Utilization management: The effect of pre-admission and post-discharge planning on health and costs

“Many employers and their health plan members assume that a utilization management program’s only goal is to approve or deny medical procedures and save costs for the health plan. In reality, utilization management programs are designed to help members navigate the health care system and achieve optimal medical outcomes in the most timely and cost effective manner possible,” says Dr. Jay Moore, senior clinical officer at HealthLink, Inc.

“To achieve this,” Moore says, “utilization management teams provide medical necessity recommendations and aid members in making medical treatment decisions, but they also provide important pre-admission and post-discharge outreach that can positively impact a member’s health and help contain costs.”

Smart Business spoke with Moore about what employers need to know about utilization management.

How do utilization management programs typically work?

Providers send a notification when they have a patient who is being admitted to the hospital or is being considered for an elective admission in the future. The request for services is compared against evidence-based policies to ensure the care is safe, appropriate and high quality. When this is verified, the service is approved.

If the service is not approved, an explanation is provided to let the patient and doctor know why the decision was made. Specific resources are also provided so that the evidence that underlies the decision is readily available. If the patient or physician disagrees with the decision, simple processes exist to submit more information or appeal the decision. This process usually results in the patient receiving the safest, highest-quality care that is evidence-based and effective.

Why might health plan members mistrust or have wrong assumptions about these programs?

The focus in these reviews is always on medical appropriateness, quality and safety. If a procedure or hospital admission is in the best interest of the patient, it is approved. Members may not always be aware of why a procedure or admission was approved or denied, they only know the end result.

Members who are unsure about these decisions can take a more active role in their health by talking to their doctor or contacting the utilization management team to learn more about the review process and discuss their case.

How should utilization management be employing pre-admission and discharge planning? How will this impact member health and plan costs?

Discharge planning from the hospital should begin as soon as the patient arrives. Utilization management teams should work with hospital staff to address any needs the patient might have before leaving the facility.

With this sort of proactive planning, care gaps may be avoided and members can receive the highest quality medical service.

If this doesn’t sound like what happens with a business owner’s health plan, what should he or she do?

A utilization management team should be dedicated to providing the highest quality, safest and most effective care to members. This reduces health care waste and allows members to receive high quality care. If this is not happening, the employer contact their broker or network to discuss medical management options.

Is there anything else you’d like to share?

Medical management programs as a whole can be really effective in helping employers, and their members control their health care spending. They shouldn’t assume that their health plan has all the right programs in place.

Employers need to take an active role in the health plan they are offering their members and work with their broker or network to explore their options for medical management programs.

Insights Health Care is brought to you by HealthLink, Inc.

How organizations can spend less on high-cost specialty drugs

The cost of specialty drugs continues to rise. In fact, it almost doubled from 2003 to 2014, according to a study from UNC-Chapel Hill. While less than 2 percent of the U.S. population used these drugs in 2015, research from pharmacy benefit manager Express Scripts shows they represent 37 percent of the nation’s drug spending.

By 2018, the figure is expected to reach 50 percent.

“Specialty drugs can cost several thousands of dollars for each prescription,” says Amber Hulme, Medical Mutual vice president of the Central Region. “And every year, costs go up, more drugs are released and organizations see their drug spend increase by 20 percent or more. That’s why it’s so important for them to take steps to control their own spending.”

Smart Business spoke with Hulme about the importance of having programs in place to control spending on these expensive, specialty drugs, and what steps organizations can take that will make the biggest impact.

What are specialty drugs?

Specialty drugs are often used to treat very rare or complex conditions that usually affect a very small portion of the population. They are typically biological drugs that are infused, injected or require special handling. Some common examples are those drugs used to treat cancer, multiple sclerosis, rheumatoid arthritis and AIDS/HIV.

What’s the best way for organizations to manage specialty drug costs?

First, make sure a specialty pharmacy is handling specialty drugs for your employees. Specialty pharmacies normally have the best pricing available. A retail pharmacy dispensing a specialty medication doesn’t have enough volume; they may only have one or two patients for certain conditions. A specialty pharmacy, on the other hand, might distribute these drugs across a much larger region and serve many more patients.

