Peter Drucker, a management consultant and business visionary, is often quoted as saying, “you can’t manage what you don’t measure.” That statement seems pretty logical; however, too often with employee benefits, that doesn’t seem to be the case. What tends to happen most often is the annual opening of the proverbial renewal envelope to see “just how bad the increase is.” At that point, you aren’t managing your healthcare costs, you’re merely trying to manage your increases.

At the root of healthcare is simply a measure of how much an employee consumes in medical and pharmaceutical costs annually. That number needs to be examined, explored, analyzed, dissected and understood on an ongoing basis. There are many factors that affect that cost, and your job is to understand what you can affect – and what you can’t.

I remember back when I sat on the client side of the table as a Chief Financial Officer and my broker would come out to do a claims review. There was always a lot of discussion regarding our large claims and what they were doing to our overall cost.

It’s true: large claims do impact the overall cost of your healthcare. But to a certain extent, so what? The large claims have already happened, and there’s generally nothing you can do about it. Yes, you want to know if the large claims will continue from a budgeting standpoint, certainly. But I’d rather hear action items regarding my other, non-large claims. Ultimately, I want to know how I can directly impact the remainder of my spend.

A deep dive into your data analytics will provide you with great information that can help control costs. It’s important to parse your analysis into costs that you can control (through employee education, plan design and incentives) and the costs you can’t control. Additionally, having good benchmarks will allow you to know the “size of the prize” if you’re able to positively affect spending. Considering areas like imaging, lab work, generic Rx dispensing, well visits/screenings and ER utilization, for example, can give you a great deal of cost savings opportunities to help meet your financial goals.

Although I’ve now been in the insurance business for over 10 years, you can’t take the “finance guy” out of me. Peter Drucker was right: proactively managing your healthcare cost through solid financial measurements will give you a fighting chance at winning the healthcare cost game.

Do you need some help figuring out how to make a positive impact on your healthcare costs? We’ve got some ideas. Contact a Marsh McLennan Agency (MMA) advisor.

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