Melina Kambitsi, Ph.D.
SVP, Business Development & Strategic Marketing at The Alliance
Melina Kambitsi Ph.D. joined The Alliance in 2017 and leads the teams responsible for business development, client development, and strategic marketing. Dr. Kambitsi came from Network Health in Milwaukee and Menasha, Wis. where she was chief sales and strategy officer. In this role, she was responsible for sales and underwriting, strategic planning, product development and risk-based contract analytics. Earlier she was senior vice president of sales at Blue Cross Blue Shield in Honolulu, Hawaii and the vice president of sales, marketing, and product development at Blue Cross of Northeastern Pennsylvania.
If you have a self-funded health plan, stop-loss insurance (also known as reinsurance) can help protect your organization from high-cost claims – unpredictable claims that are considered catastrophic to the plan. Certain forms of cancer, premature birth, and kidney failure, to name a few, can all cause a high-cost claim. Stop-loss insurance mitigates the impact of possible high-cost claims.
What Is Stop-Loss Insurance?
Stop-Loss is additional insurance purchased by employers that protects them from assuming 100% of the liability for claims losses.
The insurer’s liability begins where the employer’s liability stops – typically after a total dollar ceiling or aggregate cap is reached during a contract period. Another type of stop-loss insurance – specific-stop-loss (or individual stop-loss) – protects the employer against a high claim from any single employee. Generally, all but the largest self-funded employers have both types of stop-loss insurance in some form.
How Much Does Stop-Loss Insurance Cost?
The cost of stop-loss insurance varies widely based on several different elements. Insurance companies use mathematical underwriting models to analyze historical claims data to project future coverage costs and estimate the value of coverage per employee per month, basing the premium on the number of participants, the age of participants, and other factors.
Network savings performance is a key element that carriers use to calculate an employer’s stop-loss premium. The Alliance proactively reaches out to carriers to provide the most up-to-date network data, ensuring our 285+ employers receive the best rates possible. (Here’s a list of stop-loss carriers we’ve evaluated for our members to use.)
The Alliance uses bundled payments and sets fixed fees with providers, like dialysis centers, to reduce high-cost claimants. Additionally, by basing contracts on a percentage of Medicare, we cap payments to providers which makes costs more predictable for employers.
The Importance of Primary Care and Preventative Health
The best defense against high-cost stop-loss insurance? It’s the same defense used against high-cost claims: preventative health.
Direct Primary Care is becoming a popular tool for employers due to its undeniable value in preventing common, chronic diseases. By catching and preventing diseases (like diabetes that can lead to kidney failure and other highly expensive care,) before they manifest into high-cost claims, employers can make a real difference in their health plan costs – and most importantly – their employees’ wellbeing.
Additionally, Direct Primary Care creates a setting in which the primary physician acts as the patient’s “quarterback,” and can guide employees towards better decisions and to in-network, high-value specialists when necessary.
An Employer’s High-Cost Claim Story
One of our members had a patient suffering from end-stage renal disease (kidney failure,) and was placed on daily dialysis after being referred to an out-of-network provider. And because the TPA did not redirect their care, the employer was spending $27,000 every week – the equivalent of $1.5 million per year – on that patient alone.
The Alliance was able to help out the employer by introducing them to a dialysis vendor that will save them 50% of the annual cost. Though that’s significantly less than what they paid in 2020, had the patient been directed to a provider within The Alliance network from the beginning, they would have paid less than $370,000 per year.
These situations are why having access to – and understanding – your data is important. It’s also why knowing your fiduciary responsibility as the plan sponsor is a vital component in directing your patients to seek high-value care.
How Else Does The Alliance Help Employers Manage Claims?
Care navigation plays a fundamental role in helping an employer guide a patient to an in-network, high-value provider from the get-go. These high-cost claim stories showcase the incredible value of Direct Primary Care, which helps establish that health care “quarterback” who serves as the patient’s advocate and care navigator.
Another tactic employers can use to catch and prevent high-cost claimants is requiring pre-authorization for certain tests and procedures.
Additionally, through SmarterHealth℠, The Alliance uses licensed tools to identify patients at risk of becoming a high-cost claimant and works with the employer, using employee health guidance programs, to help them seek the lowest-cost, best-value care. We’re also creating a predictive-modeling tool to pinpoint these types of patients and work with the employer to proactively manage their care and prevent the high-cost claim altogether.