So it’s important for organizations to check with their insurance carrier or pharmacy benefit manager to see what specialty pharmacies are available in the pharmacy network. They should encourage — or even require — employees to use specialty pharmacies to help employees get the best possible prices for these expensive drugs.

What services do specialty pharmacies offer?

In addition to better pricing, specialty pharmacies do in-depth patient care and training. Clinicians will often train patients, for example, on how to administer medications that require self-injections. There’s also outreach to patients to make sure they are taking their medications.

One problem with specialty drugs is adherence. When employees take their medications properly, they’re more likely to be able to come to work, and less likely to need costly emergency room trips. This can make a big difference to an organization in terms of overall medical costs.

What other cost-saving measures are there?

Many organizations implement processes called ‘prior authorization’ and ‘step therapy.’ These two programs require that patients meet the appropriate criteria for the medication and first try a proven, but more affordable, drug before a more expensive alternative will be covered.

Another measure is to limit supplies of specialty drugs to 30 days. This helps avoid unnecessary costs that occur when a patient experiences intolerable side effects after the first few doses or the drug is no longer effective. Also, organizations with high employee turnover, for example, may not want to offer a three-month supply of a drug that costs thousands of dollars.

Anything else organizations should know about specialty drugs?

One development that could change the market is the use of ‘biosimilars,’ which are essentially generic alternatives to specialty drugs. It’s the same concept as traditional generics, where other manufacturers can sell the same drug for a lower price — potentially 15 to 20 percent less than the cost of the original drug.

So far, the U.S. Food and Drug Administration has only approved two biosimilar drugs, Zarxio (a drug used in cancer treatment) and Inflectra (a drug used for inflammatory conditions), but it is expected to approve others in the relatively near future.

Insights Health Care is brought to you by Medical Mutual

How to pick the right pharmacy plan for your business

As with health plans, there are a lot of pharmacy plans to choose from these days, and they all think they’re the best, says Chronis Manolis, RPh, vice president of Pharmacy Services in the UPMC Insurance Services Division, which is an integrated partner company of UPMC Health Plan.

Go big — it’s more economical!

Go small — it’s more customizable to your organization!

Go pharmacy-only carve out — we’re the experts!

Go pharmacy-plus-medical plan — we’re more comprehensive!

“As we say, it’s noisy out there,” he says.

Smart Business spoke with Manolis about six recommendations that will help you decide which pharmacy plan is best for your company and your employees.

1. Look for a large player

This really just comes down to the influence over purchasing power that larger plans have.

For example, larger plans are better able to negotiate drug discounts with pharmacy benefits managers (PBMs) such as Express Scripts Inc. In these cases, when a pharmacy company goes to a PBM with 50, 500 or even 5,000 lives, that company has far less leverage to obtain discounts on its drug costs than if the pharmacy company covers 500,000 lives.

2. Look for a pharmacy plan that is integrated with a medical plan (i.e. not a ‘carved-out’ pharmacy plan)

If your medical and pharmacy insurer is one and the same, this entity will know your employees better. It manages their overall health including medical and pharmacy claims and understands the impact of drug on overall costs.

Integrated plans have programs that allow for comprehensive ‘whole-person’ management.

Additionally, having access to both medical and drug claims data enables enhanced analytics to highlight opportunities to improve quality and lower overall costs.

3. Look for a formulary (list of covered drugs) that receives independent medical oversight

The best pharmacy plans include independent oversight committees of pharmacists and physicians that continuously update their formularies based on new products, new evidence and market trends.

4. Look for a formulary customized to your market

Some formularies are created using national demographic and drug trend data. Problem is, this national ‘data’ may or may not apply locally.

5. Look for a multitiered formulary

This makes it far easier to influence drug selection and control costs, including the extremely high cost of specialty drugs.

6. Look for a player that has an aligned and comprehensive strategy to manage members on specialty drugs

Specialty drugs are high cost, injectable or oral drugs used to treat rare and chronic conditions.

It’s projected that specialty pharmacy costs will drive 50 percent of all pharmacy costs by 2018, and yet involve only 1 to 2 percent of your members.

By finding a pharmacy plan that takes a holistic, ‘whole-person’ approach to members on these specialty drugs, it will promote cost effective, high quality care not just for your drug costs but for your overall health care costs.
These strategies will help you better plan for and contain your pharmacy costs.

