Employee benefit expenses are indeed one of the largest ongoing costs for any employer across the industries. The United States employers make a lot of mistakes while purchasing healthcare services for their employees. These mistakes are uncharacteristic for the typically intelligent and even frugal business managers who actually lead some of the country’s greatest organizations. Correcting mistakes will definitely make an organization better; however correcting healthcare purchasing mistakes has proved to be the added benefit so as to achieve significant bottom-line enhancements.
Mistakes businesses make when managing healthcare services
Employee benefits are typically the third most ongoing expense for employers just behind payroll and cost of goods sold. So it could be assumed that senior management would be extremely in tune with these kinds of expenses and would have very detailed plans so as to maximize the value of the expenditure. However such is rarely the case.
Mistakes made for healthcare services
Mistake 1: Staying blind to true costs
When it comes to healthcare services spending, most of the employers are absolutely blind to true costs, and they tend to trust companies and individuals with conflicting financial motivations. These individuals and companies keep employers in the dark and even follow traditional human resources thinking.
Mistake 2: Assuming there is nothing you can do
Employers can and should be blaming all the big health insurance organizations, which have been overcharging the employers for many years. So, large healthcare corporations all make much more money when the employees spend more. It is much likely that the organizations are overpaying for healthcare services by around 20% – 30%.
Mistake 3: Assuming big healthcare has your back
If the company is self-funded, ERISA law requires that the employers should spend that money prudently and even protect the health plan’s assets. So it is highly likely that the company is in breach of its fiduciary duty in order to protect the health plan’s assets.
Mistake 4: Underestimating HR Department
Human Resource management is a critical function for all sort of employers. HR needs to be at the corporate table more often, especially when expenses are being discussed. Like any other area of management, place smart people in the position and incentivize them to out-perform.
Date: June 15, 2017