Today’s health care environment is riddled with complex plan designs and rigorous government regulations, leaving many employers to feel as though their hands are tied when it comes to unique, innovative and cost-saving solutions. There is a new strategy and technology, however, that enables small employers to identify risk, influence behavior and ultimately control costs.
Smart Business spoke with Aaron Ochs, managing consultant at JRG Advisors, about risk analysis, which is part one of two articles on health insurance cost reduction strategies.
What is risk analysis?
The ability to anticipate claims or predict claims costs hasn’t been available in the small group market due to the absence of claims data from the insurance companies … until now.
Newly developed technologies include risk analysis and predictive modeling tools that make it possible to take a deeper dive into the health composition and risk factors of an employer’s workforce. For example, companies can proactively identify markers for chronic illness in order to predict health care costs and determine if a fully insured plan or alternative strategy, such as self-funding, is viable.
Why might a self-funded plan work better?
A self-funded plan differs from a fully insured plan in that it offers an employer more control over the plan. In addition, self-funding provides protection against excessive costs in years with high claims, opportunity to keep profits from favorable years and the availability of data, including claims utilization.
While self-funding is not a new concept, it is new to the smaller employer — with many insurance companies now offering level-funded premium options (a form of self-funding) to groups with as few as 10 employees.
How would a risk analysis typically work?
The deeper dive (risk analysis) begins with the collection of employee data that is captured through a custom access portal. The portal is insurance company accepted and an Affordable Care Act and Health Insurance Portability and Accountability Act compliant online benefits application tool specifically designed to reduce the amount of time, cost and paperwork for employers.
Employees are asked to complete an online enrollment interview. Once completed by employees, the employer receives a confidential de-identified aggregate report that includes an overall analysis of the employee population. This expert analysis empowers the consultants to guide the business owner through the benefit decision process with the power of knowledge.
Gaining insight into the composition and health status of the employee population means plan design decisions can be strategic rather than ‘throwing a dart blindfolded’ to find a tolerable solution.
What else do employers need to know about risk analysis?
Often, the same portal technology can reduce or eliminate many administrative burdens by providing the added support of employee enrollment, communication and plan/election waivers. The solution is a faster and more efficient approach to benefits. This means the employer can essentially build its own health plan, which can lead to generous cost savings, greater transparency, understanding and better overall cost control.
A staggering 50 percent of the average employer’s health care budget is spent on members with preventable conditions. With the strategies and technologies that exist now, even small employers can take control of their health plans.
Talk to an advisor today to learn how risk analysis tools can guide you to the benefits strategy to fit your needs and ultimately reduce cost.
Insights Employee Benefits is brought to you by JRG Advisors