Lastly, The Alliance uses tools like bundled pricing, QualityPath®, Direct Primary Care, and contracts with high-value providers based on a percentage of Medicare (Reference-Based Contracting by The Alliance®,) to help employers better manage their claims and keep costs in check.
Contact us to receive your custom data reports and see where you can save!
Tena Hoag received a Health Transformation Award from The Alliance on October 1, 2020 for significantly improving her employees’ access to high-value health care and transforming the way health care is delivered. The Alliance created a case study capturing Tena’s journey so other employers can emulate her success. This blog article is a condensed version of the case study.
How to Save Your Employees 50% on Primary Care Costs
Through self-funding and implementing a shared-site clinic that uses direct primary care, Tena Hoag, CFO of Advanced Laser, helped her organization save approximately 10% on their total health care costs in 2019. They then used those savings to reduce prescription drug prices and create their clinic’s mental health service offering – further improving her employees’ access to high-value health care.
Today, for every dollar Advanced Laser spends on their clinic, employees receive two dollars of care – over a 2:1 return on investment. When compared with the costs of other providers in the area, Advanced Laser’s employees are saving over 50% on health costs by using the shared-site clinic.
Reducing Health Care Costs
Before Tena arrived, all employees were on a traditional PPO plan and Advanced Laser was facing yearly cost increases, so Tena began trying different methods to reduce her organization’s health care costs.
“We kept requoting our insurance package in hopes of finding some relief, and although it was disruptive to our families, we even changed carriers a couple of times to take advantage of that typical ‘good first year’ pricing. We raised deductibles, coinsurances, and used incentives to try and convert our families to high-deductible plans,” she said.
Cutting Costs With Direct Primary Care
Tena finally unlocked significant and lasting savings in 2018 after implementing a shared-site clinic that practices direct primary care.
“Direct primary care is the cornerstone piece of both good health and reduced cost.”
With direct primary care, patients pay a low, set fee to access the clinic near their workplace – which not only saves them money, but also improves their access to high-quality care.
Desirable Services Create Employee “Buy-In”
Tena has been able to get her workforce, top-to-bottom, engaged in their health and has dramatically expanded their access to high-value health care using no- and low-cost services through the shared-site clinic, which offers: biometric screening programs, a smoking cessation program, mental and physical therapy services, and a prescription drug benefit plan.
In tandem with the clinic’s offerings, Advanced Laser utilizes an optional high-deductible health plan for employees, which Tena has made as affordable as possible within the federal rules regarding high-deductible health plans. Additionally, employees are offered a PPO through Advanced Laser.
Employees can get routine health maintenance, preventative prescription services, insulin, and other associated diabetic medical expenses at the clinic free of charge. The clinic also serves as the company’s redesigned EAP, so the first four sessions of mental health services are free for all employees, as well as covered dependents.
The clinic has ensured Advanced Laser’s workforce remains compliant in their health care journey.
The Benefits of a Shared-Site Clinic
“When our employees have positive experiences at the clinic, they tend to tell other employees, and this is really one of the best ways to increase the clinic’s foot traffic.”
And that increased interest in the clinic quickly created a widespread adoption by employees, and a new challenge for Advanced Laser – servicing employees in a timely fashion.
“Our clinic utilization has been high enough that we've had to increase its hours of operation not once, but twice, since its inception.
I think the difference between typical healthcare and the healthcare provided at a shared-site clinic is really the development of a relationship between the provider, the patient, and the patient's family. It's not simply a checkoff list of symptoms, but rather looking for the root cause. And that root cause doesn't necessarily require expensive medications, expensive diagnostics, or a referral to a specialist.”
Savings for Employers & Employees
The shared-site clinic has saved its participating employers and their employees a significant amount on their overall health costs, too.
“Without a doubt, the clinic has saved the plan money over the two-and-a-half years that we've had it. From 2017 to 2019, our total plan cost per-employee, per-year dropped 32%. The more important thing to focus on, though, is how it saves our employees. The dollars that are saved at the clinic are dollars not being spent by our employees,” Tena said.
Tying Together Incentives With Tiering
By using smart benefit plan design, like tiering, employers can communicate and incentivize employees to choose high-value options where both parties experience significant savings.
“Our plan has been altered to have essentially three tiers… each comes with its own set of deductibles, out-of-pockets, and co-payments. We are trying to build these choices right into the plan so they can make one that’s right for them and right for the plan.”