The right pharmacy plan and formulary will also help guide your employees to the right drugs that are both affordable and appropriate.

Insights Health Care is brought to you by UPMC Health Plan

How cost containment can be part of your targeted health care strategy

Health plans often take a reactive approach to members’ health by intervening only after services are rendered, but with detailed data sets, it’s possible to manage risk before it occurs.

“By using data to uncover utilization trends, high-risk members, inappropriate and costly treatment and plan waste that may not be visible through simple claim data, the most effective cost management strategies can be customized for each employer’s unique situation,” says Brian Fallon, regional vice president, Network Management & Business Development, at HealthLink Inc.

Smart Business spoke with Fallon about how to determine the most effective cost containment programs for your health plan.

What are the dangers of a reactive approach to your members’ health?

A reactive approach implies no employer or employee engagement whatsoever, where members probably aren’t taking an active role in their own health care. This lack of engagement makes a company health plan a commodity. It’s there if members need it — but they hope they never have to — and they don’t give it much thought until they do. The danger with this approach is that every employer has a bad year at some point,  and it will be too late to affect outcomes.

How can employers change this?

With a proactive approach, employers can predict, prevent and better respond to medical issues before they arise, leading to better quality and more cost-effective outcomes for members.

The first step is to sit down and go through claim data. Data is the key to understanding what is going on within your dynamic health plan.

Next, employers can analyze the benefit offering by reviewing where members get medical services and whether those providers and facilities are in-network, as well as emergency room utilization rates. A detailed review, on at least a quarterly basis, can give employers a good view of what’s going on so they can update benefit levels or implement programs to control spending.

What risk management strategies have you seen work for effective cost management?

Designing a program that analyzes and addresses all aspects of the health plan, data reporting, stop loss insurance, network utilization, etc., is the best risk management strategy to contain costs. For example, if an employer discovers members are going out of network, it may be time to re-examine the network. Or, cost data may show that it may be time to add additional stop loss coverage to the plan design. Examining and understanding data is the most effective risk management strategy.

How much time and resources are needed?

It can vary depending on how impactful an employer wants to be. Some strategies, like shopping for a new stop loss carrier or implementing a telemedicine program, don’t take longer than a typical renewal. If an employer wants to dive deep into the data, however, in order to build and implement a customized health plan, that can take considerably longer.

What mistakes do employers make when setting up these programs?

The biggest mistake is trying to decide which programs are most effective, and then implementing them on their own. Sometimes data is not credible or there is not enough to make sound conclusions. Employers need to partner with a network that can bring in the large data sets needed to analyze and address risk, and who can collaborate with providers on their behalf.

What else do employers need to know?

No matter what network, stop loss carrier or plan design an employer chooses, cost containment is very important.

It’s also critical to understand that cost containment strategies should be as individualized as the group itself. Shelf products should only be considered with the full understanding of what they contain, not just because they are new or seem unique. Cost containment strategies should be based on the member population. These programs are supplementary resources and shouldn’t be the sole driver of cost containment. Instead, they should be part of a targeted strategy to control costs.

Insights Health Care is brought to you by HealthLink

How to forge successful partnerships directly with health care providers

Insurance companies and providers have always co-existed in a unique relationship when it comes to patient care. The providers seek to administer the best care to patients and the insurance company seeks to “manage care” while at the same time managing cost. The paradigm can be conflicting.

However, by partnering with providers and facilities, employers may get more competitive rates and more cost-effective health outcomes. In turn, health care expenditures, the patient experience and medical outcomes are also improved.

“This sort of collaboration empowers providers, making them more accountable for the care they provide, and engages members, making them more accountable for their personal health and wellness,” says Brian Fallon, regional vice president of Network Management & Business Development at HealthLink Inc.

A more complete and proactive approach to member health and benefit utilization shifts the focus from just treating the diagnosis to delivering the right amount of care in the right setting. It also aligns the provider and member incentives with the goals and objectives of the health plan, which can decrease overall health care spending.

Smart Business spoke with Fallon about increasing collaboration between health plan stakeholders.

How is the dynamic between providers, insurance carriers and employers changing?

