For companies that self-fund, unbundling your health plan benefits offers some distinct advantages including competitive rates, more flexibility, and greater transparency. Once the decision has been made to move away from a single integrated provider, the question arises – how should we go about evaluating vendors? In order to maximize your company’s self-funded plan, you need to start with the people for whom you are providing services – your employees.
One the best ways to contain healthcare costs is to tailor your healthcare vendor services to your employee base. Every company is different. Depending on factors like demographics, geography, environment, and heredity, the healthcare needs profile of your employee base can vary widely, even between companies in the same industry.
To select the most appropriate vendor services for your company, you must first evaluate your employee base taking into account situational factors (demographics, geography, environment, societal, heredity), prevalent medical conditions, and high-cost claimants.
Situational factors
Age, gender, ethnicity, and heredity can all impact the prevalence of medical conditions your employee base will experience. Medical conditions also vary by climate – arid versus damp, hot versus cold. Examine the quality of care that is available in your area (a rural community hospital vs. a major metropolitan medical center). Also, take into account societal factors. Certain areas, for example, experience a greater proportion of smoking, substance abuse and depression.
Prevalent medical conditions
Look at where there may be a high proportion of chronic or acute conditions and their treatments. Chronic diseases account for 75% to 80% of all medical costs, according to the 2016 Aon Annual Health Forum. Identify the top chronic conditions within your employee base. Nationwide, the top chronic conditions are diabetes, heart disease, musculoskeletal conditions, and cancer. Obesity is also a leading contributor to the amount spent on medical procedures.
High-cost claimants
A key way to maximize a self-funded healthcare plan is to stabilize claims for those who are high-cost claimants. Separate claimants into tiers to determine what costs are being incurred (top 1%, 5%, 10% and 25%). Once an employer is equipped with this crucial data, they can put in place measures that focus on both patient and provider. For high-risk employees, a high-touch solution typically shows the best results, while lower risk employees often do well with high tech solutions.
Once your examination of the aforementioned areas is complete, you should have a good idea of what is driving your company’s healthcare costs. Next, you want to look at whether claims are increasing or decreasing.
If claims are decreasing, try to determine what contributed to the decline. Did the decrease come from the absence of one-time short-term occurrences, such as multiple premature births or catastrophic accidents? Or did the decline come from systematic changes that you want to further encourage – such as employees engaging in more preventative care measures or a company wellness program?
If claims are increasing, you’ll want to zero in on what is contributing to the increase. In addition to your company’s overall healthcare plan benefits, there are vendor services that can help to mitigate increasing costs.
Separate drug benefits from medical benefits
Experimental drugs are the fastest growing component of the annual claims trend. An analysis by Aon shows that while the average healthcare rate increase for mid-size and large companies was 3.2% in 2015, prescription drug costs continue to grow at a double-digit pace. With the proliferation of new drugs and treatments, the need for a vendor that specializes in pharmaceutical benefit management is growing in importance.
Out-of-network repricing services
There are a host of repricing services available that reprice out of network claims based on a combination of historical data, customary charges, a multiple/percentage of Medicare costs, pre-negotiated discounts, and direct negotiations.
Value-based purchasing coalitions
Some geographic regions have purchasing coalitions that can pre-purchase services or offer significant discounts for employers that are likely to use certain specialized services for chronic illnesses, including dialysis, diabetes medicines, and MRIs for hip and joint conditions over the coming year. For example, rather than spending $10,000 for a dialysis session, a repricing service or purchasing coalition could reduce an employer’s cost to $2,000.
Centralized health clinic
Establishing an on-site or centralized health clinic can reduce emergency room visits, especially when your company is located far from quality healthcare providers or has a night shift that makes it hard for some employees to see a regular doctor.
Telemedicine
While not a total replacement to a bricks-and-mortar health facility, telemedicine is a cost-effective way to augment access to in-person visits, and can be effectively used to monitor chronic conditions and diagnose routine pediatric illness such as ear infections and colds. A telemedicine visit can cost as little as $40 compared to a physician’s office which can run $130 or an emergency room visit, which can cost as much as $1,500-$3,000.
Being able to respond to the needs of your employee base and to exhibit flexibility in the selection of healthcare services is not only good financial sense for containing heathcare costs, it’s also good HR policy for attracting and retaining top talent. Take the time upfront to understand your employee base. Doing so will allow you to provide better, more tailored healthcare vendor services at a lower cost.
