Transparency in healthcare: The case for an employer bill of rights

medical-costs

This article was published on January 31, 2019 on Employee Benefit News, written by Steve Kelly.

Today more than ever before, benefits and human resources professionals are struggling to provide their teams with quality coverage at affordable rates. Costs have skyrocketed for the more than 150 million Americans who receive healthcare coverage through their workplace — more than doubling since 2008, according to the Kaiser Family Foundation.

Private health spending by businesses has steadily grown year after year and accounts for 20% of the $3.3 trillion of total health spending in the U.S. Businesses are finding that they can’t afford to wait any longer. They need to take control of their healthcare costs and seek resources to make changes to the plans they currently offer.

With the complexities surrounding the decision-making process for benefits programs, businesses often feel unaware, or worse yet, misled when it comes to their foundational rights regarding health plans.

Enter the Employer Bill of Rights — an initiative to help business owners empower themselves to learn and exercise the basic rights often overlooked in today’s healthcare system and take an activist role as they investigate and select healthcare options.

Knowledge is power

The employer bill of rights is rooted in the mission that every business owner needs to take responsibility for providing the best possible benefits program to their employees. Businesses can utilize the employer bill of rights as a tool and learn how to pay for healthcare like any other business expense.

With the employer bill of rights, employers are empowered to:

1. Pay a fair amount for healthcare.
Healthcare costs are often the second largest operating expense after employee wages. Employers do not have to accept the status quo for their health plan and pay significantly inflated medical expenses.

2. Know what healthcare services actually cost.
A traditional PPO health plan typically leaves the employer in the dark about how plan parameters were set by the insurer and medical provider. Businesses have a right to know the cost of medical services.

3. Audit medical bills.
Billing mistakes and inflation of medical charges are common. Businesses and individuals have a right to carefully evaluate healthcare expenses. A line-by-line auditing of medical bills helps ensure the charges are accurate and fair.

4. Explore your health plan options.
By partnering with an informed and experienced healthcare consultant, employers can discover health plan options beyond the traditional PPO model. A self-funded health plan, where employers pay for medical claims as services are rendered instead of providing ongoing and advanced payments to an insurance company, can take employers on the path toward more control over healthcare spending.

Self-funding is on the rise, with the number of businesses deciding to self-insure increasing by nearly $37 between 1996 and 2015, according to the Employee Benefit Research Institute.

5. Offer your employees a comprehensive and affordable benefits program.
Employees count on their employer-sponsored health plans to be reliable and financially feasible. Employers have a right to offer healthcare solutions that minimize the financial burden on the plan member.

6. Design a health plan to meet your unique needs.
The best health plans are well-rounded and flexible. Employers have the right to customize their health plan to determine the approach that best suits the needs of their business and team. Unlike traditional health plans, self-funded plans are customizable.

7. Defend the best interests of your business and your employees when paying for healthcare.
Surprise medical bills and inflated prices are common, but healthcare finances do not have to be handled alone. Employers and individuals have the right to access advocacy services that support fair and reasonable healthcare payments and help employers meet their fiduciary responsibility.

8. Make direct connections with providers and health systems.
Fair outcomes can be achieved when people work together. By creating direct partnerships with providers and health systems in their communities, employers can become good stewards of healthcare by building bridges and driving quality healthcare experiences for all.

The path to activism

Change in healthcare is possible when businesses take charge and challenge the status quo. As we continue to see the rise of self-funded health plans, the growth of reference-based, or metric-based, pricing is following suit.

The reference-based pricing approach starts at the bottom with an actual cost amount, then adds a fair profit margin to calculate a total cost of service. Simply stated, it allows employers to utilize rational limits of payment to medical providers instead of relying on the traditional PPO model.

Businesses can be activists for change by standing up against out-of-control healthcare costs, and they can start by adopting the employer bill of rights and investigating reference-based pricing. By innovating their healthcare solutions and turning away from insurance plans which have failed to adapt to the changing healthcare landscape, business owners have the opportunity to improve the health plans they offer their employees, transform their bottom line and help spark reform for businesses across the country.

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Maine is Reinstituting the Per Member Per Month Assessment to Fund the Maine Guaranteed Access Reinsurance Program

Section 1332 of the Affordable Care Act (ACA) permits a state to apply for a State Innovation Waiver to pursue innovative strategies for providing their residents with access to high quality, affordable health insurance while retaining the basic protections of the ACA. Recently several states have applied for waivers and have been approved. Among these is the State of Maine, which sought to reestablish the Maine Guaranteed Access Reinsurance Association – MGARA (originally established in 2012 but later suspended in light of the ACA’s transitional reinsurance program which expired in 2016). Maine’s Section 1332 waiver to reestablish MGARA was approved by the Department of Health and Human Services earlier this year. MGARA is a state instituted reinsurance program that automatically cedes high-risk enrollees with one of eight conditions (including various types of cancer, congestive heart failure, HIV and rheumatoid arthritis) and voluntary cedes other high-risk enrollees to the pool in an attempt to help stabilize individual medical premiums by about 9 percent each year beginning in 2019. The program is slated to initially run from January, 2019 through December, 2023. The Governor’s Office pushed to get the program up and running by January, 2019 in an attempt to substantially lower premiums in the individual market.

