Managing Medical Costs

Introduction

This article is written for the Singapore context; however some of the heath cost management principles may apply anywhere geographically. Companies provide medical benefits for 2 reasons: (a) to meet regulatory requirements (b) to be competitive in attracting talents to come and work for the company. Medical costs include hospitalization and surgical expenses (level 3 hospital care, level 4 specialty hospital care), outpatient (level 1 or primary care) and specialist (level 2 specialty physician) expenses, emergency ward expenses.

Medical expenses can be both a persistent and rising cost. Medical expenses bites into company profits as part of operating costs.

Health Cost Management Principles

(1)Have a broad benefits program, but spread your initiatives over a number of years, so that employees feels that there are improvements as the years passed.

(2)For outpatient and specialist treatment, use a cap rather than co-pay. It does not penalize those who spend less. For those who exceeds, it is a way to co-share.

(3)Keep a record of the claims for medical expenses (person, amount, date incurred) to help you understand the claims history. Outsource this to a third party provider which has a network of clinics.

(4)If you never have a medical plan before, start with a low cost or basic plan and then slowly adjust.

(5)It is only human behavior that (a)once you have given a benefit, it is hard to take it back (b) people like to compare what they are given to what is given to others.

(6)A portable plan will be good.

(7)Try to get away from the concept of providing medical costs based on status or seniority (length of service). If not possible, then tier your plan and put more people on the lower tiers.

(8) Always remember that insurance premiums are sunk costs. This means you still pay the premium even though there are no incidents.

(9) Provide a reasonable cover but let employees pay for the frills if they want them.

(10) A wellness program and periodic health screening may help lower medical bills.

(11) A safety program helps minimize accidents and incidents.

(12) Divert employees to Government programs if services are equivalent but costs are lower because of subsidies. Like everything else shop for services.

(13) Look at the costs of related insurance (accident, term, critical illness, disability).

(14) Consider a policy to pay for over the counter medicines.

Hospital and Surgical Benefits

The issue with Hospital and Surgical expenses is that it has low probability but high costs. Periodic health screening can promote early treatment and lower costs.

Remember, nobody wants to be hospitalized and the hospitals are very tight on hospital beds and as a result would rather patients be discharged early.

The way to save costs is to direct staff to go to Government run hospitals if these are more effective or hospitals that you have already screened for effective costs. Then ask for insurance quotes to be based on these facilities and pay the premium that cover all deductibles and co-insurance. The premium is lower when you purchase an insurance policy as a group of employees (that is on a company basis) rather than as an individual.

Next, is to select the ward type. Usually costs are associated with the hospital, ward size (real estate), number of beds, and number of attendants (nurses) to patient ratio.

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