The most impactful way for construction companies to drive down and increase control over major expenses, and find a solution to positively impact their future, is to be aware of their employee benefits costs.
Construction companies are like manufacturers, as they both have major expenses. In the manufacturing sector, the biggest expense is equipment and payroll. For most contractors, except for the heavy civil contractors, payroll remains the largest expense.
After payroll, the next derivative of cost is health insurance. Worker’s compensation follows as the third largest expense. However, worker’s compensation had an extra 112 years to develop and become more sophisticated, controlled and streamlined.
Health insurance is still “The Wild West.” Health insurance originally provided by large companies was to provide extra benefits to their customers. The great part was they provided it for little to no cost to their employees and they provided little to no incentive for using it. The general employee has not yet changed their consumer habits of how to purchase medical services, prescription services, etc.
Over the years, that strategy has changed. What used to be a $10 co-pay now is a $35 co-pay. What was once a $2,500 deductible is now a $5,000 deductible. What used to be a reasonable expense on the P&L, is now one of the largest!
So why are contractors still purchasing health insurance the same way?
Buying healthcare, the traditional way?
What we found through experience and research over the last five years is that there is an entire world out there of self-insured options for construction companies to take advantage of. That world consists of a ton of resources, experts, perspectives, and tools to help reduce health insurance costs.
Who qualifies to explore those options?
If your construction company has 75-100 employees or more, it is time to start the conversation.
Comparably, if your company is less than that. It is time to prepare for future conversations because the future outlook is not getting any better.
In fact, we see it getting much worse today. There continues to be more consolidation with health insurance carriers. Health insurance carriers are now buying prescription providers. They are now buying at the convenience stores where prescriptions are sold. With this strategy, they are creating quite an oligopoly, which will drive up costs even more. We can see that because their stock keeps going up!
A way to combat the rising costs and lack of control, and build a self-insurance model, is through a Health Insurance Group Captive.
Group captives have been around since the 1990s, starting with medical malpractice insurance for physicians.
Health insurance captives didn’t show up until the mid-2000s.
The reason this strategy makes a lot of sense is because it is the only way to get the buyer of the insurance out of the regular marketplace and out of the control of an insurance carrier.
By joining a captive, a business leaves the regular market. They go to the new market with other like-minded businesses who are all committed to having better losses and thus drive down the costs of insurance for each company.
How Do We Accomplish That?
Since we don’t control our employees’ health. We don’t control our employee’s spouse’s health. We don’t control our employees’ children.
However, if we drive the right strategies, we’ve seen it can work.
For example, one of the greatest ways to control the losses for health insurance is through changing the consumer’s mindset of buying medical services. Consumers have been taught and habits have been, ‘go to any doctor you want, and get your prescription wherever you want, and it doesn’t matter.’
There is no downside if they pick the wrong place, and there’s no incentive if they pick the right place.
Our plan is to implement a philosophy that your dollars actually matter. We incentivize the employees to make positive healthcare decisions. That includes general wellness. That also includes picking the MRI provider that has the lowest cost along with better consumer reviews rather than the one the doctor recommends.
It is time for consumers to take control of their medical services to get the best medical care they can. With that, it is an opportunity to help their employer control the costs.
When the employer incentivizes the employee to make a positive medical decision, and the employee sees the benefit through the incentives and through the decreased costs of health insurance for themselves and the rest of the employees.
So, for construction companies who are looking at their budget for 2024 and want something that will impact their bottom line, consider a Healthcare Insurance Group Captive. The process doesn’t happen right away, but it will yield results over time.
Start having conversations about Health Insurance Group Captives. INSURICA can introduce you. We can talk about the pros and the cons, the good, the bad and the monetary investment, which isn’t much, but a commitment to implement new strategies. We would love to show you what that looks like and see if it’s a good fit for you.
Please know we are here to help you and we take a lot of pride and gratitude. Reach out to Eric.Pach@INSURICA.com or fill out the Contact Us form.
This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.