Employees are perhaps the most priced asset that an organization or a company has. This is because without them, the activities of the company cannot be carried out and hence the company is ineffective in its operations. It is therefore imperative that these employees be positively motivated in their jobs so as to enhance their productivity.
One of the ways that employees are motivated, and perhaps the most important one, is through offering of competitive remuneration package that has a reasonable Health Care package. A health care package that is appealing to the needs of the employees and has a broader coverage is more preferred. This healthcare package should however be cost effective to the company and therefore the need to carry out market research on this topic to establish the best Health Care package providers and the best packages that were in the market. This paper will therefore look at how a Human Resource (HR) Director will go about the process of selecting a health care package that suited the needs of the employees including him/herself, yet still remain cost effective enough not to change the Employees’ Benefit Package budget.
Determining the Objectives of a Healthcare Package
In the review of the market to establish the most competitive healthcare provider, the HR Director should consider the general objective of the healthcare sponsor in providing these services. The objectives of the healthcare sponsor may be essential in the determination of the most eligible sponsor. To ensure this therefore, a Human Resource Director should (GFOA Best Practice, 2007):
- Develop a strategic plan of determining the most active participants in the healthcare coverage
- Consider separate strategies for the retired and active employees
- Consider the contribution of the healthcare package to both the employers and the employees
The HR Director should consider the health plan as part of the overall compensation package of the employees. Therefore, the healthcare package that he selects should be provided in lieu to the other aspects of the employee compensation so as to provide employee benefits as a complete package. This should be deeply embedded in the objective of the healthcare sponsor selected.
To ensure that the package selected is the most cost-effective, it is essential that the HR Director should thoroughly review and be able to define the economic and labor market in which the healthcare sponsor exists operates in (GFOA Best Practice, 2007). This helps to determine whether the healthcare benefits plan that the company needs should necessarily venture into the markets that are involved in the healthcare sponsor’s healthcare plan. As such, the company shields itself from engaging in unnecessary economic transactions that would otherwise be very expensive. The review of the markets involved also enables the company to compare its healthcare benefits strategies with those of other companies and determine whether it falls among, above or below its peers.
Definition of Cost Objectives using Performance Trend
In the selection of the appropriate healthcare package and healthcare sponsor for its employees, the company should look into the performance record of the sponsors and how that particular healthcare package has been adopted in the past. This should ideally involve a review of 3 to 5 years performance trend of the healthcare sponsor and package in other companies or organizations. This trend should then be tagged or correlated to the cost of the services provided in the package over the same period.
This review helps the company to consider which healthcare sponsor had performance trends that would suit its Employee Benefits Budget (EBB) (GFOA Best Practices, 2008). As such, the company is bound to select a healthcare package that will be cost effective for its economic operations. The EBB of the company and the performance trend of the healthcare sponsor should however be in the range of the national or other relevant trends (GFOA Best Practices, 2008).
On their side, the healthcare sponsors should use analytical tools to determine the drivers of cost and the risk factors that are involved in the implementation of the various healthcare packages. This should involve an understanding of the possible diseases and conditions, the facilities available for effective admission of treatment, and the treatment approaches to the various diseases identified. This accords the opportunity to save on costs and make informed decisions. If this is done effectively, it will allow the healthcare sponsor to roll out more cost effective healthcare packages which would be easily adopted by the companies.
Relating Cost to Purpose and Performance
The HR Director is mandated to ensure that the company had a work force that was positively motivated and satisfied with the working conditions to ensure enhanced productivity by the company. As such, the HR Director should ensure that the purpose of the healthcare package selected was top fulfill the same goal. These goals however should be fulfilled in a more cost effective manner. The aim here therefore is to establish the appropriate cost-containment measures that are necessary in the provision of a healthcare package that is appealing to the needs of the employees. To make this possible, it is advisable that the HR Director performs the following actions (GFOA Best Practice, 2010):
- Audit the performance trend of the healthcare sponsors
This has a general effect of identifying the most eligible sponsors. The strategies that can be used to manage eligibility include, among others, auditing the dependents, Medicare eligible, and the situation of the retirees.
In the audits, the HR Director should also focus on the vendor management strategies that have been adopted by the various healthcare sponsors. This is because vendors are responsible for processing the claims and ensuring third parties are compensated according to the benefit plans adopted in the healthcare package, and provide the channel for addressing complaints to the healthcare sponsors.
- Review the healthcare management programs such as disease management, large-scale management, and pharmacy benefits management programs to help understand the risks involved and the most realistic costs of such healthcare packages. This review should also look at how the healthcare sponsors have offered vendor contracts that include these programs, the pre-package offerings by the vendors, and the amount that the sponsors are willing to pay for every specific outcome, before the company can commit to such programs.
- Evaluate whether self-funding by the company would be viable in adopting the healthcare package that is rolled out by different healthcare sponsors. In this endeavor, it is essential that the HR Director considers the Number of employees, whether active or retired, that the healthcare package will be catering for, the ability of the company to handle the risks that may arise as a result of committing to these healthcare packages, and the availability of stop-loss coverage in the healthcare packages offered.
To help determine the viability of self-funding in the implementation of the most appealing healthcare packages, the HR Director should engage in the review comparisons between self-funded and fully-insured healthcare plans that have been adopted by known companies. The analysis of the long-term projections and the financial viability of the two approaches are paramount, since the healthcare sector is continually experiencing rapid rise in the cost of healthcare.
- The HR Director should work with the other departments to ensure that the long-term strategic plan that will be adopted by the company in the provision of healthcare package and other Employee benefits is well understood throughout the company and that it can be considered in the labor negotiations. It is therefore important for the company to integrate its healthcare plan in to its long-term financial plan.
- The HR Director should ultimately organize education initiatives to sensitize the employee and employers alike about the benefits and limitations of the healthcare package that has been adopted by the company, the cost of implementation and valuation of the package to the active employees and retirees. The education initiative should also communicate the value of the healthcare package to the elected and appointed members of the staff so that they could make informed decisions about the matter, as well as the employees, labor groups, the public and other agencies that may be involved. This sensitization, apart from enhancing informed decision making, equips the employees and the public in general with the knowledge to avoid or manage health risks that would otherwise cost the company a lot of money in compensations.
- Te importance of retiree healthcare package provision in the determination of the total cost of healthcare compensations should be considered by the company and reviewed as necessary (GFOA Best Practice, 2007). This is because the provision of healthcare packages to retired employees of the company adds to the cost of offering the same packages to the active employees. This might lead to very expensive EBB that will affect the general costs and sustainability of the company, especially if the turn-over rate of the employees was high.
A healthcare package that an organization or company decides to adopt will ultimately impact on the general cost and sustainability of the company. The process of deciding which of the healthcare packages that are provided by the various healthcare sponsors should therefore be very analytical with regard to the present and future costs and sustenance of the healthcare plan so as to avoid unnecessary risks.
Of importance perhaps is the review of the performance trend of the various healthcare sponsors before deciding on which one of them to commit to, and the review of the cost effectiveness of the various healthcare packages provided by the preferred sponsors. Cost effectiveness is a product of measures taken from both divides. Therefore, the healthcare sponsors selected should have shown that they took every measure to ensure that the packages were relatively cost effective, and the company should involve its staff in the measures to ensure that little amount of resources is channeled to compensations due to health issues. Regardless of all these factors, the healthcare package selected should focus to be an incentive to the employees, as they were the main determinants of the productivity of the company.