Self-insuring is an attractive concept because of the flexibility it offers an employer to design a health plan that falls within its budget and meets the unique needs of its employees. The potential for cost savings is greater when an employer pays claims directly instead of paying premiums to an insurer, as in a fully insured plan.
A recent Aon Hewitt report found that health care costs for employers are rising four times faster than wages, and premiums have more than doubled in the last 10 years.
Employers cannot afford to continue supplying health care coverage to their employees under these conditions. They may be overpaying for their employees' health care, either by paying too much for necessary procedures or by paying for services that are not medically necessary. As employers take control of their health care cost risks, it is imperative that they also take control of the rendering of unnecessary services and increasing procedure costs.
Brokers may be able to help their clients manage and mitigate risk associated with fluctuations in health care expenditures beyond simply purchasing stop-loss insurance. For brokers who are helping employers structure their employee medical plans, it is important to understand how a specialty benefits manager can help them better manage these costs. Specialty benefit managers work with the employer and/or its health plan administrator to implement programs that will reduce waste. Adding a specialty benefits manager as a TPA can be an effective way to actively manage the cost of care while improving its overall quality.
Managing the cost of care
While there is no single factor driving the increase in health care costs today, two in particular - expenditures associated with unnecessary procedures and the treatment of chronic illnesses - strain the health care system.
Specialty benefits management companies can manage specific areas of care to make a difference to self-insured employers' spending per employee. For example, CareCore's analysis of 24 million case reviews and medical claims found that companies can save up to $156 a year per insured by making sure patients receive the most appropriate medical treatments and diagnostic services in seven different areas of care: radiology, radiation therapy, cardiology, medical oncology, musculoskeletal care management, sleep management and lab services.
In groups where one million commercial lives are insured, the savings offered can add up to more than $156 million each year - and significantly more for Medicare Advantage members.
Employers can also lose money by overpaying for necessary services when employees receive services at facilities that are reimbursed at levels well above the market price. While the service may have been necessary, it may also have been possible for the employee to conveniently receive the same quality of care for less.
For example, we've found that for many exams, there can be a 500% cost differential between the same professional services rendered by physicians at two different locations on the same or similar equipment.
Employers can significantly reduce high-tech imaging costs by directing patients to high-quality, low-cost facilities through a member scheduling program. In fact, employers in certain markets have seen significant cost reductions (that is, on the order of multiple dollars per member per month) and employee satisfaction rates of 90% or more when implementing such a program.
Patient quality improved and protected
The best way to reduce the cost of health care may be to improve the quality of service. We have seen this best displayed through the use of patient-centric, evidence-based medical practices. Specialty benefits managers can help by making sure diagnostics and therapies are both medically appropriate and efficiently provided.
If your client is assuming all the risk, why not provide them with ways to minimize it? As rising costs and uncertainty about the effects of health care reform challenge your clients, brokers should seriously consider recommending a specialty benefits manager to ensure that they are not overpaying for care.
Ryan is the executive vice president, specialty products, at CareCore National.
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