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Employee Benefits Benchmark, Cost Containment & Control | GUM

Employee Benefits Cost Containment Strategy

Employee benefits play a key role in attracting and retaining talent, boosting job satisfaction, and enhancing productivity. However, rising healthcare costs, medical inflation, and evolving employee expectations have made managing group medical insurance renewals more challenging post-COVID-19.

Two Key metrics for Employee Benefits Benchmarking on Cost

1.Loss RatioThe loss ratio helps control costs, improve plans, and boost satisfaction by guiding better insurance rates and wellness investments.

2. PremiumPremium costs aid in budgeting and providing comprehensive benefits.

GUM Employee Insurance Benefits Research 2024

A longitudinal study conducted since 2003, the GUM Employee Insurance Benefits Research aims to provide corporate decision makers an employee benefits benchmark on Group medical trends, benefit provision and premium costing. It also dives into the latest trends and provide insights to employers in employees' medical and healthcare needs, which have transformed fundamentally after the pandemic.

To access our detailed findings and comparisons:

Download Report Now

On the rise: is the increment in loss ratio and premium healthy?

A healthy loss ratio typically ranges from 70% to 90%, balancing profitability and adequate coverage. Ratios above 90% signal financial strain, potentially leading to higher premiums.According to GUM's 2024 Employee Insurance Benefits Research, loss ratios have exceeded 90% in recent years, with inpatient claims surpassing 100%, indicating unsustainable premiums.

Why the higher benefit costs?

Medical InflationMedical costs have doubled since 2014, driven by aging populations, chronic diseases, and rising demand. This trend strains budgets and underscores the need for efficient health planning.

Aging WorkforceHong Kong's population is aging rapidly, with the elderly population growing while the youth base shrinks. High life expectancy highlights healthcare advancements but raises challenges for healthcare, social services, and economic stability.

Changing insured member behaviourIncreased use of medical services, preventive procedures, and Traditional Chinese Medicine claims are driving higher healthcare costs and premiums, with further rises expected.

Healthcare Cost in the FutureWith medical inflation projected at 9% and a shrinking workforce, healthcare costs will continue to rise. GUM advises against simply cutting coverage, instead recommending benefits benchmarking to optimize plan design.

Yes or No? Common shortcuts for HR to controlling benefit cost

Reducing insurance coverage

Cutting medical coverage may save costs but risks employee dissatisfaction and costly turnover.

Keep switching to the insurer with the lowest premium

Changing insurers can disrupt employees, reduce coverage, and increase out-of-pocket costs, leading to frustration and higher long-term expenses.

Yes or No? Common shortcuts for HR to controlling benefit cost

While cost savings are important, it's crucial to evaluate the overall quality and adequacy of the insurance plan. A thorough assessment of both premium costs and the benefits offered can help ensure that the chosen plan supports employee well-being and organizational goals.

Key Strategies for Effective Employee Benefits Cost Containment

Leveraging data and analytics

Analyzing claim patterns, demographics, and industry benchmarks helps employers optimize benefits and control costs effectively.

Adding cost-sharing elements/ limitations

Cost-sharing options like deductibles and co-pays can lower premiums and reduce unnecessary claims. GUM's strategies, such as limiting hospital choices, have helped clients cut costs significantly.

Adding specific claim incentive

Second claim incentive:
- This encourages employees to use personal healthcare benefits first, reducing group claims and overall costs for employers.
Hospital cash incentive:
- This encourage employees to choose cost-effective public or ward care, reducing employer costs while offering cash rewards.

Promoting preventive care and wellness programs

This helps address lifestyle-related conditions, fostering a healthier workforce, reducing insurance costs, and enhancing benefit effectiveness.

Focusing on employee communications

Clear employee communication on benefits and coverage helps reduce unnecessary claims, improve utilization, and manage group medical costs effectively.

Liaising with consultant and insurer

Collaborating with consultants helps employers negotiate better rates, customize benefit plans, and achieve significant cost savings.

Conclusion

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Prioritize Cost Management and Employee Protection

Corporations must balance controlling benefit costs with providing adequate medical coverage to ensure both financial sustainability and employee well-being.

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Tailor Plans to Workforce Needs

Understanding employee demographics, health conditions, and lifestyle preferences is essential for designing a benefits plan that aligns with their specific needs.

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Focus on Preventive Care and Wellness

Implementing wellness programs and preventive care can reduce long-term costs, enhance employee engagement, and improve workforce satisfaction.

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Reach out to your Employee Benefits Expert

At GUM, we focus on using market benchmarking, actuarial analysis and also market intelligence to discover, design and deliver “purpose-fit” employee benefits solution to our clients. Reach out to our consultant today to kick start your cost containment strategy planning today!

Frequently Asked Questions

1. What are the long-term implications of implementing employee benefits cost containment elements in employee benefits?

2. What role does technology play in modern employee benefits cost containment?

3. How do regional differences affect employee benefits benchmarking? Why should we look more into local data?

4. What employee benefits benchmark can employers take reference to?

5. What role do wellness programs play in long-term employee benefits cost containment?

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