Study Explores Reasons Why Some Companies Pay More for Health Benefits Than Others

SHPS, a provider of health advocacy and health benefits solutions, released a health practices study that shows the use or absence of a handful of core best practices in employee health management could explain cost differences of as much as 50 percent between two otherwise comparable employers, even after factoring out differences in location, workforce composition and industry.

The 2007 SHPS Health Practices Study substantiates that traditional financially based cost management methods are simply not enough to battle rising healthcare costs, officials said on July 24. Companies with the lowest healthcare costs focus on optimizing employee health and managing clinical risk, rather than manipulating the health benefit.

The SHPS study reveals that best practice companies take a laser-like focus on improving employee health, driving positive changes in health behavior with rigorous, clinically based care management programs and cash-based incentives. They also reported having strong centralized benefits administration, health analytics and employee communication practices.

The SHPS study identified six common health benefits practices that correlate with substantially higher healthcare costs, including:

  • Managing employee health solely through the use of wellness promotion and education.
  • Being unable to assess quality of provider care.
  • Offering multiple plan designs.
  • Using deductibles and co-pays to drive health behavior.
  • Using health benefits to position a firm as an "employer of choice."
  • Incurring unacceptably high levels of turnover.

"After observing that a handful of SHPS clients consistently outperform other employers in controlling healthcare costs without making cuts in covered benefits, we undertook this study to determine the basis for this phenomenon, and share the findings so that employers throughout the country could understand and implement best practices," said Rishabh Mehrotra, SHPS' president and CEO. "Results of the study provide evidence that traditional methods of cost management, which rely primarily on the management of financial risk rather than clinical risk, are not enough to effectively manage the ever-increasing healthcare cost trend. In the long run, health costs can be lowered only by managing the health of the covered population."

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