As more and more employer-sponsored health plans become self-funded, the trend from PPOs to direct provider contracting is growing. High quality health plans continue to demonstrate that direct contracting promotes a more level playing field where both parties can agree on pricing that is fair rather than trying to determine the real value of network discounts.
In an effort to take control of their healthcare spend, more employers continue to move to self-funding. But as those who have used this funding mechanism for some time have learned, designing a self-funded health benefit plan is just the beginning. When a health plan is self-funded, the entire healthcare supply chain is unbundled, giving everyone a clear, unobstructed view of the healthcare spend. An experienced Third Party Administrator will help you identify exactly where your healthcare dollars are going. Providers can be evaluated. Opportunities to achieve quality outcomes and lower costs can be explored. Best of all, unlike fully-insured health plans that are carrier-based, employers who self-fund their health benefits have the flexibility to act.
Target Cost Transparency
According to the Centers for Medicare and Medicaid Services, healthcare costs have increased by more than 260% since 1999. One of the biggest problems is costs for the same service can vary drastically from one provider to the next, even when the providers are located in the same marketplace. One way to attack this problem is with Reference Based Pricing, which typically allows qualified self-funded health plans to pay for medical services based on a percentage of Medicare, rather than by applying a percentage discount to a facility’s billed charges. Using an accepted index such as Medicare has enabled a growing number of health plans to bring cost transparency and consistency to hospital billing, since Medicare sets prices for every procedure.
Communicate with Purpose
From mobile cost transparency tools to telemedicine, employers are doing more than ever to help plan members utilize their benefits. Engagement rates, however, often tell a disappointing story as many employees are reluctant to use these new features. Experience tells us that whether we’re talking about a published provider directory or an online member portal, most people are confused by healthcare coverage.
Whether your company decides to place colorful posters in gathering spots, hold employee meetings or distribute email newsletters, emphasizing the steps you’re taking to make healthcare more accessible and affordable is critical. In this time of full employment and intense competition, health benefits can play an extremely important role in attracting and retaining valued employees. Don’t miss this opportunity to enhance your company culture and improve your employees’ quality of life.
From Amazon, Berkshire Hathaway and JP Morgan to Walmart and Humana – disruption is all around us. The future of our healthcare system is unfolding right before our eyes and regardless of how this giant chess match turns out, health plan participants just may be the biggest winners.
The Retail Effect
While many healthcare plans have done well under Obamacare, they need to review what many retailers have experienced since Amazon began building its Prime subscriber base of 100 million plus. When you consider the scope of Walmart, their potential for retail clinics is virtually unlimited. Whether by Amazon, Walmart or others, home delivery of prescriptions could make things very difficult for brick and mortar pharmacies. No matter what area you examine, these mega-partnerships have the potential to impact access to care in ways that most traditional healthcare providers have never imagined. And, if recent retail history means anything, healthcare consumers are sure to benefit.
Self-Funding Will Rule
Most working Americans are already covered by self-funded health plans, and we would expect the new Amazon, Berkshire Hathaway, JP Morgan family to offer at least one self-funded option. Studies show that self-funded plans offer employers far more flexibility than fully insured counterparts and Berkshire Hathaway’s Specialty Services unit certainly has the resources to provide the required stop loss insurance.
A Transparency Opportunity
With a little creativity, the transaction processing infrastructure of JP Morgan could make real-time claims processing a reality for fellow plan members. Real-time payments may encourage providers to discount more. Add telehealth and enable physicians to view electronic medical records and patients may know what to expect from their visit and what they will pay before they make the appointment. The bottom line is that as the level of information sharing increases, cost transparency and the potential for savings will grow.
As a TPA dedicated to controlling costs for self-funded health plans and members, we know these deals will keep more people out of the hospital and increase competition for outpatient care. Technology will move forward, actionable data will be more accessible and consumers will have their day as costs become more transparent and delivery more user-friendly.
In at least one big city, a major carrier is providing 100% coverage to public employees for MRIs, CT Scans and other imaging services only when free-standing, non-hospital based facilities are used. What do you know? Independent TPAs have been helping self-funded health plans do things like this for years.
Too many people have long considered rising health care costs to be a condition we simply must live with. Fact is there are alternatives, most of which can only be implemented when the plan’s best interests are first and foremost.