One of the funding sources supporting MGARA’s operations is a quarterly assessment due from each insured and self-insured plan that writes or otherwise provides medical insurance in Maine (other than federal or state government plans) beginning in 2019 at $4.00 per month for each covered person enrolled under each such policy or plan. Only federal and state employees are exempt from the assessment. The 2019 Quarterly Assessment will apply to policies and plans initiated or renewed on or after January 1, 2019, with the first assessment due on May 15, 2019, and 45 days from the end of each calendar quarter thereafter. Self-funded plans using a Third Party Administrator (TPA) will be assessed and reported through their TPA similar to other state assessments.

Diversified Group will collect and report the MGARA on behalf of our self-insured clients who have members residing in Maine.

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The end of the health insurance carrier

This article was published on September 27, 2018 on Employee Benefit News, written by Nelson Griswold.

More than six years ago, Aetna CEO Mark Bertolini proclaimed that “the end of insurance companies, the way we’ve run the business in the past, is here.”

At the very least, it’s the beginning of the end for these dinosaurs. The health insurance carriers face slow but steady disintermediation by innovative next generation employers and benefits professionals who are using alternative funding to take control of employer health plans and reduce costs.

Merriam-Webster defines “disintermediation” as “the elimination of an intermediary in a transaction between two parties.” In general, the purpose of disintermediation is the removal of an unnecessary middleman that adds more cost than value to a process.

medical-costs

Photo Source: Employee Benefit News

In our dysfunctional benefits/healthcare model, the employer delegates to the carrier middleman responsibility for controlling costs by managing the healthcare supply chain, which is all the medical and health-related products and services purchased by employees. The most costly are prescription drugs, hospitalization, outpatient surgery, and physician visits.

The employer wants lower healthcare costs and with a fully insured plan depends on the carrier to control the cost of healthcare by managing this complex supply chain. The carriers, however, consistently have failed to perform this most basic task. Healthcare costs have risen every year since 1960, according to the Centers for Medicare and Medicaid Services. And healthcare costs haven’t just risen but have soared, growing 261% between 1999 and 2016.

The carriers’ spectacular failure is the logical result of grossly misaligned incentives: Carriers financially benefit from rising healthcare costs. From 1999 to 2016, rising healthcare costs drove up health insurance premiums — also known as carrier revenue — by 213%, according to the Kaiser Family Foundation.

As of July, BUCAH stock values had grown an average of more than 255% in the previous five years. We can’t expect carriers to work to reduce healthcare costs and healthcare spending; businesses never work long-term for their customers’ interests against their own financial interests.

The employer that wants to take control of its health plan to reduce costs must disintermediate the carrier and implement some form of self-funding. No, self-funding isn’t new and it isn’t the solution by itself. I’ve written previously that the value in self-funding is control, not cost savings. Self-funding is a means to an end.

With control of the health plan thanks to self-funding, the employer can work with a NextGen benefits professional who knows how to manage the supply chain to both improve the quality and lower the cost of healthcare for the employer and employees.

This does not mean that every employer should disintermediate the carrier and jettison their fully insured plan. Not every employee population is a good fit for a self-funded health plan; some are too sick and need to stay fully insured. But for employers that are a good candidate for self-funding, responsible brokers and advisers have a fiduciary responsibility to their clients to disintermediate the carrier, if possible.

Sounds crazy … extreme? So did today’s $2,000, even $5,000 deductibles, just five years ago.

Benefits professionals and employers today have the power to reduce year-over-year healthcare cost while enhancing benefits and improving medical outcomes. But you can’t do it with a carrier running the show. If the employer can move to self-funding, it’s sheer malpractice not to disintermediate the carrier.

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Considering a TPA to administer your health plan? Ask these 8 questions first

This article was published on August 7, 2018 on Employee Benefit News, written by Corte Larossi.

We all know that making changes to your health plan can have major consequences for your company. It can impact your medical costs and company bottom line, the health and welfare of your employees, employee satisfaction and performance, as well as your ability to hire and retain high performing staff. If your health plan is currently self-funded — or you are considering moving to a self-funded arrangement — the stakes can be even higher since you’re responsible for part or even all the medical costs, depending on the size of your company and risk tolerance.

One of the most critical functions is the administration of your medical claims. Your claims payer — whether a traditional insurance carrier or a third-party administrator — can help make or break the success of a self-funded plan. Many times, these entities also will provide other services directly, or through strategic partnerships including pharmacy benefits management, medical management, stop-loss, employee and provider portal access, voluntary products and telemedicine — just to name a few.