And by offering a plethora of concierge services and the shared-site clinic, a top-tier choice, Tena’s employees are reaping the rewards of high-value health care. Since the clinic’s inception, medical claims paid on their plan have gone from about $200 per member, per month to about $160.
“In terms of hard dollars, the clinic generates about $4,000 to $7,000 a month in savings, but because most of our folks are on a high-deductible plan, they never reach those deductibles, so those savings are typically passed immediately into the hands of our employees. It makes me smile every time I think about how they can spend that cash on their families instead of on overpriced health care.”
Words of Advice
When asked to share a last bit of advice to employers. Her response was unsurprisingly straightforward: “For anyone considering an on-site or shared-site clinic – just do it. Don't agonize over the ROI. Don't wait for the moon and stars to align. Just do good by your people and the rest will take care of itself.”
On Sept. 18, RAND Corporation and the Employers’ Forum of Indiana released the National Hospital Price Transparency Study (RAND 3.0), which aims to help employers understand the costs they’re paying for hospital services. Employers can use this data to empower their purchasers to contract with hospitals that offer the best value – the highest quality at the best cost. To take a deeper dive into the study, employers can attend The Alliance Fall Symposium & Annual Meeting on October, 1st, where we’ll have experts from RAND Corporation on-hand to answer their questions.
For the study, RAND researchers used data from 2016 to 2018 to document variation in facility prices using commercial inpatient and outpatient hospital prices, using data furnished by employers and other purchasers. These prices were then compared with Medicare reimbursement rates for the same procedures and facilities to report relative prices across the U.S.
Many Wisconsin employers came together to volunteer their claims data for the study, (making Wisconsin one of the most data rich states to participate altogether,) because, as our CEO Cheryl DeMars has stated, “Employers — and the public — need to know the prices they are paying and the relative difference between hospitals and regions so they can make informed decisions.”
Here are the key takeaways from the study:
What This Means For Employers
Rising health care costs place pressure on employers and their workforces, and this price gap represents a huge savings potential for employers – the second largest purchaser of health care nationwide. The problems they face are threefold: lack of transparent information, lack of incentives, and institutional issues – like the consolidation of hospitals (which limits provider choice,) and the traditional referral system.
Employers must use due diligence and careful consideration when making health care purchasing decisions – especially for procedures with a large variation in price and services that account for a large percentage of their budgets. The Alliance can help employers analyze their claims data to see where their health care dollars are being spent.
What Can Employers Do?
Employers need transparent information to guide their benefit plan design. According to the RAND study, approximately 35-43 percent of all health care services are potentially shoppable. So by identifying and directing employees to low-cost, high-quality health care they can significantly lower their costs. However, transparency alone is not enough to reduce pricing for the highest-priced hospitals.
For more effective change, employers can design their benefit plans to offer more high-value networks. Further, employers can use tiered networks (like The Alliance Premier Network,) to offer their employees broad choice while incentivizing smarter, cost-saving options. These initiatives encourage providers to increase quality and maintain competitive prices.
Additionally, The Alliance covers roughly 90% of Wisconsin with its Smarter Networks℠, and of those contracts, more than 80% are negotiated based on a percentage of Medicare, or Reference-based Contracting by The Alliance. By using a predictable, simple, and transparent Medicare-based pricing structure, employers can cut spending waste and reward hospitals for quality.
To understand where their money is being spent, make use of their claims data, and develop a benefit plan design strategy, employers can join a purchasing coalition, like The Alliance. In addition to deep data mining and claims analysis, The Alliance uses its large employer membership to negotiate lower prices with providers directly.
Lastly, employers need to further push for transparency – you can’t manage what you can’t measure – and can do so by participating in studies like this one by RAND Corporation.
Primary care has always been the first line of defense in caring for patients and offering the most value for our health system overall. However, its effectiveness has suffered over time, due, in part, to a lack of care coordination, health care access for patients, and misaligned payment incentives. And although this worldwide pandemic has only further highlighted our current system’s flaws, The Alliance believes there’s good news on the horizon.
As Cheryl DeMars, CEO of The Alliance explained in an interview with InBusiness Madison: “I think [the pandemic] is accelerating the pace at which the public is embracing alternative modes of care delivery.”
