Benefits and Compensation

Q&A: Tweaking Health Benefits Helps HR Prepare for a Recession

Perhaps you’ve heard talk of the looming recession. A prediction of the future, however, is less than reliable, especially when talking about something with as many moving parts as the economy. But in the event that the doomsayers are right, HR might want to take a few steps to mitigate such dangers.

Healthcare Benefits sign

I recently discussed the situation with David Henka, President and CEO at ActiveRADAR.

HR Daily Advisor: How concerned should HR managers be about another recession?

Henka: HR managers should always be concerned about another recession. No one can predict or understand when another economic downturn is going to occur, so it is the responsibility of the HR manager to always, always, always be prepared. Just as you would ready yourself for a hurricane, a tornado, or a snowstorm, you need to prepare for a recession.

HR Daily Advisor: How can trying to safeguard your health benefits against a recession be of service to an organization?

Henka: You want to constantly innovate and look at ways to reduce your overall costs and healthcare spend so you aren’t caught in a situation where you have to make a dramatic change in a single fiscal year. The idea is to continue to look at the levers you can pull as a benefits manager on an annual basis. Implementing these annual strategies consistently can help you stay ahead of the curve by cutting out excessive programs and waste and, at the same time, help improve access to care and outcomes. It’s a difficult balancing act, and it takes diligence, hard work, and strategy to execute.

HR Daily Advisor: What are some strategies that HR managers and benefits professionals can implement to make their health plans more resistant to a recession?

Henka: The most effective way to look at your healthcare benefits plan, especially if you have employees in multiple geographic locations, is to evaluate your pharmacy benefit program because it is a consistent benefit that is applied throughout various geographic regions. There are tools that can help you manage your pharmacy spend, like reference pricing, that have an immediate and dramatic impact on your overall healthcare costs.

HR Daily Advisor: Are these approaches effective?

Henka: Reference pricing is a proven, effective model that has been implemented throughout the United States and has been academically reviewed in the New England Journal of Medicine. It is a strategy that can be implemented relatively quickly but also very effectively to help identify the lowest-cost therapeutic equivalent for nonspecialty drugs for your entire membership population.

HR Daily Advisor: What happens if there isn’t a recession? Will all of this effort be a waste?

Henka: Absolutely not. Reducing the costs of health care should be a goal of any good student in the corporate benefits arena. Costs are out of control; it is part of the national debate, and doing nothing would be considered a waste. Doing something and making changes that evaluate the effectiveness of those changes is really the job of the benefits professional in today’s economic environment.

HR Daily Advisor: Do you have any final thoughts?

Henka: Managing a population of employees—especially if they’re geographically dispersed—is very challenging. Different hospitals, healthcare systems, and provider groups all have different economic microclimates, and it’s very difficult to manage the overall impact across a wide geography. This is why pharmacy benefits represent a unique opportunity to help manage a diverse population in a much more uniform and effective manner that doesn’t necessarily discriminate against somebody or a group of employees who live in a high-cost area.

In order to keep benefits attractive to retain and hire employees, you have to strike a balance between affordability and benefit structure and benefit level. You can’t have the most expensive benefits in the world that nobody can afford. At the same time, you can’t have the skinniest benefits that provide so little coverage because if the cost-sharing, deductibles, and out-of-pocket expenses are too costly, they can discourage people from accessing care. You have to find a balance, and within that balance, you have to have room to maneuver things based on the realities of the economy, your industry, and your company.