Who says the little guy never gets a break? Advisers can steer their smaller clients to the same health benefit cost-saving, quality-improving strategies as the Fortune 500 — if they know where to look.
The biggest obstacle to better results for many employers isn’t size, but “a willingness to embrace change,” says Tracy Watts, a senior partner at Mercer and an author of the report entitled “Leading the Way: Employer Innovations In Health Coverage,” that was recently issued by mercer and the American benefits Council. That means having the stomach, for example, for a few complaints from employees when they’re being steered to new providers.
Early hopes that employees would be smart consumers of healthcare services if they were only given the chance to view quality and outcomes data proved to be overly optimistic. The metrics employees often use to assess quality, Watts says, such as “how much time did the doctor spend with me” or “did he really listen to me” don’t get to the bottom line of outcomes.
Employees, understandably, aren’t looking at questions such as whether their provider follows protocols based on evidence-based medicine, or orders a genetic test to determine a patient’s suitability for a high-cost specialty drug before prescribing it. That’s where aggressive provider network selection comes in.
And yet, Watts adds, employers often are unwilling to consider shifting to narrow, high-performing medical networks (available to smaller employers as well as large ones) because they are making untested assumptions about how their employees will react. “Organizations are too quick to say, ‘it won’t fly,’” she laments. “It’s a good idea to take employees’ pulse before drawing that conclusion.”
So when employers are sufficiently open-minded (or desperate) to look beyond traditional tactics to get more value out of their health benefits, what can advisers propose? Michael J. Rodgers, Jr., the managing partner of Axial Benefits Group, has been on a mission to introduce them to a new breed of purchasing coalition. He has formed three of them, each collectively representing dozens of employers and around 10,000 employees.
The basic healthcare purchasing coalition concept is neither new nor hard to grasp. Members of the National Healthcare Purchaser Alliance collectively represent around 12,000 employers and 45 million covered lives, according to Mike Thompson, CEO of the organization.
And advisers often play a key role in helping their clients assess their priorities and making them a part of a local coalition’s agenda. “They can play a big role in driving systemic changes,” Thompson says.
It doesn’t require a great leap of faith. “Everyone who shops at Costco or Walmart intuitively gets it,” says Axial’s Rodgers. Purchasing power equals price negotiation leverage. But the answer isn’t just haggling over medical fees and drug prices.
One way that small employers can benefit from a multifaceted purchasing coalition involves claims risk aggregation. A huge claim for a small self-insured employer can be costly not only to the employer, but its stop-loss carrier, if the claim was inconsistent with that employer’s claims history.
The larger the risk pool, the more predictable the claims pattern, and thus the more competitively priced the stop-loss coverage. “If you’re dealing with 10,000 lives, it doesn’t matter so much if they’re working for one employer, or 50,” he explains.
And, notes Mercer’s Watts, employers and stop-loss carriers are getting hit more frequently with very large claims. One big carrier told her the number of over-$1 million claims it has encountered has grown by 68% over the past three years. That means the size of the risk pool is becoming more important than ever in keeping stop-loss premiums in check.
Employers using purchasing coalitions organized by Axial don’t have to give up their own health plan designs to take advantage of its stop-loss coverage.
Another service purchasing coalition service that can help employers on the cost front without price-haggling involves high-cost specialty drugs. For example, a full 90-day regimen of the hepatitis C drug Harvoni can cost $90,000, according to Rodgers. But under the federal program mandating that pharmaceutical companies offer discounts on certain high-cost drugs to low-income individuals, that price tag can be reduced by one-third or more. However, a purchasing coalition can take advantage of that program to lower drug costs more broadly, depending upon various parameters including its deductible levels, according to Rodgers.
Care management carve-out
Finally, aggressive case management services — the kind highlighted in Mercer’s “Innovations in Health Coverage” report — can also be made available to smaller employers via a coalition. “Wherever we can,” says Rodgers, “we carve out the case management program” in coalition members’ health plans “and put in our own.”
Those case managers not only handle such basic tasks as treatment pre-certification and case management, but negotiating with providers to outside of the employer’s network if high quality service is available at a more attractive cost elsewhere.
But even when their clients aren’t part of a coalition, advisers can help them secure services (including comprehensive case management) that they might not have known they’re already paying for. If a client is facing a high-cost claim, “talk to your vendor partners to see what programs are available,” urges Watts.
Often employees with the highest claims are struggling with multi-faceted medical problems that need to be addressed with a holistic case management approach that factors in the patient’s entire family environment, she says. A good service can “focus beyond just that condition,” she adds, to tackle the issue more effectively.
Advisers can help employers toward that end by getting them to look at their claims patterns for the largest expenditures. “The first clue is going to be in your data,” Watts says.
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