New Payment Methods
Patients suffering from common, chronic symptoms may not see their physician due to post-pandemic restrictions limiting their access, their physician not having sufficient ability to test for COVID-19, or they may forego treatment altogether due to fear of contracting the novel virus at their physician’s office. In fact, nearly half of adults (48%) have postponed or skipped medical care due to the coronavirus outbreak.
As fewer patients seek primary care, their providers lose billable hours that are crucial to their fee-for-service payment models. Additionally, more than a third of hospital income is generated via “shoppable” procedures, which are being delayed or cancelled by patients and even the hospitals themselves.
These issues are casting a bright light on the need for change – specifically, a move toward global payments and an integrated care model that focuses on the quality of care, and one that aligns financial incentives for both the patient and provider. The National Alliance of Healthcare Purchaser Coalitions (NAHPC) coined the term for this performance-driven integrated health care strategy, “Advanced Primary Care.”
Telehealth – Our New “Normal”
The Advanced Primary Care model emphasizes value over volume and improves access for patients with options like same-day, virtual appointments. An emergency declaration made on March 13 relaxed various federal rules that prohibited the Centers for Medicare and Medicaid from utilizing these virtual appointments, and this newfound access to telehealth has played an important role for patients with common, chronic illnesses that need to check in with their doctor regularly.
DeMars believes these new regulations have come to stay. “If people get comfortable with a different way to receive health care services, particularly if their experience is positive, this won’t be just a change that’s limited to the current crisis,” she said.
The Future Cost of COVID-19
Although employers can look forward to value-based care and value-based insurance benefits becoming more predominant in the future, ultimately saving them money on their health plans, they might be wondering what the pandemic is going to cost them in the shorter term.
On its face, the cost of COVID-19 is quite staggering; private insurers pay as much as $20,000 for pneumonia treatment, and more than $80,000 if the patient requires a ventilator, according to Health Systems Tracker. And because the cost of coronavirus testing is expected to increase as it becomes more widely available (and insurers are required by law to cover those costs), that could mean insurers might overprice their 2021 health plans to offset those costs. Medicare’s spending could also increase with new costs for telemedicine and COVID-19 testing and treatment as the elderly are inherently at a higher risk for infection.
However, because 37% of private insurance spending on hospital admissions stems from non-emergency surgical procedures, 2021 should see a higher volume of these procedures and help offset some of those costs for insurers. Overall though, employers can expect their health plans to increase in the coming years.
For self-funded employers, health costs will be impacted differently; while they may see a decrease in spend this year due to the lack of elective procedures, the incidence of COVID-19 testing, the number of cases in their workforce, and the severity of those cases will determine the long-term effects. They will not, however, see the same increasing insurance prices because they own their own plan.
We are here to help. If you need The Alliance to help you make sense of your data, including how to plan for the future, please reach out to your Account Executive.
Last month, The Alliance was pleased to host National CooperativeRx CEO Josh Bindl, for a webinar where he discussed all things prescription drugs. Missed the webinar? You can view it here.
The High Price We Pay
Bindl opened his presentation with a plain and simple message: “Employers spend too much.” He explained that complex pricing models, the ability to reclassify prescription drugs (and their prices,) and clever combinations of common, over-the-counter medications at substantial markups create a perfect storm for Big Pharma to keep prescription drug costs high.
The Role of Pharmacy Benefits Managers
Bindl stressed the important role that Pharmacy Benefits Managers (PBM's) play in providing oversight against pharmaceutical companies. He acknowledged that PBMs have had a lot of dirt thrown on their names recently in the news media: “PBMs have taken a lot of heat as only taking profits, but we need to remind people of the value they provide. PBMs negotiate lower prices for payers – aka employer groups – by offering cost utilization and education.
He said the latter duties help ensure that patients take their medications and that if patients didn’t receive education from PBMs they would only receive it from pharmaceutical programs, which are not impartial.
Bindl stated plainly that National CooperativeRx members are not chasing rebates but explained that rebates are a significant part of pricing. In fact, across all their members, National CooperativeRx saw more than 90% of its gross costs through rebates. “Good or bad – they’ve become a huge pricing component – and if you’re not getting a significant proportion of gross costs in the form of rebates, that means someone else is keeping it,” he said, “If you do not get 100% rebate pass through you can have that audited, but it’s expensive, so your best defense is to again, define what prescription drugs are considered specialty versus generic.” Nearly 50% of total prescription drug spend accounts for specialty medications alone, so employers should check their contract and see if they’re getting an overall discount, a fee-for-specialty payout, or an overall guaranteed discount off those medications. To add to the convolution, he laid out the differences between pass-through pricing, traditional pricing, and fully transparent pricing, and said that you should align incentives with your PBM. “We find the most value in traditional pricing because that way the PBM bets on the future value of their contract and our employers end up saving more money.”