Detailed Reporting Needed
In contrast to a fully insured plan or self-funding with a carrier-owned ASO, using an independent TPA enables the plan to make informed decisions based on detailed reporting – reporting that the plan owns.
There is no secret to controlling plan costs. It requires discipline and the tools to monitor individual parts of the plan, such as prescription drugs, imaging, chronic disease management and more. Analyzing expenditures such as these can yield huge savings over the course of a year, but only when your administrator is free of carrier or provider affiliations. Having checks and balances in place can make all the difference.
With time running out on an opportunity for Congress to repeal and replace the Affordable Care Act and open enrollment season approaching, thousands of small and mid-sized businesses are likely bracing for another round of premium increases. A growing number of employers, however, will choose to avoid the uncertainty plaguing traditional group insurance markets by moving to a self-funded health plan – an option that provides an opportunity for savings and far more plan design flexibility.
Healthcare benefits continue to be perhaps the biggest obstacle facing small and mid-sized businesses. The Self Insurance Institute of America reports that between 2011 and 2016, the average annual deductible for employer-sponsored plans increased by 49% and the percentage of firms with fewer than 200 employees still providing health benefits fell from 68% in 2010 to 55% in 2016.
Self-funding on the other hand, has proven to be a far more responsible alternative for employers, enabling thousands to not only use their health benefit plan to attract and retain high quality employees, but to do so at an affordable cost. While self-funding has long been a staple for the nation’s largest employers, nearly a third of companies with 200 or more employees now offer at least one self-funded option.
Everyone Benefits from Flexibility
There are many reasons for the growth of self-funding, with flexibility and access to valuable claims data high on the list. Since self-funded plans are governed by ERISA, they avoid many of the costly mandates governing fully insured plans. To manage risk, stop loss coverage is obtained to cover claims that exceed anticipated levels. If claims are below anticipated levels, the plan retains the savings that would have been paid to an insurance carrier in the form of non-refundable premiums. Benefits can be customized to meet the unique needs of the group. When an independent TPA is engaged to administer the plan, claims data can be analyzed to identify chronic conditions and other key cost drivers. Services such as telemedicine and mobile transparency tools can be added to make physician access more convenient and more affordable. From plan design to data analysis, everyone benefits from the flexibility that a self-funded plan can provide. It’s the biggest reason why more small and mid-sized companies continue to move to self-funding with help from an independent TPA.
In New York, industry efforts to support self-funding for smaller groups have led to legislation extending the grandfathering of existing stop-loss policies for groups of 51 to 100 for an additional year, through January 1, 2019.
Other legislation impacting access to stop-loss insurance products by smaller groups has taken effect in Minnesota and is slated to become effective in New Mexico on July 1st. Attachment points are still being discussed in New Mexico and it appears that new opportunities for smaller groups may emerge in Minnesota as well. Since our last newsletter, legislation prohibiting small group stop-loss failed to advance beyond committee debate in the State of Maine.
The article below, titled Leveling the self-funded field, written by Robert Bull, was originally published by Employee Benefit Adviser on July 18, 2017.
Technology is changing every aspect of the way businesses operate — and that includes health plan self-funding.
It used to be that self-funding was limited to only the largest companies that could afford the manpower to either administer their own plans or develop their own proprietary administrative software. Today, new data technologies are leveling the playing field, making it affordable for virtually all employers to self-fund.
For too long HR teams have shied away from self-funding due to the perceived administrative burden. But technology has removed this barrier, making it easier to track eligibility and generate billing information. What used to be a painstaking manual process has been automated, and HR teams at self-funded companies can now provide richer benefits at a lower price. A good healthcare plan goes miles in attracting and keeping quality employees — and ensuring that they’re productive by minimizing absenteeism due to a lack of care for either themselves or their family members.
Here’s what to look for when shopping for a top-notch self-funding solution:
1. The ability to consolidate information and manage all healthcare-related data from a single system. Most employers deal with multiple service providers — stop loss, vision, pharmacy, dental, medical, wellness, and third-party administrators, just to name a few. But they should insist that all of the relevant data is consolidated onto one system. For one thing, it’s much simpler and less time consuming to administer and pay all of their providers from a single source. For another, it takes much less time and effort to master a single application — as opposed to having to learn the ins and outs of each provider’s software.