For many small to medium-size employers (25-1,000 employees), and even some larger companies, a TPA may be a good option. The advantage of the traditional carriers is often the medical claim discounts they offer along with nationwide access, which is clearly important, but they might not provide the flexibility smaller employers may need to meet their plan objectives. Additionally, some carriers do allow TPAs to access their networks, which can provide TPA clients deeper savings than may be available through rental PPOs.

medical-costs

Photo Source: Employee Benefit News

Here are eight important questions employers should ask when vetting TPA partners.

1. What is their claims administration platform?

This is one of the most critical issues when choosing a TPA. Do they have an older legacy system that may be less flexible, or are they using a platform that provides the ability to manage newer, more sophisticated products? Also, can they adjudicate a high volume of claims on an automated basis, or is the process more manual? This is not to say that manual processing isn’t necessary since there could be plan nuances and exceptions that need to be addressed outside of the standard adjudication process. But in general, the higher degree of automation, the more cost effective the process for both the TPA and the client.

Can they easily and accurately manage service/provider carve outs or additions? What is their process and commitment to meeting your objectives? Can they administer other types of services including, but not limited to dental, vision, HRAs, HSAs, COBRA, subrogation and COB? Continue reading

Million-dollar medical claims increase by 87 percent

This article was published on July 18, 2018 on Employee Benefit News, written by Cort Olsen. Photo Source: Employee Benefit News.

The number of million-dollar medical claims has nearly doubled, with cancer care remaining the most costly health condition, according to a new Sun Life Financial report.

Cancer made up $798.7 million in reimbursements to self-funded employers from 2014 to 2017, followed by metabolic disorder and hemophilia disorder, according to Sun Life’s 2018 High-Cost Claims Report.

The report, based on analysis of Sun Life’s database of over 62,000 medical stop-loss claimants, shows that high-cost conditions totaled $6.9 billion in paid charges over the four-year period.

The number of patients with million dollar claims rose 87%, to 194 in 2017 from 104 in 2014, with most charges ranging from $1 million to $1.5 million, and totaling over $935 million in charges.

cubing costs stats

The growth in million-dollar claims can be expected to expand further due to new life-saving treatment options coming to market, along with existing treatments getting approved for expanded use.

“This means better care and outcomes for patients,” says Dan Fishbein, president of Sun Life Financial, who notes that the trend is an important consideration for employers who self-fund their medical plans. “We partner with our clients to protect them from the financial risks of these high-dollar claims, but also to work with them to identify opportunities for cost savings that may improve patient care as well.”

Other analysis from the report showed that rare conditions hit highest dollars. The two highest claims for a patient in a single policy year were for metabolic disorder in 2016, with a total of $6.7 million in treatment costs, followed by hemophilia disorder with a total treatment cost of $5 million in 2017.

Million-dollar cases left a big footprint. Patients with claims of more than $1 million represented only 2% of the total number of stop-loss claims from 2014 to 2017, but roughly 20%, or nearly $600 million, of the total $3 billion in stop-loss reimbursement.

The impact of injectable drugs peaked in 2017 with four of the five costliest injectable drugs, used to treat cancer or related conditions, accounting for approximately $45 million, or 24% of the total $186.3 million spent that year.

Employers had an 85% chance of seeing a high-dollar claim in any given policy, according to the report. Those who self-insure their health plans use a stop-loss coverage to protect themselves from excessive financial losses from high-dollar claims.

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Reference-based pricing is gaining momentum

This article was published on July 17, 2018 on Employee Benefit News, written by John Kern. Photo Source: Employee Benefit News.

In my 25 years in the insurance business I’ve seen many changes. But there’s always been one constant: Healthcare and pharmacy costs continue to accelerate and no regulatory action has been able to slow this runaway train. The problem is that we have focused on the wrong end of the spectrum. We don’t have a healthcare issue; we have a billing issue.

At the root of this national crisis is a lack of cost transparency, which is driven by people who are motivated to keep benefit plan sponsors and healthcare consumers in the dark. Part of the problem is that most cost-reduction strategies are developed by independent players in the healthcare food chain. This siloed approach fails to address the entire ecosystem, and that’s why we continue to lament that nothing seems to be working.

But that could change with reference-based pricing, a method that’s slowly gaining momentum.

getting blood work

Here’s how it works.

Reference-based pricing attacks the problem from all angles and targets billing — which is at the heart of the crisis.

Typically, a preferred provider organization network achieves a 50-60% discount on billable charges. However, after this 50-60% discount, the cost of care is still double or triple what Medicare pays for the same service. For example, the same cholesterol blood test can range from $10 to $400 at the same lab. The same hospitalization for chest pain can range anywhere from $3,000 to $25,000.

