You provide health coverage to your employees, but do you really understand how they use it? And are you helping them get the most out of those benefits while discouraging utilization of services that may not be medically beneficial?
If you’re not, you could be paying for services that are not beneficial, or employees may be costing you more by consuming services that aren’t medically necessary. And that’s where a medical management firm can help you both save money and benefit your employees, says Nancy Sublette, R.N., M.H.A., business change manager, Sr., at HealthLink.
“Employers should explain the services that are available to members, make contact information about those services readily accessible and assure members that information obtained in the provision of services is not shared with the employer,” says Sublette.
Smart Business spoke with Sublette about how engaging a medical management firm can reap rewards for you and your employees.
What is medical management?
Medical management is the name for services within a health plan that evaluate the medical necessity of a procedure or medical service, and help members help themselves.
For example, case management is often employed in catastrophic cases. Following a discharge from the hospital, a member might need support services. The case manager can direct the member to available services and help coordinate those services, providing somebody for that member to reach out to.
However, a lot of people are adverse to someone getting into their personal business, and for that reason, may refuse case management.
How can the medical management firm, and the employer, help the member overcome that resistance?
When nurses are able to talk to the member and the member doesn’t instantly put up a brick wall, they can generally develop a relationship.
On the employer side, communicate that services are available and that the employer does not receive information gathered in the provision of those services. People have concerns, when their health insurance is through their employer, that the employer is going to have access to their medical information, and that is not the case. HIPAA regulations created the rules for keeping information confidential, and it cannot be used for employment decisions.
How can utilizing a medical management firm benefit an employer?
If people know about their disease and how to take care of themselves, and they have support to find the services that they need, then they will have less down time in the workplace. If they are on top of their disease and compliant with their medical treatment plan, they are going to be more productive members of both your staff and of society.
On the medical necessity side, which is the other component of medical management, the advantage for the employer is that anything that is determined not to be medically necessary, and therefore not covered by the health plan, should be seen as a savings.
With all the direct advertising today, people see a new drug and think it will work for them. They see a new service and think it might enhance the quality of their life, and they’re willing to consume the employer’s health insurance dollars to pay for these services.
As a result, there has to be oversight to make sure that services covered by the health plan aren’t being utilized where there’s really no science (medical evidence) behind it that this is going to have a positive effect on the member’s health.
What do employers need to know about precertification?
The main thing about medical necessity is that groups have created lists of services to be precertified. That means the provider has to say, ‘I want to do this, on this date. This is why, and these are the conditions that go into it.’ That system started in the 1970s, and a lot of self-insured plans have maintained lists of procedures to precertify, with little upgrade. This creates an administrative burden, so it’s important not to require it when it is not going to be advantageous to the outcome.
Medical management companies need to look at the return on investment for precertification and, if a procedure is going to be approved every time, there’s not a reason for the call. It places an extra burden on the provider, and creates worry for the member and extra paperwork for the claim paid.
On the other hand, there are procedures that don’t have medical evidence behind them. For a medical management company to review a procedure without medical evidence is just someone’s opinion that it is or is not medically necessary. So it is important when selecting a medical management firm to know what science (medical evidence) it is using to develop and maintain its lists and review of medical necessity.
What would you say to executives who say they don’t have time to deal with this?
They need to rely on someone who does know about it, whether that is a consultant or a credible carrier that incorporates these services. The savings can be from little — just a sentinel effect — to a significant savings because you are reviewing things that may not be medically necessary and only helping those members who really need help through case management. The employer should see a return not only on savings from discouraging medically unnecessary procedures but by helping members be more productive by managing their health conditions.
The employer can approach a decision on medical management either as a way to save money on health insurance, or as wanting to help employees and make resources available to them. When selecting a medical management company, you need to recognize, do you just want to save money, do you want to help the members, or are you looking for a combination of both?
Nancy J. Sublette, R.N., M.H.A., is business change manager, Sr., at HealthLink®. Reach her at (314) 925-6611 or firstname.lastname@example.org.
Many employers continue to pay their health care premiums month after month, without really understanding what they’re getting and how the plan is being used.
If you’re not using claims reporting to understand how your employees are using health care and pinpointing how you can help them use it more wisely, you are leaving dollars on the table, says Mark Haegele, director of sales at HealthLink.