Contract Best Practices
Bindl listed some guidance on drawing up a contract and enforcing them, too:
Always double-check the contract to make sure you’re not narrowing the network so much so that your employees will be left unsatisfied with their options.
Make sure you have access to your own data and that you can get it within a reasonable timeframe.
Ensure there are guarantees (and penalties for not reaching them) in the contract.
Longer-term contracts typically garner much better discounts.
Have strong definitions of what a brand medication is and what a specialty medication is, etc.
Trust but verify – audit your PBM and don’t let them pick the auditor.
National CooperativeRx also recommends utilizing co-insurance for your plan. Though not for everybody, it promotes good consumerism and high patient awareness. If it’s feasible within your plan, he also suggests using mail-order prescriptions because there are deeper discounts and high patient adherence due to regular, automatic refills.
Moreover, Bindl encourages possibly mandating generics because, “for every 1% you improve the generic dispense rate, your overall plan savings rate can be 1%-2.5% lower."
Across all members of National CooperativeRx, the patient cost share is roughly 10%, which equals roughly $1,000 per member. National CooperativeRx has saved over $13 million over the past three years with $700-$900 in discounts per member, annually.
Public Policy & The Future of Rx
Thanks to higher patient engagement, elected officials are hearing about the increasingly higher costs of prescription drugs. Subsequently, there’s now been over 100 bills signed by state governors targeting high prescription drug costs as well as hundreds of federal proposals. But Bindl says those have only provided a modest impact due to most bills passed focus solely on regulating PBMs, and a lot of the proposals on regulating them come with hidden ramifications like eliminating narrow networks, mail-order prescriptions, and restricting changing formularies mid-year.
He did explain how some change has been made through kickbacks. Though a rare occurrence, they've now been made illegal, as well as a prohibition on the prescription gag clause, which stipulated pharmacists could not tell a patient if there was a lower-cost medication.
Bindl also added that thanks to a recommendation by The Alliance, he was invited to be part of Wisconsin Governor Tony Evers’ Task Force on Reducing Prescription Drug Prices as one of the few stakeholders from an employer perspective.
Perhaps the most effective form of change this public pressure is creating has been on Big Pharma themselves. “All this attention has made Big Pharma reduce their price hikes overall,” Bindl said. Even though prices are still going up, they only went up by 5% last year compared to 11% in 2016.
Bindl ended his presentation by saying that international generic alternatives will continue to be talked about, but National CooperativeRx does not trust them due to no FDA oversight, and when asked the likelihood of prescription rebates going away he responded, “Based on what I’m hearing, there’s less than a 1% chance of that happening.”
As a not-for-profit cooperative of employers and insurance trusts that self-fund their health benefits, The Alliance is pleased to work with many forward-thinking, ethical brokers for health benefits. Most brokers will steer you to a product that’s right for your business.
You may still question how do you properly vet your broker?
The simplest way to identify good broker behavior is to ask questions. We’re going to outline the three easiest, most important ones below.
“How Do You Get Paid?”
To begin, you’ll want to ask where the broker gets their money. This question will help you learn about any financial incentives that may influence a broker’s decision-making.
This is a necessary ask because some payment arrangements from vendors or health systems are structured in a way that allows brokers and brokerage firms to receive commissions for guiding a client’s business to a particular vendor.
In this scenario, a broker might get a bonus for retaining a specific percentage of customers, or for guiding a minimum percentage of their business to a specific insurance carrier. Since it’s not labeled as “commission,” they may deny receiving one.
That’s why it’s important to broaden your question. A proper way to pose it might be, “Do you receive any money from insurance carriers or from vendors who provide services to self-funded employers? Does this include any commissions, bonuses, or other types of rewards?”
Sometimes brokers claim to work on fees – not commissions – but they sometimes build commissions into ancillary service lines, like life or dental insurance.
And if the broker won’t respond to this question? Well, you’ve probably got your answer.
“Who Pays You?”
We suggest following up with a more specific question: “Do you receive the majority of your revenue—more than 50%—from a single insurance carrier or another source?”
