From Aha! to A Win: How to Transform Your Health Care Benefits

As a large public-company Chief Human Resource Officer (CHRO), one of my biggest aha moments happened when I reviewed our company’s self-insured health care plans. It wasn’t just the cost per employee. Or the premiums. Or the year-over-year percentage increases.  It was the sheer cost of this behemoth: Nearly $500M. And significantly more than our company’s combined short- and long-term incentive plans.

Every. Single. Year.

My take-away: Status quo was far more risky than change. So we dug deeper, created a business case and made changes in our health care strategy that not only improved our bottom line – it delivered better health care for our employees. This is the first of a three-part series on how we did that: Starting with the business case.

The Aha Moment and Case for Change  

I remember thinking: Could this be right?  Our company’s health care benefit cost far more than our employee incentive expense. And yet, as CHRO, I spent far less time working on health care than incentives.

That simple comparison got my attention. So we analyzed the business impact of our health care spend and the quality of this benefit to employees. Based on the size of the cost and the need to improve, that got our leadership team’s attention. We knew we had to change.

A Business Case Example  

Our situation is not unique – so let’s look at an example to quantify the impact.

Sample Corp. has 10,000 employees in the U.S., $5B in revenue, a 10 percent profit margin and $4.5B in total cost. As with most employers, their health care cost is $15K per employee. That translates to a $150M health care spend per year. Or a whopping 3.3 percent of total cost.

The good news? Health care is not a fixed cost.  It’s variable. Or at least, that’s how Sample Corp should be looking at it.  Even better – there are strategies to reduce cost AND improve quality.

A Change Worth Making 

Based on the case for change at my former company, we initiated a comprehensive health care strategy in 2019.  Between that year and 2024, the compounded cost of self-funded health care plans rose about 40%, according to conservative estimates. If we had followed that trend, our $500M health care cost in 2019 would have risen to $700M in 2024.  But over that five-year period – while many companies’ health care costs increased – our costs went down.  That generated huge savings and a material increase to the bottom line. And at the same time, we introduced a better quality of care for our employees.

If Sample Corp. followed our strategy, their five-year, flat-cost health care cost reduction would increase net profit more than 6 percent. That alone would be a great reason for Sample Corp. to shift its health care strategy.  But not the only reason.

Beyond the Numbers 

In a recent Forbes study, 67 percent of respondents said health insurance is the most important benefit that employees want from their employers. And 26 percent said they would quit their current job for access to better health care benefits. That translates to recruitment and retention. Robust health care benefits are a competitive advantage, helping companies attract and retain top talent.

In addition, health care plays a key role in corporate culture. Accessing health care is often an emotional experience, especially when employees or their family members are sick, need surgery, or have a health care crisis. If the process is bureaucratic and slow, those emotions are negative. If it’s expedited, employee-centric and sensitive, the reaction – and the connection to company culture – is much more positive. Employer health care plans are one of the most tangible ways to demonstrate caring.

Beyond traditional physical health care benefits, research reinforces employees’ focus on wellbeing and mental health support. Gallup has studied wellbeing for decades. One of their recent studies shows that employees who strongly agree that their employer cares about their overall wellbeing, compared to other employees, are five times more likely to strongly advocate for their company as a place to work and to strongly agree they trust the leadership of their organization. Both components of company culture.

How to Move Beyond Status Quo  

So we’ve laid out the case for change. In my next article, I will share key questions leaders should ask to reshape their health care plans. Here’s a teaser to get you thinking.  Start with the basics:

• How are your overall health care costs moving year over year?
• Are your employees getting healthier as a result of your health care plan?
• Are your employees and their families satisfied with the service level of your plans?

We’ll flesh out these questions and more, based on my experience and that of other organizations that have renovated their health care plans. The final article will include actionable strategies to drive your company’s health care transformation.

Worth the Work  

Managing health care cost and improving benefits are common concerns for companies of all sizes. Based on the complexity of health care plans, many leaders stick with the status quo. I hope my “aha” inspires you to do your own deep dive and create your case for change. From my experience, it’s well worth the work.

Written by Thomas Plath.