Maintaining a self-funded health insurance plan is an attractive option for many employers providing enhanced flexibility, tax savings and risk management. However, self-funded plans are potentially susceptible to the negative impact of the most expensive medical conditions when they dont establish and follow the right cost management strategy.
End-stage renal disease (ESRD) is one of those expensive conditions. It affects more than a half-million Americans, according to Kidney.org. The treatment is costly. According to the United States Renal System 2013 report, the cost of dialysis for Medicare patients is $61,000 annually, not including drugs. More than 430,000 patients require dialysis annually.
Because Medicare coverage doesnt begin until after 33 months of treatment, employer-sponsored group health plans often pick up these costs in the interim. And outside of the Medicare system, dialysis can cost up to five times more than what the federal insurance program allows.
If you advise an employer running a self-funded plan, how do you help them reduce costs without incurring potential liability or affecting the quality of care? Here are some scenarios:
If you are a gambler, you can recommend an employer do nothing. After all, kidney dialysis happens only once every 3,000 health plan members. But losing this gamble can result in exorbitant costs up to $300,000 and higher annually per patient. Clearly, there are better options.
Do it discriminately
An alternative is to insist that health care providers bill only reasonable and customary charges, perhaps a smaller multiple of what Medicare allows. Re-pricing claims charges for dialysis treatment is a major cost-control option for self-funded plans, but the wrong approach can result in potential liability.
Its illegal to discriminate by cherry-picking only certain plan members for re-pricing or treatment restriction, according to HIPAA, unless treatment limits apply to all individuals with the same condition. Benefit cost management also must include a strong methodology backed by thorough documentation to avoid future damages established in a court of law. Simply cutting invoices by a percentage doesnt meet this standard.
Self-funded plan sponsors also cant count on shifting costs to Medicare before the 33-month waiting period. The Medicare Secondary Payer Act stipulates group health plans cannot take certain actions that lead to plan members entering Medicare before this waiting period ends.
Do it right
A third option is a common-sense solution to containing ESRD medical costs without creating undue liability: a comprehensive dialysis cost-management strategy. Like the disease, the wrong strategy can be catastrophic to self-funded plans. By working with a knowledgeable partner that can document its success in both cost management and mounting a defense, self-funded plan sponsors can avoid the minefields on their way to containing dialysis costs.
Fleet is president of AmWINS Group Benefits, a wholesale broker of comprehensive group insurance programs and administrative services.
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