Why does this matter? Brokers who receive the majority of their profit from a single source are unlikely to look for a better deal for you and your employees. They’re also more likely to reject new ideas, options, or approaches, which means you could miss out on innovations that deliver big cost-savings.
You want to work with someone who’s motivated to find you innovative, cost-saving opportunities.
“What Makes You Effective?”
The final question you should ask a broker is, “How will you find the right solution for my organization?”
If a broker assures you that they always look around but consistently end up with an HMO, a fully-insured plan, or a solution from large national carriers, then it’s possible they’re limiting your solutions.
Look for a broker who examines the marketplace with vigor to find opportunities that work for you. In most cases, that means finding a broker who is experienced with self-funding so they understand all available options for employers today.
Aim for Transparency
While it seems simple, these questions play an integral part in finding a good broker – one who’s transparent.
Satisfied with the answers to these three questions? Then you’re ready to learn more. (Of course, that means asking more questions!) Other areas to explore with your broker include:
Their knowledge of self-funding, and if it’s a good option for the employer or not.
Their ability to use data and dive into costs and potential savings.
Their willingness to explore plan design to deliver better outcomes for employees.
Their approach to learning about innovations that could help you improve services or reduce costs.
Their willingness to consider performance-based contracting – where the broker and business mutually agree on goals for the plan year, then tie a set percentage of compensation to achieving them.
To learn more about how The Alliance works with employers and brokers to make health care more affordable, contact our Business Development team. Members and their advisers are encouraged to contact the Member Services Team.
In a new study released by GNS Healthcare, data shows that employers could save hundreds of millions of dollars by steering consumers toward high-quality, low-cost physicians.
Using 2017 Wisconsin Health Information Organization (WHIO) claims data, they analyzed 3,760 primary care physicians who performed at least 100 evidence-based measurements, totaling $1.4 billion in costs. The result? If the bottom 50% of providers increased their performance, it could save up to $394 million.
Health care costs have increased every year since 1960, and the only strategy fully-insured employers had to stave off cost increases was to shift the financial burden to employees – who have grown dissatisfied with their ever-increasing high-deductible health plans. This trend has caused an overall lower rate of health care utilization, and when combined with a competitive hiring market, it’s causing employers to look for a new health care solution.
There is no correlation that higher cost equals better care, and nearly 1,000 doctors in the study ranked better than average on cost and quality.
The answer then is to educate patients and encourage them to use high-value providers. The only way to lower health care costs substantially is to provide shareable data that employers can use to educate plan beneficiaries. By banding together and volunteering claims data to future studies, employers could push the public policy pendulum towards better cost transparency, forcing that change.
It’s why The Alliance is participating in the new Rand 3.0 study, set to be released in May, which takes an in-depth look at the prices paid by private health care plans in comparison to Medicare. The study will supply the market with much-needed cost transparency, and hopefully drive employers to demand necessary, immediate change
As Dana Richardson, the CEO of WHIO, puts it, “When I think about cost, I say to myself, this journey that we have been on for quality has been 30 years and we don’t have 30 more years to address cost. I contend that we need to think about our work to slow the rise of healthcare cost as an expedition instead of a journey. And we need to do that because it needs to be a serious movement from one point to another.”
What Employers Can Do
Employers can work with an employer-owned cooperative like The Alliance and encourage patients to utilize high-performance providers.
If employers educated their employees and encouraged them to seek low-cost, high-value health care, both groups could save a substantial amount of money. Employers can also participate in future studies by releasing their health care data to increase transparency in the market.
Additionally, they can join other employers in self-funding to increase their collective bargaining power.
For more information on how the Alliance can use data to help you steer employees to the right care, contact Member Services.
There’s been a lot of buzz about self-funding vs. fully insured plans, so let’s discuss the numbers. Health care costs in the US have increased every year since 1960. And according to Nelson Griswold, an employee benefit advisor, family health insurance premiums nearly tripled from 1999-2018, while wages during that time increased by just 17%.
The good news is that traditional health care is changing. Employer-owned cooperatives, like The Alliance, are introducing the next generation of health care by empowering employers to gain access to their data and provide high-value health care at low-cost providers. And while the benefits year may have just kicked off for some, for those organizations that may be considering self-funding in the future, we’ve compiled information on the risks, benefits, and differences between fully insured and self-funded plans.