“Many employers that take an approach of active engagement have not had any cost increases for years,” says Haegele. “It’s not unrealistic to have flat costs for several years in a row as a result of the active management of information and reporting.”
Smart Business spoke with Haegele about how health care reporting can save employers money and help employees get more directed care at a more reasonable cost.
What is health reporting?
A true managed care approach helps employers understand their costs, and that is done through reporting.
Your broker should be identifying what your costs are for your health plan and looking at the drivers that are causing year-over-year increases. Using that information, you can apply solutions to help mitigate those costs.
Too many employers simply pay their premiums with no idea what they are getting. They don’t go to that next step and get a full understanding of their costs.
How can employers begin to take that next step?
Take, for example, wellness and biometric screening. Those are important and the employer will pay for employees to get their blood drawn, identify cholesterol numbers, but then that’s it. They don’t close the loop and make sure the member’s primary care doctor gets the information, or that those whose numbers were above normal get a checkup six months later to measure improvement.
Employers are not taking advantage of the information available to them and then asking the right questions. You have to ask: What is driving these costs? And the best way to get the answer is through reporting.
How does the reporting process work?
Cost in a health plan is driven by three components: price, utilization and intensity. Intensity is the one that everyone forgets about. Everyone knows price: You went to the hospital, it cost X dollars per unit. Utilization is the type of services and how often they were used; for example, someone went to the emergency room four times, you had so many hospital admissions per 1,000 members, etc. Intensity is the third, but not often acknowledged, component of health care. For example, did a member get an MRI when he or she could have gotten a less expensive CAT scan, or had carpal tunnel surgery when he or she could have had therapy?
To get started, talk to your broker about this funnel approach. Give him or her 12 months’ worth of claims information. Then the broker can break it down by categories — inpatient dollars, outpatient dollars, physician dollars and ancillary dollars that make that initial number of claims dollars.
Then, because everything is driven by trends, you want to look at three years’ worth of claims information. Start with year one and see how each of those categories has gone up and down. Now you can see how your overall costs increased year after year on a per-member, per-month basis, versus the total.
Next, look at what is increasing. If everything is increasing, you know you have to dig into each category. But if only outpatient costs are increasing and the other three have been level, you now have a direction to focus your energy.
Then, as you dig into that category and claims information, you can pinpoint the thing that is driving those costs and identify where there are either opportunities to get people into a lower-cost setting or avoid waste, fraud and abuse.
Then you can establish, over the next 12 months, and over three years, what you are trying to accomplish with your health plan.
If you are ever going to implement a strategy that is going to end cost trends and improve the health of your members, it all starts with reporting. As with anything, in order to create improvement, you have to understand the metrics, and you have to have a benchmark and a baseline to identify where to improve from.
Otherwise, you’re just going on without any kind of acknowledgement or realization of what you can accomplish.
What would you say to a business leader who seems overwhelmed by this approach?
Go after the low-hanging fruit. There will be certain things that you’ve identified when you look at these numbers that are clearly the worst, so start by going after whatever is the easiest and presents the biggest opportunity for you.
If you’re not doing this, if you’re not dedicating your energy and resources to understanding your benefit plan through reporting, and creating metrics and objectives to control costs; that’s part of the reason your costs are going up. If you dedicate time to this, you will find savings and opportunities that are very significant and that will afford you the ability to control trends.
Don’t worry that you can’t change the overall culture overnight. That’s where your strategy comes in, where you work with your broker or consultant to try to create some improvement.
Employers should expect from their health plans, and from their consultants, that this is being done. As a business leader, you shouldn’t have to dedicate much of your time to making this happen. You’ve hired a health plan, you’ve hired brokers, and you should expect them to bring new solutions to you. And if they’re not, you should be asking for it.
Mark Haegele is director of sales at HealthLink®. Reach him at (314) 925-6310 or email@example.com.
Most consumers don’t think of mental health as separate from physical health; when they don’t feel well, they simply want to take steps to feel better.
Now, due to ongoing legislation and changes in thinking, more providers and employers are beginning to view mental health as being on a continuum of medical care, not as something separate, says Peter Ambrose Jr., Ph.D., M.B.A., regional vice president — Behavioral Health Operations at HealthLink®.