The Affordable Care Act (ACA) has had a dramatic impact on health care.  From the medical loss ratio mandates, elimination of lifetime maximums, mandated plan design and, of course, additional tax liabilities, employers are looking very closely at their health plan configuration.

The ACA has also attempted to emphasize the quality of care so doctors and hospitals are becoming more attuned to the health care consumer. Provider reimbursement will soon be influenced by pay-for-performance measures, as well as patient satisfaction scoring. Carriers have already started instituting pay-for-performance models and the increased availability of transparency tools has employers and members engaged in the assessment of health care costs. This environment makes it advantageous for an employer to collaborate with a health system and design a custom health plan that drives members to the highest quality, affordable care.

How can employers help make these partnerships successful?

Employers can start the conversation with their broker, to begin to address all aspects of the plan — namely, a plan that focuses on cost, quality and access. All the parties have to work together. You need a broker who is willing to facilitate this sort of dialogue, a network partner who can support custom plan designs and a third-party administrator to administer it all. Once you have the right pieces, face-to-face communication becomes important. Each party needs a clear understanding of what they gain from the partnership and what they’re willing to give in return.

How much time needs to go into these kinds of collaborations?

Time is absolutely a concern for employers of all sizes and a lot goes into these sorts of collaborative negations. This is not an ‘off-the-shelf’ product that can be bought and applied. It’s an individualized process that could take 30 to 60 days.

Much is dependent on the willingness of the employer and provider. It’s important to make sure everyone — internally and externally — has the same collaborative goal before this sort of custom plan design can be developed and implemented.

What’s the best way to get started?

Reach out to a broker, and tell them you’re interested in exploring opportunities to reduce your health care spend. If those opportunities include collaborating with a provider or facility, make sure you have willing parties who have the data and flexibility to sit down with providers on your behalf.

The best way to approach provider engagement is for employers to show how both parties can gain from the collaborative effort and that they have the required resources to make the partnership successful.

Insights Health Care is brought to you by HealthLink

The importance of cost transparency in medical care

In health care, the consumer mentality continues to grow. Over half the respondents to Deloitte’s 2015 Survey of U.S. Health Care Consumers said they go online to research information about their medical needs. At the same time, only 30 percent of consumers are comparing prices before an appointment or procedure, according to a recent survey from HealthMine.

“Consumers definitely want cost transparency in medical care, but there’s still a disconnect that keeps some people from putting it into practice,” says Veronica Hawkins, Medical Mutual vice president of Government Accounts. “While more insurance carriers have introduced cost estimating tools, employees need to understand what the tools can do and how to use them effectively.”

Smart Business spoke with Hawkins about why cost transparency is so important, how cost comparison tools generally work and how much difference a little research with the right tools can make.

Why is cost transparency important?

With many employers moving to high-deductible health plans, employees are being asked to cover more of their medical expenses. To do that, they need to be able to evaluate their options and make the most informed decisions they can.

That means knowing how much a visit or a procedure is going to cost before they go — not after they get a bill. Most people don’t understand that costs can vary widely for medical services. They are surprised to learn costs can even be different for the same procedure, performed by the same provider at different locations.

How do cost comparison tools work?

Depending on the organization’s insurance carrier and the employee’s specific health plan, each tool will probably work a little differently. Price estimates are often available for everything from office visits to X-rays and surgical procedures. The estimates may factor in facility fees, as well as associated costs like consultations, outpatient visits, medications and rehab. That means the estimates should be pretty close to what the patient will have to pay — at least when there aren’t any complications.

What are some easy ways to save?

They are many services that can include facility charges. These extra charges come into play when you see a doctor at a facility he or she doesn’t own, like a hospital-owned clinic. In many cases, patients can pay much less by seeing the same doctor, and having the same treatment, at a different facility. To reduce the cost of those visits, it’s important for employees to know if facility charges will apply, and whether they can be avoided. These tools can help with that.

Should employees be looking at lab costs, too?

They absolutely should. Many people have their lab work done at the hospital or clinic where they see their doctor. But they have a choice. If their health plan has a cost comparison tool, employees can see how much a standalone option, like an independent lab, will charge for tests they might need. Price differences can be significant.

