MUSKEGO, Wis.–One of the biggest challenges facing credit unions when it comes to healthcare plans for staff is insufficient time to make optimal decisions when renewals arrive, according to one company that is working to change that.
InterLutions, a CUSO of Corporate Central CU that focuses on providing innovative business solutions, including healthcare offerings, said the process of finding the best healthcare options can often be a “trap.”
“Offering generous employee benefit plans has been a hallmark of the credit union industry, and we want to keep it that way. But continuous price hikes, along with the insurance industry’s practice of announcing new pricing late in the year, keeps making the healthcare benefit/cost balancing act more and more difficult,” said InterLutions President Jesse Kohl. “Oftentimes, renewal terms are not known until shortly before open enrollment begins. As credit unions wait for the new terms, they run out of time to make strategic and impactful changes. Falling into this trap makes it a challenge to stay ahead of the game, but it is possible.”
But there is a solution to be found in using big data and “high-powered systems” that can run what-if scenarios and target benefit services that focus on credit union-specific solutions, according to Kohl.
Key Areas
Kohl outlined important areas he said credit unions need to focus on when addressing healthcare:
1. Develop a three-to-five-year strategic employee benefit plan that meets organizational and cost objectives
2. Use big data to pinpoint cost drivers and other factors affecting overall plan performance
3. Continue to invest in education relating to the healthcare industry and benefit administration
4. Collaborate with other credit unions to pool resources, share information, and create affordable access to data and support systems
Jesse Kohl
"Credit unions’ employee benefit management needs never stop evolving,” noted Kohl. “HR professionals have always desired more flexible funding arrangements and more responsive plan design, and not every credit union is satisfied with just one benefit structure option. Because of this, many credit unions are considering a transition to self-insured funding arrangements. Over the last two years, several large credit unions have joined a new-to-the-market, collaborative self-funded arrangement in order to access a wider selection of plan choices. As more credit unions collaborate and pool resources, more opportunities to create better benefit packages at lower costs will become available.”
Kohl emphasized that credit unions are realizing they have to take healthcare into their own hands in order to continue providing attractive benefit packages at reasonable costs.
“As I said, due to the insurance industry’s ‘strategy’ of late-in-the-year term changes, many credit unions don’t know the upcoming year’s costs until they receive their renewal notices at year-end,” reiterated Kohl. “That makes it impossible to strategize around the changes, and the insurance companies know that.”
Tough Decisions
Because of that practice, credit unions are forced to make tough decisions regarding how much extra cost the credit union will take on versus how much employees will take on, he said.
“Often, this results in more expensive benefits or reduced coverage,” Kohl said. “The good news is that credit unions investing in collaborative benefit solution services and big data will have a leg up. They’ll be able to determine which variables are driving costs and strategize accordingly. They’ll be able to create economies of scale, have more time to develop strategic roadmaps to success, and position themselves to proactively develop cost control measures.”
Kohl noted that two emerging factors are driving healthcare plan price hikes: rising pharmaceutical costs and general medical inflation.
“If left unchecked, most credit unions will average a 5%–10% annual increase in healthcare costs year after year. This means that healthcare costs will potentially double in 10 years,” he said. “But data analytics can stop this trend. With the big data now available, accurate cost tracking can help identify a credit union’s top three–five cost drivers. In a statistical analysis of 1.6 million claims, the top 1.2% of all claims contributed 39.4% of all claims costs. With analyses that can identify the largest contributors to health plan budget breakers, credit unions can build targeted strategies to control long-term benefit plan outlays. Not only does data analysis allow credit unions to more effectively plan for use of limited resources, it also shows credit union HR managers how to reduce the impact of high-cost participants on the majority of plan users.”
In five years, if nothing changes, many financial institutions will have to decide whether they will continue to offer quality—let alone, any—employer-sponsored health plans, insisted Kohl.
“Costs will be too prohibitive. But by helping credit unions pool healthcare resources, offering employee benefit solutions based on big data, and providing information-sharing platforms and educational opportunities, we are helping to change that trajectory,” he said. “Offering affordable, quality benefits is a big part of the credit union industry’s DNA. We will continue to respond to challenges with creativity, to approach opportunity with thoughtful action, and to react to threats with affordable, sensible, researched solutions.”