Managing Medical Insurance Spend – the Role of Procurement
Providing employee benefits, specifically health and medical care, to an increasingly diverse workforce is complex as well as costly for any enterprise. As health risks and health care costs continue to rise, it is becoming increasingly important for the procurement organization to address the enterprise's medical insurance spend, which typically ranges between 4-8% of the indirect spend for a Fortune 500 company in the United States. Procurement can help companies save 8-15% on medical insurance by pulling the right levers. However, this opportunity is often untapped by enterprise procurement organizations because of the complex cost structure of medical insurance and the unwillingness of the human resources (HR) department to allow procurement to influence spend in this sensitive category. Besides, the impact of changing federal regulations such as the Affordable Care Act is difficult to comprehend and keep a pulse on.
By joining forces with the company's benefit and finance team, as well as the employee benefit broker/consultant, procurement can develop and implement a customized solution, striking a balance between offering a market competitive program, meeting the employees' needs and achieving the company's financial goals.