“When the behavioral heath care benefit is integrated with the medical benefit, it benefits the consumer,” says Ambrose. “They are two sides of the same coin, and integrating them allows health care consumers to see the appropriate providers and do everything they can to improve their health both physically and mentally.”
Smart Business spoke with Ambrose about how offering a behavioral health benefit can improve both productivity and your company’s bottom line.
How does a behavioral health component of health care coverage benefit both members and the employer?
For an employer, the advantage to having an integrated benefit is that, if employees don’t receive the appropriate treatment for mental health or substance abuse issues, they are likely to experience higher medical claims, poor productivity, increased absenteeism, short- and long-term disability claims and FMLA claims. All of a sudden, you are facing myriad productivity and financial ramifications due to poor access to specialized providers.
If you own a business in which, for example, you have someone on a ladder every day and that person has a substance abuse issue, and is not getting treated properly because the benefit isn’t good enough, the odds are good that that person is going to fall off the ladder eventually. That is a worksite liability for you as an employer, as well as a health care issue.
What would you say to an employer who says the company can’t afford to cover behavioral health issues?
Practically speaking, you can’t exclude behavioral health conditions, because the cost is going to show up somewhere in the total medical cost of care. Depressed employees will go to a primary care physician and say they are upset, are depressed or are anxious. Even if your plan excludes adequate behavioral health benefits, the employee will be treated for anxiety or depression but may not necessarily be treated correctly.
Mental health patients don’t just go away; they still show up elsewhere in the medical system. If employees have substance abuse problems, they’ll show up in neurology, in primary care or in emergency rooms. The result is that people with specific conditions are being forced to see professionals who are not specialists in the area in which they need help. As an employer, you’re still paying for it, but it’s not being addressed correctly.
Think of depression as an ‘emotional flu.’ If you have diabetes and you have to watch your diet, take insulin and exercise three times a week, but you feel like you have the flu, you’re not going to exercise as much as you should. Depression saps your energy and mitigates thinking patterns, which, as a result, can have an adverse impact on the physical problem.
Mental health represents 3 to 5 percent of premium coverage in terms of cost to the employer. The bang for your buck, however, far exceeds that. Studies show that if someone has a medical condition that costs them $1 over the course of a year, if the exact same person also has bipolar illness, that person will spend $1.25 to $1.30 per year on the exact same illness, excluding psychiatric care costs. The bipolar illness impacts compliance that results in poor health and increased costs.
As an employer, if you don’t help employees take care of behavioral health issues, it’s going to impact everything else that goes on with that person. When the employee really needs it, you’re not giving that person the expertise he or she requires and you’re going to pay dearly covering other issues that result.
How can employers encourage employees to overcome the stigma of behavioral health issues and get the help they need?
Although the stigma is not what it used to be, it still exists. You have to educate people that regardless of their health condition, if they are in pain, it makes sense to treat it and, more important, if you are going to go out of your way to get it treated, go to the right professional to get it treated correctly.
The majority of all antidepressants are prescribed by primary care doctors. A large portion of those are given inappropriately, either for too short a period of time or in too low a dosage. If that’s the case, the patient is taking a drug but not getting the benefit he or she needs. You wouldn’t go to a podiatrist if you have a toothache, so if someone has a mental illness or a substance abuse problem, you want that person to go to a psychiatrist, psychologist, social worker or other mental health professional.
How can an employer get started implementing a plan that integrates behavioral health with medical health?
Oftentimes, employers have concerns but don’t know who to talk to. When it comes to behavioral health, call your account representative and say, ‘I don’t even know the right question to ask, but I want to talk about how to improve our medical benefits.’
Under health care reform, the rules are not clear, and many employers don’t understand what they can and can’t do. They are worried about liability, both financial and legal. And sometimes they suffer from paralysis, either from too much or too little information.
But you have to treat it like any other business decision. Health care costs are eating at the bottom line and you have to address them. You can no longer ignore them because doing so will affect your ability to add employees and diversify your company.
Peter Ambrose Jr., Ph.D., M.B.A, is regional vice president — Behavioral Health Operations at HealthLink. Reach him at (314) 923-8325 or Peter.Ambrose@wellpoint.com.
