How SMEs & growing enterprises can manage employee health and benefits costs amid inflation

According to the latest Mercer Marsh Benefits (MMB) Health Trends report, the per-person medical cost for employers in Asia is exceeding pre-pandemic levels, with the medical trend rate projected to exceed the forecast inflation rate by more than four times (11.5% vs. 2.8%) in 2023. Companies in Asia — in particular small- and medium-sized enterprises (SMEs) — are taking action to contain their rising employee health and benefits costs due to greater plan utilisation, deferred medical treatment, and higher claims ratio.

Containing employee health and benefits costs: the typical approach by SMEs & growing enterprises

Be it SMEs or larger corporations, organisations typically transfer the cost of healthcare to employees or scale back their health insurance coverage to achieve cost containment against the backdrop of sustained inflation. However, this approach may result in employee attrition and difficulties in attracting talent amid the war for talent in Asia.

What cost containment solutions can work better for SMEs & growing enterprises?

SMEs and growing enterprises can now access competitive and cost-effective health and benefits plans that are pre-negotiated and managed by an insurance broker on a portfolio level. These solutions help SMEs achieve cost-containment via plan designs with the following features:

#1: Providing the ‘element of choice’

According to the MMB Health on Demand survey, employees with the most varied benefits and well-being resources are “35 points less likely to move elsewhere”. SMEs and growing enterprises can deliver this to their employees via a broker-managed health and benefits solution that is pre-negotiated on a portfolio level and incorporating the element of choice (i.e. providing employees with a variety of benefits to choose from). 

There are two ways the element of choice can help companies contain costs while retaining access to the benefits that employees value:

- Opting-down or opting-out of coverage in exchange for ‘flex credits’: The plan should give employees the option to scale down coverage in exchange for credits that can be used for benefits they deem more relevant (e.g. gym membership, travel). 
- Having outpatient coverage in a flexible program structure as an element of choice to encourage prudent and responsible benefits utilisation.

#2: Co-payment/co-insurance with equitable plan designs

Implementing medical co-payment and co-insurance can be an effective cost control solution for companies as it encourages employees to take on greater accountability for their benefits utilisation while promoting the overall health and well-being of the workforce. 

However, requiring out-of-pocket medical expenses may be challenging financially for specific groups of employees. Via a broker-managed health and benefits solution, SMEs and growing enterprises can ‘flip the pyramid’ with an equitable plan design, which ensures lower-income employees and specific groups (e.g. employees with dependents) retain more coverage with a lower co-payment portion. This can also help SMEs and growing enterprises attract and retain talent by supporting employees at every level within the organisation, focusing on their unmet needs, and demonstrating Diversity, Equity & Inclusion (DE&I).

#3: Averaging of claims ratio among SMEs and growing enterprises within the portfolio

A broker-managed health and benefits solution that is pre-negotiated on a portfolio level ensures effective cost containment on the principles of pooling of risk and economies of scale: Claims from employees of an SME/growing enterprise is averaged out among the employees of all companies within the portfolio, resulting in a more favourable overall claims ratio that may have an effect on premium.

#4: Benefits governance and administration

A proactive approach to benefits governance and administration — from managing medical providers’ charging model to preventing excess medical care beyond what is needed — is key to cost containment for SMEs, as they typically lack the leverage of larger corporations to be able to actively manage their providers and negotiate for preferential rates.

What’s the next step for SMEs & growing enterprises?

The first step is to assess your current benefits plan against your industry peers. The Your People Risk Assessment by MMB, which is free and takes only 10-minutes to complete, will provide you with a detailed report containing data-driven insights that can highlight potential cost containment opportunities within your organisation and help you refine your benefits plan with confidence.

SMEs and growing enterprises can contain employer health and benefits cost with Mercer Marsh Benefits (MMB) — Benefits One — a comprehensive benefits plan design that is specially tailored for Asia’s SMEs, and can be adapted at different growth stages.