Each month, employers dutifully pay their health care premiums, but many don’t understand what they’re getting for their money.
By demanding claims data transparency in health plans, employers can better understand their expenses and shift money to the areas that will best benefit their employees.
“A lot of insurance companies don’t want to give you that information for a lot of different reasons, but that’s like getting a credit card statement without any detail about your purchases and just paying it,” says Steve Freeman, president of USI in San Francisco. “With claims data transparency, the insurance company provides the employer with the details of the claims expenditures. And the more information you have, the more power, leverage and control you have over your health care spending.”
Smart Business spoke with Freeman about claims data transparency and how employers can use it to control their health care costs.
Why are insurance companies reluctant to share claims information with employers?
If an employer knew it had a better-than-average claims experience, it could more easily go to another insurance company and get a better deal. Employers with a worse-than-average claims experience would see their information and know they couldn’t get better rates elsewhere, and wouldn’t bother seeking out a better deal. This leaves the insurance company with only risky clients.
Some insurance companies will provide the information for companies that are at a certain size employee group, for example, 200 members. Others will say they need 200 members in each of the plan choices, such as POS and PPO plans. Also, insurance companies have different rules regarding data depending on the state in which employers are doing business.
How can employers benefit from health care transparency?
Typically, health care premiums are the second-largest expense for most employers, behind payroll, and they need to get their arms around what is driving premiums.
Transparency gives employers a better understanding of claims utilization by employees and what services are being used. Are people going to the emergency room, versus utilizing an urgent care clinic? How many office visits have employees made? What is the hospitalization rate, prescription drug usage, large claims information? How are disease management programs being utilized? What is inpatient utilization versus outpatient utilization versus benchmarking norms? Is the employer above or below those benchmarks?
At the end of day, claims costs drive premiums and rate increases. But if the insurance company doesn’t give you any information, it’s hard to know where you stand.
How can this information help an employer structure a wellness program?
This information gives you more detailed aggregate information about your population and its needs, allowing you to offer more customized solutions. If you have a lot of employees with conditions such as asthma, diabetes or high blood pressure, you can craft a more customized wellness program, instead of just guessing and pulling one off the shelf.
How can employers get better transparency from their insurance companies?
The No. 1 thing is understanding what the parameters are in the marketplace for different carriers. A lot of times, the insurance company will say that information is not available, but if you work with a consultant who understands the parameters or who has other customers that are receiving that information, he or she can leverage that to get the information.
Also, when you are putting your insurance out to bid, make it a requirement that whoever underwrites that business must provide a certain level of information on claims use.
A consultant can help navigate through the maze of rules and requirements for insurance companies and types of information and reporting that you can obtain.
How can having this information save an employer money?
Underwriters want information, and the more you can provide, the more confidence it gives them to drill down to what your actual costs should be. When they get more aggressive, you get a more competitive price.
For example, say a company is trying to save money and so it raises the co-pay for an office visit from $20 to $30. The insurance company will say that move is worth X percent. But a consultant can go back and say, ‘Actually, it’s worth more, because we have data that demonstrate a larger discount.’
How can transparency help a company budget?
It gives you a good idea of what is happening within your group. With a medical plan, the insurance company typically gives you 60 to 90 days’ notice of your rate increase, and you don’t know what that is until you get that letter. But if you have claims data, there shouldn’t be any surprises. Future costs are more predictable and you have a better idea of what the rate increases may show. This will help you make decisions about your budget and plan design changes, such as increases in deductibles and out-of-pocket costs.
The thing to remember is that having data is power, and it gives you more control. And with more control, you have more leverage in the insurance marketplace.
Employers that embrace and require their vendors to provide data will be in a much better position in the future than their competition. They will know the health status of their employees and have information to benchmark against their peer competitors, industry, geographic location and size.
Steve Freeman is president of USI San Francisco. Reach him at (925) 472-6772 or firstname.lastname@example.org.