Your employees go to the dentist and to the doctor. They call nurse help lines and visit the eye doctor. They use employee assistance programs and go on disability.
But in many, if not most, cases, those individual silos of health care are not communicating with one another.
Now imagine a system in which all facets of the health care system work together to offer integrated care and lower costs, and you’ve got an integrated medical solution, says Mark Haegele, director, sales and account management, at HealthLink.
“Under a truly integrated medical solution, all of those components talk to each other,” says Haegele. “They have a continuous feedback loop, with medical talking to dental and a nurse line talking to disease management.”
Smart Business spoke with Haegele about the steps you can take today to begin integrating medical solutions and how doing so can improve the health of your employees and your company’s bottom line.
Why are integrated medical solutions important?
There are multiple components of a traditional benefit plan, including medical, dental, disability, vision, life, employee assistance programs, disease management, lifestyle management, medical management, case management, nurse lines and other things. And the industry is just beginning to recognize the importance and value of the information associated with each of the components and their implications for other components.
It is just now understanding that information obtained through an eye exam has a direct implication on the identification of heart failure, diabetes and other diseases as it relates to the medical plan. It is just starting to utilize the fact that the identification of gum disease has a direct correlation to and implication on premature birth.
How does integration work?
As an employer, you have to be aware that a vendor is not related to other vendors and ask, ‘What data elements, what information is important for other vendors to have?’ Then ask whether those different parties are conversing and whether they’re sharing information to try to create the best solution for the employer. Ninety percent of the time the answer is no, as even large carriers have silos within the organization that can preclude an integrated solution.
What are simple steps an employer can take today to get started?
Basic things include working with your pharmacy benefit manager and those running your disease management program to ensure there is compliance among employees with certain disease cases.
Work with your third-party administrator, carrier or broker to identify members who have hypertension and diabetes, based on claims experience, and provide it to the pharmacy benefit manager (PBM) to make sure that someone — whether it’s the PBM, broker or those running disease management — is reaching out to members to create awareness among those who are not in compliance with their treatment plan.
For example, those in your disease management program probably don’t know if people are taking their prescribed hypertension drug. They don’t have that information because there is no integration. But if you take that information from the PBM and make sure that gap is being bridged and that someone’s reaching out to members who have diagnoses of hypertension, but who aren’t taking medication, you’re creating awareness and integrating those components to create compliance.
Employers start asking, via their brokers or their health plan, ‘How are you helping my members stay compliant with their medication, and how are you pulling information from the health plan database to identify opportunities for health improvement within the plan?’
What other questions should employers be asking?
Ask how disease management is integrated with your claims operation. How does your case manager integrate with your disease manager? How does vision integrate with the medical plan? How does dental integrate with the vision and medical plan? How does your disease management program interface with pharmacy benefit management?
How does your health plan attempt, through integration, to ensure prescription compliance? Does your employee assistance program integrate with your pharmacy benefit management program as it relates to antidepressants? If you have a third-party administrator, what is it doing to feed information back to health coaches or to those in a disease management role?
What is your health plan doing to incentivize members to help prevent fraud and abuse? For example, some plans encourage members to closely review hospital bills for errors, and if the bill is adjusted as a result, return some of that savings to the member.
From claims data on the medical side, you can identify and assess the risk probability associated with your disability insurance, so you can oftentimes get a disability insurance quote that’s much more attractive than the norm because of information you’ve identified from the medical plan. If you integrate case management and disease management with disability, so your disability team has more information on the front end, it affords it the ability to better manage members, get them back to work more quickly and ultimately lower disability costs.
Finally, take a hard look at your vendor management and work with your broker about overall vendor integration strategy so that vendors become aligned over time.
You’re not going to go from a completely disjointed operation in your benefit plan to having something that’s integrated overnight. But if you start asking questions, you can begin to create some level of integration within your plan.
Mark Haegele is director, sales and account management, at HealthLink. Reach him at (314) 925-6310 or Mark.Haegele@healthlink.com.
The cost of health care for employers is rising at an average annual rate of 12 percent and, for many businesses, health care is the No. 2 or No. 3 budgetary issue stressing their bottom line.
