Many companies are looking to maximize return for their investors but in today’s age the challenges facing financial performance are ever-present. High employee turnover, rising cost of healthcare benefits and inflation can all negatively impact the profitability of a business. One way to drastically improve a business’s profitability is by reducing the money spent on healthcare for employees. Healthcare expenditures are often the second or third largest item on a company’s profit and loss statement, yet they are overlooked.
Reducing costs will instantly help private equity by dropping the savings to the overall profitability of the business. When businesses cut out the high costs of healthcare that money becomes extremely impactful on the valuation of the company.
Cost reduction isn’t solely a business concern; it extends to employees as well. Maintaining competitive benefits with low deductibles and premiums can contribute to the overall happiness and well-being of employees. Benefits become a huge factor when employees are deciding whether to take a new job or stay with a company. Happy employees translate to a reduced turnover rate, which can not only save a business money but help them meet the growth goals of private equity firms.
By implementing the following tips, businesses can maximize return from investors, negate employee turnover and increase profitability.
Stop “Shopping” Each Year
The solution to these challenges is not to “shop” each year for new healthcare solutions, attempting to reinvent the wheel. Instead, businesses should develop a five-year plan, allowing employers to fine tune and adapt benefits based on the needs of their employees. Level funding or self-funding is the only way to accomplish this.
Customization Is Key
Tailoring benefits to the unique needs of employees is essential. For employees to feel satisfied with their benefit packages, businesses must meet them where they are. For instance, the needs of employees in a manufacturing company are going to vary significantly from what matters to those at an IT startup.
Leverage, Examine and Utilize Data to Reduce Costs
To leverage data, you must have the right health plan in place. Fully insured carriers rarely provide the critical data that companies should own. Taking control of your healthcare plan by using an independent third-party administrator will keep you in control of the data you need and own. Businesses must examine and utilize data to their advantage. Data is not just information but, rather, actionable intelligence that can be used to address the 20% of the population driving 80% of healthcare costs.
Consider Healthcare a Business Investment
Healthcare should be treated like any other business expenditure, with a clear understanding of cost and source. Often, a CFO can confidently cite the cost of a paperclip but when it comes to the price of an X-ray or hip replacement, they draw a blank. Healthcare must be considered a strategic investment that can have an impact on the bottom line.
David Slepak is president of Employee Services at StenTam, a full-service tax and employee benefits company offering technology-enabled financial solutions that provide accurate, compliant, hassle-free tax credit filings and employer services. Offering well-rounded and comprehensive employer services to help build and refine best-in-class benefit solutions. The multidisciplinary team leverages knowledge of tax incentives and programs to help maximize employee benefits and strategies.
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