For example, hospital-based labs sometimes charge up to 70 times more than an independent lab for a simple blood test. If a doctor has an agreement with the lab, the patient may not even have to go to a different facility. A lab technician can pick up the sample from the doctor’s office. They’ll do the test, submit the claim and share the results with the doctor.

What other information is important?

Cost is obviously important, but it’s definitely not the only factor. More people are looking through reviews and ratings to help them make informed medical decisions.

That’s why Medical Mutual’s cost comparison tool, for example, includes patient satisfaction scores and quality ratings for doctors and hospitals in its network. It also includes specific information about the doctors themselves, like how long they have been practicing, where they went to medical school and what languages they speak.

Insights Health Care is brought to you by Medical Mutual

Five things CEOs should know about the latest health care technology

As in so many areas of business, technology is radically transforming health care and health plans.

“But there’s good technology and there’s bad technology. Seamless technology and non-integrated technology. Essential, intuitive technology and bells-and-whistles technology. You get the idea,” says Kismet Toksu, president of eBenefits Solutions, an affiliate of UPMC Benefit Management Services and UPMC WorkPartners. “The key is to find the right technology.”

Smart Business spoke with Toksu about five of the latest developments to keep an eye on,when you make your health care plan decisions.

Integration = efficiency.

The right health plan technology includes such things as Affordable Care Act (ACA) compliance and private exchange capabilities. Keeping up with ACA-driven rules and regulations is a massive chore all by itself for any size company, and these changes affect countless aspects of your plan administration.

Thus it is best for both to be administered on the same platform. Capabilities often associated with private exchanges, such as defined contribution and employee support tools, will bolster your benefit strategies today and in the future.

Communication is key.

Health plan platform technology must now have smart communication capabilities baked into it. As the ACA and other external forces continue to change the world of employee benefits, it becomes ever more vital that businesses keep their employees up to speed on their plan options via their employees’ preferred communications channels.

Case in point: A recent workplace survey found that when employees received benefits communications through their preferred channels (i.e., email, web, mobile, etc.), 70 percent were very confident in their selections. When employees didn’t receive benefits communications through their preferred channels, less than 40 percent were very confident in their selections.

Optimizing the user experience.

Gone are the days when employees accessed their health plan exclusively by mail, interoffice memo or an HR benefits fair.

Today, employees expect to be able to instantly access their health savings account and this month’s wellness incentive, via the same platform anytime, anywhere and on any device.

Emulating the ‘Amazon Effect.’

When an employee accesses his or her health plan — via phone, tablet, desktop, laptop or watch — he or she then expects a retail-like experience akin to ordering a book on Amazon or browsing rug styles at Overstock.com.

Similarly, the technology must now include capabilities such as easy-to-use cost-comparison and decision-support tools. These user-friendly tools help customers make the right health care choices that suit their needs, budget and lifestyle.

Tailored human engagement has reached a new level.

To retain the still-important human factor in an increasingly self-service tech world, leading-edge technology partners are now employing customer service avatars and other voice recognition capabilities.

The best of these provide targeted, real-time, in-depth answers to questions that customers are actually asking. Using voice or text, human avatars guide consumers through the decision-making process. This improves customer trust, engagement and brand loyalty — just as “live” customer service always has.

Having a health care plan that meets your employees’ expectations is a powerful recruiting tool for your workforce needs. But don’t just add features to add features; be thoughtful when it’s time to renew your health care plan.

Insights Health Care is brought to you by UPMC Health Plan

How to use data to customize your health plan and control costs

“In today’s health care market, data can be used as a valuable resource to control costs. By examining customized financial data sets, it’s possible to determine where heath care dollars are being spent and where there is potential waste,” says Brian Fallon, regional vice president of Network Management & Business Development at HealthLink Inc.

Smart Business spoke with Fallon about how employers can use data to build a customized health plan and control costs.

Why is data so valuable?

Health care spending can be analyzed in terms of fixed and variable costs. Fixed costs include administrative costs such as third-party administrator charges, network access fees and the premium for stop loss insurance. Variable costs are just that, variable, and include claim utilization cost incurred by covered members/their dependents, and are impacted by plan design, demographics and the health of the member population served.