But there are steps employers can take to keep those costs in check, with annual increases of 4 percent or less, says Mark Haegele, director, sales and account management at HealthLink.
“The average annual trend in overall costs, which includes administrative fees, fixed costs, plan costs and pharmacy costs, is about 12 percent,” says Haegele. “That clearly has an impact on a business’s bottom line, as anything more than 3 percent has a detrimental impact on a company’s ability to offer products and services. But there are a number of things an employer can do to get those costs in line.”
Smart Business learned more from Haegele about how employers can control health care costs and boost their bottom line.
Why should employers be concerned about rising health care costs?
Unsustainable increases in health care costs, over time, will impede an employer’s ability to continue to offer services in its local market, having a profound impact on communities and the country as a whole.
How can employers lessen the burden of health care costs?
Typically, employers can implement several initiatives around wellness, health improvement and risk management. And there are a number of pilot programs that are trying to redefine how to finance health care on behalf of employers. You have to look at plan design, wellness strategies and a company’s financial structure in order to beat the street and do better than typical cost increases. Employers can structure programs specifically for their employees’ needs and design a plan that fits that particular group of employees better than a standard plan would and that also addresses aberrant cost increases. There are a number of flaws in the system that need to be addressed and a number of challenges. There are underutilized cost containment strategies related to health care, and if an employer is just paying for a base plan, it is not incorporating these specific strategies.
What areas offer potential cost savings for employers?
Areas such as specialty pharmacy should be addressed. This is an area where there are 650 biometric drugs in the pipeline, and specialty drugs represent 20 percent of that pipeline, and although just 2 percent of the population, represent 18 percent of the prescription drug cost. That is certainly an area that can be managed.
Cancer drugs are another category that is not traditionally aggressively managed. There are programs available that employers can use to get the lowest cost out of their providers via aggressive case management. These programs work with members to get home health treatment with cancer drugs and look at different ways to procure those drugs outside of the traditional system that is so expensive.
The typical path with injectable drugs is that a patient goes to the doctor, who sends the member to the hospital and gets that person on a program, charging up to 800 percent above Medicare costs. If, instead, the patient goes through a specialty pharmacy and uses a home health nurse to inject those drugs at home, that can cut costs by up to 70 percent.
Too many employers simply pay the premium and don’t think about these things, when doing so could have a significant impact on their business and their bottom line.
How can employers get started on cost savings?
Employers should sit down with their health care consultant to structure a plan that meets the specific needs of their members. They need to take a hard look at the demographics of their employees, what industry they are in, and the age and sex distribution of their population. They need to look at their ‘historical tracks in the snow,’ where people have sought care and the prevalence of chronic illnesses.
Employers can then decide where to place their benefit dollars. For example, an employer may want 100 percent coverage for diabetics, for test strips and other supplies, because it has a disproportionate prevalence of diabetes. But it may not need to offer as many benefits around other illnesses because the prevalence rate is very low. It can shift its plan design to accommodate its members’ needs.
How can employers encourage employees to be healthier?
At a bare minimum, they can educate employees by sending informational pieces centered around health and wellness, preventive guidelines, key risk factors for illnesses and actions associated with a healthy lifestyle.
On the extreme end, they can design their plan with incentives that encourage people to perform wellness activities to be eligible for an enhanced benefit plan. For example, if members get a biometric screening once a year, they will qualify for the gold plan. If not, they will default to the basic plan.
An employer can also require other wellness activities to qualify for the gold plan, such as cholesterol checks, health risk appraisals or membership in a gym. The message is that if employees want enhanced benefits, they have to take an active role in being healthy.
To encourage employees further, employers can offer other incentives. For example, if employers encourage health risk appraisals, 3 to 5 percent of employees will participate. But if the employer offers something as small as a $10 gift card, that rate increases to 40 percent.
To achieve optimal results and truly bend the typical cost trend, employers really need to employ a hands-on, active approach and take control over what is happening with the plan. By understanding the risk factors of its population and addressing what is happening with its employee population, the employer can have a drastic impact on its bottom line.
Mark Haegele is director, sales and account management at HealthLink. Reach him at (314) 925-6310 or Mark.Haegele@healthlink.com.
