4 Ways to Help With Controlling Compliance Costs

4 Ways to Help With Controlling Compliance Costs

This article was updated on June 12, 2018.

In 2016, organizations faced one of the most expensive years to date for health care compliance. Between increasing prescription drug expenses, increasing administrative costs, and disclosures and preparation for the 2020 Cadillac tax, organizations have been faced with a tall task — namely, controlling compliance costs.

According to the International Foundation of Employee Benefit Plans, 97 percent of organizations continued to offer health care coverage for full-time employees. But that will come with increased costs, thereby threatening affordability.

What can organizations do to control health care compliance costs? Here are four ways finance leaders can try to keep costs down.

1. Change Plan Design

To control compliance costs, the International Foundation of Employee Benefit Plans reported that many organizations made plan design changes. Included in these changes, organizations increased out-of-pocket limits by 37 percent and increased in-network deductibles by 34 percent. Additional changes included a 31 percent increase in employee share of premium costs and a 28 percent increase in primary care copays and coinsurance.

Although these plan design changes provide some cost control, organizations should also consider shifting focus toward improving employee access to health care to lower costs. This access includes offering telemedicine, consumer-directed health plans (including health savings accounts or health reimbursement arrangements) and tools to manage health care decisions, including nurse coaching.

2. Implement Wellness Programs and Prescription Management

Organizations also use wellness programs to help control health care compliance costs. These programs help reduce health care costs by promoting better health for employees, thus decreasing the need for medical care. According to the International Foundation of Employee Benefit Plans, one in five organizations offered wellness programs and another 15 percent of organizations plan to do so.

According to the Society for Human Resource Management, with prescription drugs now serving as a major driver of costs, especially specialty drugs, the promotion of health is an ever-increasing tactic to reduce health care costs overall. To curb these increasing costs, many organizations are requiring prior authorization before filling certain prescriptions, step therapy (where less expensive prescriptions are required before "stepping up" to more expensive prescriptions) and mandatory mail-order for certain maintenance prescriptions.

3. Streamline Administrative Systems

Another major cost driver of health care is the administration of the Affordable Care Act (ACA) reporting and disclosure requirements. Organizations will face further financial burden when the Cadillac tax is effective.

For 2017, applicable large employers were given an extension for providing Forms 1095-C to employees until March 2, 2018, according to the IRS. It did not change the electronic filing date with the IRS of March 31, 2018.

These reporting and disclosure requirements mean organizations have to gather data across several administrative systems, including HR, payroll, benefits and compensation. Many organizations have created, or are planning to create, integrated data management systems to aid in reporting this comprehensive information to the IRS. Organizations, along with corporate IT departments, should look to these management systems to streamline these administrative burdens and subsequently lower costs in the long run.

4. Prepare for the Cadillac Tax

Finally, another cost driver for health care compliance is preparing for the Cadillac tax, which takes effect January 2020. The Cadillac tax was originally slated to take effect in 2018; however, the tax was delayed for two years through the implementation of the Consolidated Appropriations Act. The Cadillac tax imposes a 40 percent excise tax on employer-sponsored health care coverage that exceeds certain indexed dollar limits, according to the IRS.

Despite the delay, organizations should still analyze their health care plans to determine whether the tax will be triggered. Although the tax is delayed until 2020, the indexing of the annual dollar limits will continue. Approximately 28 percent of organizations are currently working on changes to avoid the tax and 38 percent are planning to take future action, according to the International Foundation of Employee Benefit Plans.

As health care costs are projected to increase, changing plan design, implementing wellness programs and prescription drug management, streamlining administrative systems for reporting and disclosures and preparing for the Cadillac tax should help organizations with controlling compliance costs associated with health care.