Data allows fixed costs to be analyzed in order to find opportunities for saving. But more importantly, data allows you to look at variable cost. You can discover where costs are coming from, and if there are underlying root issues. Then, you have the opportunity to predict variable costs and, using custom plan design strategies and cost containment programs, control health care spending.

Does this only work for self-funded plans?

Historically, yes. For employer groups with less than 100 lives, fully insured employers receive a monthly list bill with premiums owed. Since the carrier assumes the risk and pools it with other employer groups, there is little, if any, reporting. Fully insured groups with greater than 100 employees receive some reporting but the availability varies among carriers. Typically, the greater the enrollment the greater the reporting, because once an employer reaches a certain size, there is less dependency on the risk pool and greater consideration of an employer’s own data.

The customization and flexibility of self-funded arrangements, coupled with the fact that a self-funded plan is the employer’s plan, not the carriers, make them ideal for utilizing data to drive more cost-effective outcomes. The chosen programs and services can be customized for the employer — the plan is theirs, the programs are theirs and the savings is theirs.

Is using data to this extent a recent trend?

Using data to look at costs has always been important and a major benefit of self-funding, but changes, such as Affordable Care Act mandates and the removal of lifetime maximums, have facilitated a more aggressive approach.

How can employers use customized data to examine their health care dollars?

Examining data in this way isn’t a product employers just purchase and apply. It’s a process — and the process starts with availability of data. This depends on whom an employer is working with, how transparent the company is willing to be and the degree of creditability within the data.

Some areas that should be examined are ages within the group, top diagnoses and incidences of high-cost medical conditions. Also, consider non-clinical data — out-of-network and emergency room usage — to see if it is a factor of high spending.

Once there’s concrete understanding of the health plan and member population, your advisers can show you how to proactively manage risks. The best way to affect outcomes is a collaborative relationship between all the required parties needed to design and administer a benefit plan. There are also new opportunities with providers who are willing to collaborate in shared risk agreements.

What else do employers need to know?

How data is presented can be as unique as the network or carrier itself. Discrepancies can distort accuracy, so employers need to understand what the data actually entails. They should know the difference between repriced and actual paid data, how current the data is, whether or not it has duplicates and, when looking at discount data, the facility level discounts. It’s also critical to review the facilities’ case mix indexing and the cost to charge ratios. These components can affect the data, the analysis, and ultimately, the conclusions.

Insights Health Care is brought to you by HealthLink

How organizations can benefit from self-funding employee health plans

How to fund health benefits is a major decision for any organization. There are two options — get fully insured through a health insurance carrier or fund it themselves. Until recently, self-funding was only considered for large organizations due to the potential risk involved, but that’s changing.

In fact, according to Pricewaterhouse Cooper’s 2015 Health and Well-being Touchstone Survey, 66 percent of employers with 500 to 1,000 employees are now self-funding their health benefits. That’s up 7 percent from the previous year and up 11 percent compared with 2013.

“Self-funding can be a very effective way for some businesses to control the cost of health care,” says Amber Hulme, Medical Mutual vice president of Central and Southern Ohio. “But it’s definitely not for everyone. Organizations need to evaluate their options carefully to make the right decision.”

Smart Business spoke with Hulme about the basics of self-funded health plans, how organizations might benefit from the approach, and what factors need to be considered before making a switch.

Why has self-funding grown recently?

A decade ago, self-funding was primarily utilized by employers with at least 500 employees. Now, more insurance carriers, including Medical Mutual, have introduced self-funded products for organizations with as few as 50 employees.

In 2018, many small businesses are scheduled to lose the transitional or ‘grandmothered’ status that has kept them exempt from some aspects of the Affordable Care Act. In preparation, even businesses with as few as 10 employees are evaluating the benefits of self-funding.

How does it generally work?

With self-funding, organizations budget for and pay the claims for all employees covered by the plan and any covered dependents, plus administrative fees. Most employers also pay for stop-loss insurance, which limits risk when one employee has a catastrophic claim, as well as when claims for the entire organization are higher than a set amount.

It’s basically the alternative to being fully insured, where the insurance carrier charges a premium and pays the claims — thereby assuming all the risk.

What are the benefits?