Too often, patients are not properly taking medications, following up on care after release from the hospital or correctly managing chronic diseases.
Medical management can help change that, as utilization management nurses and medical case managers work with members to make sure they’re getting the most out of their health care benefits, says Dr. Bob Sorrenti, medical director at HealthLink.
“Medical management includes utilization management, in which we look at services to make sure they are medically necessary so the impact of inappropriate medical services can be eliminated,” Sorrenti says. “It also includes disease management, putting a focus on people who have high-risk conditions, such as cardiac disease or diabetes, looking at what drives the cost of care and better managing those drivers.”
Smart Business spoke with Sorrenti about how medical management can improve care and how employers can encourage employees to take advantage of available services.
What is medical management?
In a broad sense, through a variety of different types of interventions, medical management addresses the use of services and their appropriateness according to medical standards, the quality of members’ experiences as they receive health care, and ultimately, the cost of the medical care. For example, if someone were using the emergency room multiple times in inappropriate ways, a case manager might approach that person about finding a primary care physician. By doing so, the member will save money by paying a lesser co-pay and get a better level of care than that person is getting by frequent use of the ER.
Medical management strives to make sure that physicians are following accepted standards of care and doing the kinds of tests that are appropriate according to those standards. It’s not only about saving money; it also helps members avoid being exposed to unnecessary services down the line. As a result, the member has gotten more quality in the level of care, in line with what are the accepted practices in medicine.
How would a utilization manager interact with someone with a chronic condition?
That patient might be impacted in a number of ways. If you were admitted to the hospital, you or your provider would let the utilization management team know. The utilization management nurse would contact your physician and hospital to learn why you were admitted and what the plan of care was going to be.
As your stay in the hospital continued, the UM nurse would make sure you were in the right setting for your needs and that you weren’t staying in the hospital beyond the appropriate time.
As your discharge approached, the UM nurse would start thinking about what services you needed after discharge. Do you need to go to a rehabilitation facility or to a skilled nursing facility? Do you need support services at home, such as home health care? Do you understand what your benefits are for these types of care?
The UM nurse would help facilitate the arrangement of those services within your benefits, making sure you were using your network providers and thus minimizing any out-of-pocket expenses. After discharge, a case manager might become involved to look at gaps in your understanding of what you’re supposed to be doing and make sure that when you got home, you were following your doctor’s directions as to what medication you were supposed to be taking and where you were supposed to be getting your care.
How can medical management help prepare a patient for surgery?
For example, our UM nurses call members who are having elective surgery, both before they go into the hospital and after they leave. The purpose is to ask, ‘Are you clear on what’s going to happen with your surgery? Do you have your care lined up when you go home from surgery? Do you have someone to take care of you? If you have steps in your house, do you know how the surgery is going to interfere with your ability to do steps?’
After the surgery, the UM nurse would follow up and ask, ‘Are you clear on the doctor’s instructions? Have you gotten the tests that you were supposed to get? Do you have an appointment to see the doctor?’
The readmission rates have been reported to run from 7 percent to as high as 20 percent in the Medicare population. The key to reducing those rates is to make sure members are following up with their physicians after discharge. Making those phone calls is very important to support members and to make sure they are doing the right thing.
It’s not about saying no to someone and denying services; it’s about how to help members make sure they are doing the right thing.
How can employers encourage employees to take advantage of medical management?
One thing employers can do is stress to members the importance of engagement with the medical management staff. In the past, people have seen something of an adversarial relationship with medical management people and wanted to keep them at arm’s length. If employers can encourage employees to cooperate with the medical management staff that can go a long way to benefiting the member and the plan.
Employers can also stress the importance and value of members actively participating in medical case management. Medical case management often targets members with complicated and extensive care needs. As the case managers help to build the care plan, the member is essential to the success of that plan. The case manager can be of great support and assistance to the member and help them work their way through the complexities of medical care.
Dr. Bob Sorrenti is medical director at HealthLink. He can be reached at (978) 474-5108 or Bob.Sorrenti@wellpoint.com.
Many employers shy away from funding their own health insurance, fearing that doing so could lead them into bankruptcy.
