Successfully navigating the sea of change brought about by health care reform will require corporate finance and human resource (HR) departments to achieve a new level of cooperation to promote both employee health and company financial health, according to an insurance industry expert at a client conference recently hosted by Doeren Mayhew, a top accounting firm in Houston.

Michael Turpin, executive vice president of USI Insurance Services, shared his views on the impact of health care reform on the corporate bottom line, explaining that benefit philosophies will become increasingly influenced by financial performance.

“HR and finance will have to come to a skillful détente on what they are willing to do,” Turpin said. “HR must be a friend and a fiduciary.”

Many companies will see growing tension between HR and finance as the desire to minimize disruption and maintain employee engagement clashes with the financial realities of operating a profitable business in a low-growth economy, Turpin said. This will leave organizations with four basic options:

  1. Continue with the current health insurance benefits model and accept a larger impact on the bottom line.
  2. Adopt a different benefits model that incentivizes or requires employees to better manage their own health care.
  3. Make managing costs a higher priority than providing benefits.
  4. Eliminate health benefit plans completely.

Costs tend to be higher for companies that are not self-insured, Turpin said. Experts predict self-insured companies will save about 10 percent in costs in 2014 over their fully-insured counterparts.

Companies wanting to see their benefits costs remain equal to or lower than their rate of revenue growth must have a plan that includes tactics such as:

  • Shifting costs to employees through contributions and/or benefits reductions.
  • Reducing insurance costs through aggressive negotiation and thorough underwriting practices.
  • Reducing the unit costs of services by reviewing network discounts, narrowing networks to exclude outlier providers and engaging employees to be better consumers.
  • Reducing waste and over treatment.
  • Reducing consumption of health care by improving employee and dependent health.

Noting that health care benefits represent a bilateral contract between employees and the employer, Turpin said strong HR fiduciaries can help manage health care costs without increasing contributions or cutting benefits by identifying and engaging employees at risk for developing diabetes, cancer or other serious diseases to adopt healthier behaviors. Employers also should encourage employees to become health care consumers by comparing costs of various health care services and avoid emergency room visits for minor issues.

Turpin suggested HR and finance work together to answer key questions such as:

  • Does health care reform represent a challenge and/or opportunity for our organization?
  • Will health care reform require us to make significant changes in how, what and to whom benefits are offered?
  • How do the revisions required by health care reform fit into our own benefits philosophy and strategy?
  • What do we expect other players in our industry to do?
  • Should we consider changes to our benefits strategy and overall compensation model? Are we prepared to internally support those changes needed?
  • Do we understand how public exchanges will develop in our state and for all of our locations? Will plan designs vary dramatically from current commercial plans?

In the end, managing balance between employee benefits and revenues comes down to one important question: “What is more disruptive?” Turpin asked. “Engaging employees or firing them?”