Healthcare is complicated, but employers should still be able to follow the money.
Many organizations are asked to make one of their largest annual financial decisions without a clear view of how claims, pharmacy contracts, rebates, fees, and other healthcare dollars move through the system.
Complicated should not mean impossible to explain.
Employers should be able to understand where their money is going, how their contracts work, and whether the plan is being managed in the best interest of both the organization and its employees.
A simple pharmacy example makes the point.
If a medication is purchased for $5 through a discounted pricing arrangement and the health plan pays $10, who received the other $5?
It is easy to assume the pharmacy benefit manager kept it. Maybe it did. But the money could also have gone to the pharmacy, insurance carrier, hospital, administrator, or another organization involved in the transaction.
The inability to answer that question is the larger problem.
Employers do not need to become experts in every drug-pricing rule or pharmacy contract. They should, however, have an advisor who can explain in plain English how money moves through their own health plan.
That is where the renewal conversation needs to change.
Too many employers still manage benefits one renewal at a time. The increase arrives, alternatives are compared, and the organization decides whether to stay with the carrier, shift more cost to employees, reduce benefits, or absorb the increase.
That may complete the renewal, but it does not create a long-term strategy.
Before renewal numbers arrive, employers should already understand what is driving the plan. They should know whether claims are trending higher, whether pharmacy spending is being actively managed, whether employees are receiving guidance before making expensive healthcare decisions, and whether the current funding arrangement still makes sense.
A successful advisor relationship should create more visibility, not more dependency.
Employers should know what is driving costs, what is being done to address those drivers, and what results the strategy is expected to produce. They should not have to wait until renewal to discover that pharmacy spending increased or that the current plan is no longer working effectively.
This does not mean every employer needs to change carriers, replace its PBM, or move to self-funding. It means every major decision should be based on a clear understanding of the numbers, the contracts, and the options available.
Renewal should not be the starting point of the healthcare strategy. It should be the result of the work completed throughout the year.
Before accepting the next renewal, follow the money.
The answers may change what the organization is willing to accept and what it decides to do next.
About Ken Wosczyna
Ken Wosczyna of EBA-1 is a healthcare strategist specializing in employer-sponsored health plans, utilization analytics, and sustainable cost control. Based in Stamford, Connecticut, he helps employers develop long-term healthcare strategies that improve affordability for employees while creating more predictable healthcare spending for businesses. Through data-driven analysis and multi-year planning, Ken works with organizations to reduce overspending and build sustainable health plans that better serve both employers and their workforce.
For additional perspectives on employer healthcare strategy, cost management, and industry trends, visit https://eba-1.com/ or subscribe to Ken’s LinkedIn newsletter, K.I.S.S. Healthcare 101 — Keep It Simple & Smart, Monthly Health Insurance at https://www.linkedin.com/build-relation/newsletter-follow?entityUrn=7249889392675155968