But for some companies, this alternative method of health plan funding may not be any riskier than using a traditional fully funded plan, and it has the added benefits of potentially lowering your premiums and benefitting your company should the plan show a surplus, says Mark Haegele, director, sales and account management, at HealthLink.
“There is the misperception that alternative funding is too risky for companies with fewer than 500 employees,” says Haegele. “But if you structure the plan properly, you can minimize potential risks while seeing the benefits that come from a healthier-than-average work force.”
Smart Business spoke with Haegele about how businesses with as few as 20 employees can take advantage of alternative funding.
What kinds of companies can benefit from alternative funding?
Alternative funding is becoming popular for employers with 20 to 200 employees that believe their population is healthy and that don’t understand why they face rate increases of 15 to 20 percent or more. If an employer feels it doesn’t have control over its plan, and it actively supports the health and welfare of its employees, it is a great candidate.
Many companies keep paying the same increases each year, hoping for something different, but may instead continue to pay more with no opportunity to share in the benefits of having a healthier-than-average work force. Take ownership of the plan and evaluate the alternatives.
The dynamics are such in the marketplace, with health care reform implications and new products to protect businesses, that now is a great opportunity to take a hard look at whether alternative funding is the right choice for your company.
How does alternative funding work?
With alternative funding, employers are still buying insurance over a specific risk threshold. Some people use the term ‘self-funding,’ but that is a misnomer because you’re not taking on all the risk. It’s partially funded for most employers, generally, unless they have more than 1,000 employees.
Employers should ask their broker or consultant for a proposal for an administrative services-only health plan that has four main components: a third-party administrator, a health network, a pharmacy benefit manager and a reinsurance carrier. Assess the plan based on how much risk the employer is willing to take on and evaluate proposals from reinsurance carriers based on risk tolerance.
With an appropriate alternative funded plan, the employer may be taking on no more risk than with a fully insured health plan, and its maximum exposure may be no more than it would be if the plan were fully funded. Typically, the employer will purchase specific and aggregate reinsurance; claims up to a specific threshold on an individual person are the responsibility of the employer, and the reinsurance kicks in for anything over that amount.
Alternative funding gives employers the flexibility to design a health plan that fits their member populations. Coupled with education and access to wellness programs, alternative funding will deliver a measurable health care cost savings over an extended period of time.
What are the current benefits of choosing an alternative funded plan?
First, the employer avoids premium tax. Second, it has lower fixed costs than with a traditional plan.
Third, it has the ability to customize its plan design in accordance with specific employee needs. Under fully insured, a plan must meet state mandates such as coverage of bariatric surgery and infertility treatments. But if an employer has an employee population that is all young, single, healthy men, it doesn’t have to cover those mandates.
It has complete control over its plan and can move its dollars to better suit its employees’ needs. For example, if it has a population with a high number of diabetics, or employees with high blood pressure, and it wants to cover those conditions 100 percent, it can do so.
In addition, it has control over plan information. If the plan is fully insured, the employer generally doesn’t have access to the trends associated with its population. With alternative funding, it has total access to that information, which gives it the ability to adjust the health plan to best suit its members’ needs.
As a result, the employer can turn that data into actionable information. For example, it can identify members with chronic illnesses and enhance the benefits to ensure compliance with medication and standard treatment protocol to improve the health of its employee population. That data can also allow it to identify if employees are misusing the emergency room, driving up costs. It can then educate them about the proper use of the ER and the availability of services such as a 24-hour nurse line, clinics and urgent care centers.
An alternative funded plan also gives employers the ability to manage cash flow. With fully insured, the company pays a premium every month, and any upside goes to the insurance company; if it has low claims, it still pays the same premium. But with an alternative funded plan, the employer only has to spend the dollars for the care provided that month.
What are the future benefits?
Under health care reform, there is a defined tax for insurance companies that goes into effect in 2014. That tax bill for insurance companies is estimated at $8 billion in 2014 and as much as $12 billion by 2018, which will be passed on to employers. If an employer has an alternative funded plan, it will avoid paying toward that upcoming tax.
With changes in the market, now is the ideal time for employers to make a change and take ownership of their plan through alternative funding.
Mark Haegele is director, sales and account management, at HealthLink. Reach him at (314) 925-6310 or Mark.Haegele@healthlink.com.