Specifically, companies must focus on the health of their employees so that they can sustain themselves both physically and psychologically.

So given that 79 percent of middle market firms report they have experienced a cumulative increase of at least 27 percent in healthcare costs over the past five years — and more than 90 percent of these executives say that rising healthcare costs are among their top cost challenges — any company that's proactive in preserving employee health will most likely keep its overall healthcare costs on a sustainable trajectory.

Several independent studies show that a healthy workforce leads to lower direct healthcare costs due to fewer major medical interventions, as well as lower indirect costs due to reduced absenteeism and higher productivity. Here are four ways that middle market firms can achieve healthcare cost control while improving employee health and satisfaction.

1. Actively source lower-cost healthcare. Middle market firms should seek a more consultative relationship from their health insurance providers in order to discover offerings that would financially benefit the firm and employees alike. For additional guidance, management should look into educational sessions run by their industry's associations and by HR consulting firms.

For instance, with 35 percent of middle market executives saying they intend to shift to high-deductible health plans to stem rising costs, firms should inquire as to how health savings accounts (HSAs) can be paired with this option to allow employees to set aside pretax money for medical expenses for which they are responsible. One middle market firm that did this is RCO Limited in Columbus, Ohio, a franchisee of Raising Cane's Chicken Fingers that operates 11 stores. CEO Roy Getz learned how to bundle certain plans with HSA accounts, and as a result was able to keep his firm's monthly insurance expenses manageable while having all employees — not just full-timers — gain access to a $50 HSA debit card each month.

2. Collect and analyze the workforce's healthcare data. A middle market company can partner with its medical insurance provider to gather data to identify the medical issues that presently cost the firm the most and which health issues concern employees the most. Dr. Carmella Sebastian, a corporate wellness expert who worked for several insurance companies as senior medical officer, says that "you get to know your population by reviewing employees' claims with your health insurer on a quarterly basis. You must also determine the reasons for absences as well as how many employees are accessing behavioral health providers."

To learn the most current health profile of the workforce, insurance companies will often pay for a health fair conducted by a local medical office or a corporate-wellness company. With such an assessment, "you're finding out what health topics and initiatives most interest your employees," Sebastian says.

3. Develop a wellness program targeting the most pervasive health issues — and proactively sustain its momentum. Middle market firms can use all that employee data and information to create a wellness program (perhaps in conjunction with a wellness company), focusing the majority of resources on the most predominant and most expensive health issues among its employees.

Eighty-five percent of executive respondents to the NCMM healthcare survey stated that they're likely to implement some sort of wellness program; however, just 41 percent stated they're likely to implement employee incentives to keep healthcare costs down. This highlights an important issue: Motivating employees not just to start in the program, but to stay with it over the long term. To make your program work, focus on just a few policies and programs that could touch many employees and gain early success, rather than implement several policies and programs at once with insufficient resources. "You really want a successful first year," says Sebastian. "You need a win to let employees know the program is not a passing thing, but something the organization will continue investing in."

4. Partner with a local medical clinic or develop an on-site clinic. With 55 percent of respondents to the NCMM healthcare survey likely to deploy and drive use of near-site healthcare offices; 53 percent likely to deploy and drive use of remote provider consultations; and 49 percent likely to even develop permanent care right in the workplace, it's clear that middle market executives understand that the cost of implementing any of these is likely considerably outweighed by their benefits. These include more effective preventive care for all employees, especially those with chronic ailments; less absenteeism and partially-lost workdays; and a decreased loss in productivity among employees who are not fully healthy but are on the job.

Rob Carey is an NCMM contributor and a features writer who has focused on the business-to-business niche since 1992. He spent his first 15 years at Nielsen Business Media, rising from editorial intern to editorial director. Since then, Rob has been the principal of New York-based Meetings & Hospitality Insight, working with large hospitality brands in addition to various media outlets.