In times of crisis, especially now when the Covid-19 virus brings the world’s economy to the verge of standstill, many companies and their management are looking for ways to reduce costs. As a first step they relatively intuitively cut expenditures like marketing, external consulting services and employee training. Next, employee benefits such as health insurance are investigated due to the high premium payments compared to other types of insurance (such as property, liability etc.). Many managers consider a reduction of coverage or even cancellation of health insurance as an option in this unprecedented economic environment.
The intention of this article is to provide proposals on how to reduce the cost of health insurance and is focused on the Russian market, with its specifics in the insurance segment but we’re sure that some of the topics raised are also valid for other markets.
The main cost driver of corporate medical insurance in Russia is related to the choice of hospitals, services covered by the health insurance policy, the treatment frequency and availability of franchise. Over the last decade, the competition and thus the service levels between private hospitals in Russia has increased significantly, this leading to an increase in prices.
Therefore, it is important to understand which medical facilities the companies’ employees visit. Often expensive facilities are included in the insurance policy to satisfy the expectation of 5% or less of the employees. Mainly senior managers visit those facilities as they, for example provide English speaking doctors and staff. Providing this can drive the price of corporate insurance up significantly. Furthermore, many companies do not understand properly, which services are included in the insurance package and how or with which frequency these services are used by their employees. This often results in the companies paying for services not being used at all. Despites the fact that many insurances offer franchise solutions (the patient pays part of the treatment costs), companies in Russia rarely use this option, which can significantly reduce the insurance premiums and the frequency of treatment by employees.
In case a company is doing business in several countries, like CIS or Europe, pooling solutions for accident and disability cover (Global Benefit Management) can not only bring significant cost saving compared to several individual contracts. Pooling solutions for medical insurance are currently not that common due to frequency of transactions but a consolidated reporting provided by an international partner could help improve the positions for the upcoming premium negotiations. Furthermore, Multi-Employer solutions offering standard packages for most companies in the SME segment are also a way to reduce the costs for the medical insurance. Pooling several SME companies under one Multi-Employer program generates a economy of scale effect and leads to lower prices than if every company signs a separate contract.
Understanding the cost drivers behind the different insurance policies and choosing the right program attributes can save insurance premiums by up to 40%. These savings facilitate the companies’ further expense optimization and at the same time enhance the benefit program for the company’s employees by adding additional treatments (like massage) or addressing additional health risks. This in turn will retain and motivate your key staff.
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