The story for many businesses in 2016 has been one of reducing costs and increasing sales. It’s the same balance business has always played but the characters change from time to time. In the 1980s, businesses were recovering from the worst recession since the Great Depression— perhaps not so different from our current environment, only eight years after our Great Recession. The 1990s brought us the World Wide Web, low unemployment, minimal inflation and forced businesses to reevaluate organizational structures.
Then came the turn of the century when dotcoms were all the rage and the Y2K scare flopped on the scene. In the 2000s, businesses faced some of the same problems we see today. According a National Federation of Independent Businesses (NFIB) report published in 2008, some of the most severe problems facing small businesses were cost of health insurance, federal taxes on business income, and the cost of fossil fuels. So what kind of problems are we facing today?
Challenges and Failures in 2016
2016 has been a tumultuous year in business. Many of the stores we have come to know for years have either filed for bankruptcy or are on the ropes as they struggle to maintain financial solvency. Sports Authority filed for bankruptcy in March 2016 ultimately leaving 14,500 employees out of work. American Apparel, too, filed for bankruptcy in 2016, citing, “…unfavorable market conditions that were more persistent and widespread than the debtors anticipated.”
Even those stores who have not filed for bankruptcy are doing some serious damage control as they close hundreds of stores. Wal-mart, the juggernaut of inexpensive retail, closed 269 stores in 2016 to include 154 US locations. Some of the main drivers cited by bankrupt and non-bankrupt businesses alike are increased costs and decreased sales.
Fortune 1000 Companies and Small Businesses Alike
What are the Fortune 1000 companies doing to keep ahead of costs and increase business? According to Deloitte’s fourth biennial cost survey, the two top cost saving actions are streamlined business practices and improving health care policy compliance. These two actions are the most significant to create a competitive advantage over their peers in the market.
Small businesses are also dealing with the market pressures. M&T Bank conducted a survey of small businesses and discovered some interesting things. It is important to note that one of the biggest challenges cited by business owners is the cost of healthcare and other employee benefits. We all feel this to be true and it seems to be the same story each year. 2017 has proved to be no different.
High Costs in 2017
Predictions pegged group health benefits rising 5 to 6 percent in 2017. Now we are watching the scenario unfold as small and large businesses alike find ways to reduce costs, maintain quality coverage for employees, and comply with regulations. In today’s heated political environment, it’s hard to get anyone to agree about anything, but say that health insurance is expensive and you are sure to get nods of agreement. The cost of healthcare in the US is twice that of any other developed country.
Take Action: Combat Cost Drivers
So what can you do about it? If you have been charged with the decision to get the right health policy for the company’s employees, how can you get both quality and reduce costs? You don’t have to be Houdini.
Many times group insurance plans can get unnecessarily inflated for two reasons. These two reasons are within your control and have the potential to create massive savings.
Overpayment of Medical Services: In Texas, a report concluded that patients overpaid by thousands for some medical services. The Medical Billing Advocates of America estimate that “over 80% of medical bills contain errors.” Some hospitals are getting creative in their billing practices to increase profitability. Medical coding is often misunderstood by the layman, but buried within these codes are the real cost drivers for any medical services you receive.
Buying without Shopping Around: Just like with any other purchase, it can pay big time to shop around for a medical procedure. Often times we don’t shop around and can end up with a much larger bill for the same procedure. The Health Care Cost Institute conducted a study and found that in Cleveland, the average price for a pregnancy ultrasound was $522 and just 60 miles down the road it cost $183 on average. The average knee replacement costs $44,237 in Palm Beach, yet only cost $27,115 in Miami.
It really pays to watch for overpayment of medical services and to shop around for medical procedures. The smart businesses in 2017 are seeking and finding ways to capture these low hanging savings fruit.
There are three simple ways to make a massive impact on your group health insurance plan:
Directly negotiate costs using reference based pricing.
Use a healthcare concierge to help employees shop, compare and negotiate.
Use an objective party for bill review, applying clear objective standards.