When the data from multiple vendors are integrated onto a single platform, the time-consuming process of having to reconcile across providers every month is eliminated. The plan’s administrator can instantly determine counts and claims. Likewise, multiple payment processes can be eliminated in favor of a single, consistent payment method.
Best of all, HR can take all this data, which reflects employee behavior and everything related to treatment, and use it for predictive modeling. With that level of insight, the employer can develop a plan that truly meets its — and its employees — needs.
2. Data transparency. For an employer to take on the added risk of self-funding, it needs to be able to closely examine its data and determine the underlying trends. Without pricing and transaction transparency, it is impossible to perform a meaningful cost analysis.
As opposed to fully-insured plans, where the data is the property of the insurance carrier, with a self-funded plan the employer owns the plan’s data. And once the employer can access its claims, demographic and pricing information, it can make accurate decisions about what is best for the company and its employees.
The data can also be used to influence employee behavior. By educating a workforce about those behaviors that are wasteful and ineffective, the employer can reap significant savings for itself and its employees. And by analyzing the response rate to different messages and campaigns, HR can then determine what incentives would be useful to obtain even greater compliance.
3. Real-time data access. It’s not enough to have healthcare plan data; it needs to be timely or its utility is diminished. The best way for employers to be proactive is for them to be able to see what is happening with claims and cash flow on a monthly, weekly or even a daily basis. At a minimum, the employer should review its data at least quarterly. And the larger the employer, the greater the number of employees and claims, the more frequently the data needs to be examined.
Three years ago, it would have taken three weeks to scrub a mid-size employer’s claims data. Now it can take just two hours.
4. Safeguards. Data is power. That’s why an employer wants to ensure that only authorized personnel have access to healthcare plan data and analytics. There are legal and privacy considerations as well. That’s why it’s crucial to have robust security that maintains an audit trail of who touches what data and when. In case of an error or a breach, the event can be traced back to the people involved at the moment where it occurred.
Self-funding will continue to be transformed by technology. Cloud-based software is making it possible for ever smaller employers to implement and administer self-funded plans. Embracing and utilizing these tools can lead to lower premiums, greater access to health care and reduced costs for employer and employee alike.
The Employee Benefit Research Institute reports that nearly 20% of mid-sized employers made the jump to self-insurance from 2013 to 2015. A major attraction is the availability of data and analytics, enabling the employer to learn how healthcare dollars are being spent. A growing number of employers are using this data to incentivize employees who lower claim costs by choosing more efficient hospitals or free standing imaging centers when tests such as an MRI are needed.
With research showing that the average cost of healthcare surpassed $11,000 per employee in 2015, stretching every healthcare dollar is a must. Since self-funding is the foundation from which so many cost control strategies emerge, we encourage you to take this step if you haven’t already done so.
Understand the Needs of Your Group
Since every employer group is unique, it’s imperative that you look closely at demographics, prior claims and medical conditions. The availability of meaningful data is one of the biggest advantages of a self-funded plan, and key to making sure that those with chronic conditions such as diabetes or hypertension are receiving the treatment and attention they need. If your administrator isn’t helping in this critical area, you have the wrong administrator!
Self-funded health plans involve several parts that need to be working together. If you think healthcare is complex, put yourself in the shoes of your members and their families. Programs such as utilization review, hospital pre-certification, disease management and healthcare coaching can go a long way in managing costs. Services like patient advocacy and telemedicine can help members get the care they need in an efficient setting. For example, while office visits cost about $130, a telemedicine visit can be equally effective at a cost of about $40. With so many variables available today, it’s easy to see why customer service and care coordination are as important to your bottom line as they are to your employees.
Education and Wellness
Once a self-funded plan design and professional administration are in place, employee education and wellness integration must follow. Few factors influence healthcare costs more than lifestyle choices and the need to make informed buying decisions. And whether it involves understanding benefits or choosing a high quality, efficient provider, studies show that members need more support. To help in this area, many TPAs are integrating online access to comparative data on costs and providers.
When you consider that we can only manage what we can measure, delivering meaningful information to members, when they need to make a healthcare decision, should result in happier, healthier employees and lower costs for all.