Organizations usually decide to be self-funded because it lets them predict costs based on their specific claims history and make any necessary adjustments. If claims are lower than expected, they can invest that money in the business or offer incentives for employee wellness. If claims are higher, their stop-loss insurance can cover it.

There also can be tax advantages to self-funding. Under health care reform, there are certain taxes related to risk that only apply to fully insured health plans. By moving to self-funding, organizations hope to eliminate some of those taxes from their budget.

When isn’t self-funding a good option?

Self-funding introduces more risk, so it’s usually geared toward organizations with more predictable claims. That’s why organizations need to be familiar with their claims history and understand the overall health of their employees when they are making this decision. If the population is relatively unhealthy, for example, self-funding might be a challenge.

Another important factor to think about is their financial flexibility. Some organizations simply don’t have the cash flow available to cover unexpected claims if they come up. Others may need to know their costs ahead of time, and prefer the predictability of being fully insured.

What other factors should be considered?

Self-funding isn’t a short-term solution. It requires a full commitment and a long-term strategy. To actually control costs through self-funding, organizations need to manage their claims effectively. That means committing to keeping their employees healthy through wellness and disease management programs, as well as negotiating with health care providers.

It’s also critical for organizations to know exactly what’s in their contract — and to work with an insurance carrier or a third-party administrator they can trust.

Insights Health Care is brought to you by Medical Mutual

Selecting the right wellness vendor takes careful study

Wellness programs have become a staple of American companies over the past two decades. A 2012 study by Rand Corp. showed that 51 percent of all employers with 50 or more employees reported that they offered wellness programs.

The foundation for workplace wellness programs actually goes back to the 1970s, when government entities such as the National Institute for Occupational Safety and Health and the Occupational Safety and Health Administration were created to help ensure safe, healthful working conditions.

Over the past 20 years, the popularity of wellness programs has intensified, especially as health care costs have risen. But not all wellness programs are created equal as companies are finding out. Choosing the one that best suits a specific company can be a challenge.

“The characteristics and quality of health management and wellness programs can vary considerably,” says Stephen T. Doyle, senior director of Strategic Health Management Solutions at UPMC WorkPartners. “Business owners should make a careful study of their options before selecting a wellness vendor.”

Smart Business spoke with Doyle about what employers should look for in a wellness program.

What is the future of wellness programs?

It is obvious that with health care costs on the rise and participation-based incentives losing some effectiveness, the emphasis is shifting to programs that provide incentives (or disincentives) based on outcomes. Recent employer surveys have shown 52 percent of employers had outcomes-based incentives for tobacco use in 2013, and 33 percent offered outcomes-based incentives for biometric screening values such as weight, blood pressure and cholesterol.

To ensure continued participation and to maintain program momentum and success, programs often need to make significant shifts toward outcomes-based incentives.

What are some characteristics of successful incentive wellness programs that employers should look for?

An effective incentive program can be a powerful strategy for engaging employees and motivating behavioral change. However, while many programs may provide incentive strategies for specific behaviors, often these will fall short of addressing the whole population, given individuals’ specific health concerns or needs.

Each employer’s needs are different, and, therefore, wellness and health management providers need to be able to tailor programs to accommodate an organization’s particular needs.

Should wellness programs be integrated with other employee benefits?

Wellness and health management programs produce optimal results when integrated with an organization’s medical benefits. Integrating all employee benefits allows for seamless coordination of benefits and can provide the most complete picture possible of the health of the employee population, which in turn can help guide program direction and development.

Professionally trained and credentialed staff is needed to produce the best service. Ideally, staff should be involved in ongoing training and education initiatives.

In addition, a wellness and health management program provider should be readily accessible in the same geographic region as an employer. This allows for the most responsive service delivery and face-to-face interaction with employers and employees as needed.

Regular, customized reporting that summarizes employee utilization of programs and its impact on the organization is essential.

Are wellness programs the final answer to improving overall workplace health?

Achieving widespread and significant improvements in health risk levels, especially among workers at risk for chronic diseases, may require more than financially incentivized workplace wellness programs. Other workplace modifications — such as on-site health clinics and lifestyle and disease management health coaches on-site — may be needed to enhance the impact of workplace wellness programs.

Insights Health Care is brought to you by UPMC Health Plan