Reference-based pricing allows employers to pay for medical services based on a percentage of CMS reimbursements (i.e. Medicare + 30%), rather than a percentage discount of billable charges. This model ensures that the above-mentioned hospitalization cost an employer $3,000 rather than $25,000.

“Negotiating” like Medicare

Reference-based pricing is becoming increasingly popular as more organizations consider the move to correct cost transparency issues as they transition from fully-insured to self-funded insurance plans.

One well-known and considerable example is Montana’s state employee health plan. The state employee health plan administrator received a notice from legislators in 2014 urging the state to gain control of healthcare costs. Instead of beginning with hospitals’ prices and negotiating down, they turned to reference-based pricing based on Medicare. Instead of negotiating with hospitals, Medicare sets prices for every procedure, which has allowed it to control costs. Typically, Medicare increases its payments to hospitals by just 1-3% each year.

The state of Montana set a reference price that was a generous 243% of Medicare — which allowed hospitals to provide high-quality healthcare and profit, while providing price transparency and consistency across hospitals. So far, hospitals have agreed to pay the reference price.

Of course, there is still the risk that a healthcare provider working with the state of Montana health plan, or any other health plan using reference-based pricing, could “balance bill” the member. But a fair payment and plenty of employee education about what to do if that happens could help you curb costs.

If balance billing does occur, many solutions include a law and auditing firm to resolve the dispute. In one recent example, a patient was balance billed almost $230,000 for a back procedure after her health plan had paid just under $75,000. An auditing firm found that the total charges should have been around $70,000, and a jury agreed. The hospital was awarded an additional $766.

Reference-based pricing is a forward-thinking way to manage costs while providing high-quality benefits to your employees. It’s one way to improve cost transparency, which may eventually transform the way that we buy healthcare.

Want to tackle rising health costs? Consider self-funding ancillary lines

This article was published on February 05, 2018 on Employee Benefit News, written by Liisa Granfors-Hunt.

If your medical plan is fully insured, switching to self-funding (and covering catastrophic claims) can be downright intimidating, even with stop-loss insurance. That’s why many employers are sticking a toe in the financial risk pool by self-funding one or two ancillary lines of coverage.

The most commonly self-funded ancillary benefits are dental and short-term disability, followed by vision. These benefits are relatively low risk: Chances are, your employees don’t typically use dental services much beyond bi-annual checkups and a filling here and there. Short-term disability is a popular benefit for employees needing maternity leave. However, if you plan accordingly, these claims won’t drastically affect the benefit spend.

Self-funding can save money and provide a greater level of transparency into how a benefits plan is performing. Here’s where you can save money: When insurance companies price products, they determine the premium by reviewing actuarial data, setting aside a portion to pay current claims, reserves to pay future claims, plus a profit. Why let the insurance company hold your reserves? By self-funding, employers hold that money.

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Photo Source: Employee Benefit News

If you’re interested in trying self-funding for dental or short-term disability coverages, you’ll need some claims data to work with. When you self-fund a benefit such as dental care, an underwriter will review your claims history, taking into account the number of people covered under the plan, and determine what your expected claims will be based on past data and future trends. You’ll set a budget that includes your fee for plan administration, based and your expected claims. We don’t recommend self-funding the benefit the first year you offer it.

What to consider

When self-funding short term disability, depending on your comfort level, there are varying levels of help to administer the plan. Third-party administrators can handle the full range of managing a self-funded plan, such as adjudicating the claim, calculating the amount to pay and actually paying the claim. This takes some of the pressure off of plan sponsors who are completely new to self-funding, but, as with anything that conveys value, TPAs come at a cost. Therefore, you may choose to handle most of this responsibility yourself, including calculating the benefit and drawing the check. But before you make that decision, assess the availability and knowledge of your internal resources.

For both dental and short term disability, compliance is key. Depending on how your plan is structured, you may be responsible for complying with state and federal regulations that your carrier handled previously. When setting up your plan, it’s vital to ensure that you understand where responsibilities lie so you can remain compliant.

Risk should be your primary concern. Sure, this may seem obvious — for ancillary benefits such as dental and short-term disability, the risk is relatively low. Self-funding an insurance benefit means you should watch how the plan is performing more closely than you would if it were fully insured.

One example of potential savings

For companies who weigh the risk and begin self-funding dental, the savings can be very real. One company offered an employer paid dental plan to its 420 eligible employees. The plan averaged 394 enrolled members over 18 months. During that same 18-month period, the employer paid $567,474 in premiums. The insurance company paid $481,617 in dental claims, equaling a difference of $85,857. Even after adding a $4.50 per employee per month administration fee to the claims cost, the employer would have saved nearly $54,000, or 9.5% of the total cost.

Medical costs continue to rise steeply; self-funding some of your ancillary cove rages can give you greater insight into how your program is performing and help you save money.

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