Self-Funding vs. Fully Insured
Fully insured is what most people mean when they talk about insurance. The employer pays a premium to the insurance carrier on behalf of each employee. In return, the carrier pays medical claims for covered services that are beyond the out-of-pocket maximum for which an individual or family is responsible. In a fully insured model, it doesn’t matter whether an employee has a medical procedure that costs $20,000 or $80,000. The insurance company has contracted to pay all claims and assume all financial risk. The fully insured model may mean that employers pay higher premiums to cover the risks and generate profits for insurance companies.
Self-funded insurance is almost the opposite. The employer pays the claims of its employees, so it matters how much an individual pays for care. And because there’s always the possibility of claims being higher than expected, most self-funded plans have a form of insurance in place, called “reinsurance” or “stop-loss insurance.” A third-party administrator (TPA) processes the medical claims and issues benefits on behalf of the employer. But while the employer may assume the risk, they also keep the difference, including interest income.
The Benefits of Self-Funding
Self-funding your health insurance provides you with full access to claims and pharmaceutical data you can use – because you own it – to guide your plan design and decision-making. The Alliance provides its members with accurate, easy-to-access information comparing cost and quality from providers. This enables employers to be informed when deciding their provider network and benefits plan design.
Depending on the needs of your employee population, self-funding can give employers the option to approach provider contracting differently. By offering tiered options, you can still give employees choice while also steering them to the most cost-effective options. Employers can also consider broader or narrower networks than are often available through the traditional fully insured model. And having the ability to make the recommended customizations related to steering to high-quality, low-cost providers can also help keep costs in check for the employer and employees.
Being self-insured can also help support company culture. If an organization cares about the well-being of its employees, they can align their benefits to those values. And when an employer shows that they believe their employees’ health is important, it sets an expectation for employees to become more mindful of their health. And can lead to higher employee satisfaction.
Want to learn more?
Employers interested in learning more about self-funding can contact the Business Development Team for more information, and to see if self-funding is right for your organization.
“A small group of empowered purchasers can change the system.”
Members who attended The Alliance annual meeting this year heard these words of encouragement from Suzanne Delbanco, Executive Director of the Catalyst for Payment Reform (CPR).
Suzanne provided many examples of employers influencing the value of health care delivery in recent years and explained how their work is becoming even more important, given physician and hospital consolidations. More and more research studies show that consolidation drives up the price of health care for employers. This is something that certainly impacts the markets where we buy health care, with few independent physician groups and hospitals remaining.
Employers have the power to demand better health care spend. They just need to use it. This blog is the fifth in a series that explains how the four core drivers on The Alliance Roadmap to High-Value Health Care fit together. Our last core driver is benefit plan design, which accomplishes two important things:
It makes the right care more convenient, accessible, and transparent to employees, making it more likely that enrollees choose cost-effective and high-quality health care; and
It provides financial incentives for employees and their families to choose high-value health care that delivers better results for lower costs.
Benefit plan design is the driver that brings all the components of high-value health care together: transparency, payment reform, and provider network design.
Examples of Strategic Benefit Design
Financial incentives that reward enrollees for choosing higher-value health care are probably the most common benefit design strategy that employers utilize today. Network tiering is an example of this, where high-value health care providers are more affordable for plan participants. Providers who don’t want to be in lower tiers are driven to change their business model, usually by lowering their prices.
Employers are also using benefit design to help employees get the right care. According to Suzanne, 33% of employers today are increasing out-of-pocket costs for services that are overused or potentially inappropriate without an evidence-based approach. Others are lowering out-of-pocket costs for services that employees need to stay healthy, like diabetic supplies. Yet another strategy is offering advanced primary care through onsite or shared-site clinics at low or no cost. These providers can then help educate employees and refer care to high-value specialists.
What can Employers Do?
Employers can use the tools The Alliance has developed to create benefit plans that make high-value health care accessible and less expensive for their employees. Because when enough employers get involved and
provide these kinds of incentives, physicians will be motivated to improve the value of their care and make real change in the market. Please reach out to the Member Services Team to start strategizing today.
You might expect employees who benefit from an employee stock ownership plan (ESOP) to quickly become good health care consumers. When employees save money by making smart health care choices, both the company and the employees (as owners) will benefit financially. But even employees who own the company need help understanding how their decisions impact health plan costs, according to the leaders of Trachte Building Systems, Sun Prairie, Wis.