How HR Can Lower Healthcare Costs Without Reducing Coverage

This article was published on August 30, 2019 on the HR Daily Advisor written by Eileen Clark, Senior Vice President of Human Resources, ELAP Services.

Large employers currently pay about $500 more in healthcare costs per employee than they did just a year ago—money every company would love to have back. With healthcare costs increasing yearly, many HR departments are struggling to contain healthcare spending, which has become the largest cost to many companies outside of payroll.

The escalating healthcare costs not only cut into every budget, including HR’s, but also hurt the business’s benefits package—a vital offering in today’s tight labor market—and its ability to retain and recruit employees.

While decoding healthcare’s black box to lower costs might seem impossible or overwhelming, a reference-based pricing model can help self-insured businesses and HR professionals lower healthcare costs without reducing quality of coverage.

How Reference-Based Pricing Supports the Business

Reference-based pricing is a bottom-up approach to containing healthcare costs that offers price protection against variable and inflated charges. Based on the actual cost it takes to deliver a medical service or the Medicare reimbursement rate plus a reasonable profit, reference-based pricing enables businesses to audit and rein in costs. Under the right reference-based pricing model, employers can reduce their total healthcare costs by up to 30%, while employees pay less in out-of-pocket costs.

The model helps HR lift a burden off employees and the CFO. Its cost savings can be allocated back into the business, giving the CFO some breathing room, or into employees’ pockets, either directly or as funding for employee initiatives. Reference-based pricing has empowered companies to lower deductibles for members, raise contributions to employees’ 401(k) plans, increase year-end bonus pools for employees, and more.

By moving to this transparent healthcare model, HR enables employees, the heartbeat of every organization, to take back their health plans and provides them with the flexibility and transparency to go to any doctor or specialist they want. Because reference-based pricing isn’t tied to certain providers, there’s no in-network or out-of-network doctors.

Preparing for Reference-Based Pricing

Before implementing reference-based pricing, there are a few boxes to tick on the checklist.

Self-funded. The first is that reference-based pricing is for self-funded employers only. It’s best for companies with over 100 employees and as many as 3,000, but sometimes, companies with as few as 70 employees can take advantage of this payment model.

Cost-savings analysis. Determine how much reference-based pricing can save the company by conducting an analysis beforehand. This data can help convince the CFO and other stakeholders to support a move to the model.

Broker selection. It’s also important to identify a broker experienced in reference-based pricing. This person will be an important guide and asset for implementing the new model. For one, he or she will know all the right questions to ask to ensure that reference-based pricing is a fit for your company and understand the details related to forming your benefits package, including pharmacy, vision, dental, and more. With the right broker, you’ll have better control over which benefits you provide and for how much.

TPA partner. Another important partner to identify is a third-party administrator (TPA) that has experience administering reference-based pricing. The TPA will handle the claim logistics and ensure your employees have the support they need.

Stop-loss insurance. Lastly, to protect the plan and its members’ assets, select a stop-loss partner that understands the cost savings reference-based pricing provides and will extend coverage at appropriately reduced premiums. Your stop-loss insurance should minimize risk while optimizing the cost of coverage.

The Importance of Education in Reference-Based Pricing

Like many HR initiatives, employee education is key to the successful adoption of reference-based pricing. This isn’t just teaching employees about their new plan—it’s also about educating them on how the healthcare system stands today and how they can be smart healthcare consumers. Reference-based pricing addresses these issues, and an understanding of that helps employee adoption.

Education also helps combat negative impressions of reference-based pricing. A reference-based pricing model gives employees the flexibility to go to any doctor or facility while saving them money on healthcare.

Another misconception about reference-based pricing is that because hospitals are receiving a reduced payment, it’s more common to be billed for the difference, but even with a large healthcare provider, you still receive “balance bills” or “surprise bills.” The difference is how unexpected charges are managed. A good reference-based pricing solution provider will have a methodology for addressing balance bills that provides personalized support and advocacy for members.

Becoming the ‘White Knight’

HR often struggles to be appreciated as a function that directly contributes to revenue. Instead, we’re depicted as the department that always spends.

But reference-based pricing presents an opportunity to positively influence our company’s bottom line and put money back into employees’ pockets. By introducing an innovative solution that addresses high healthcare costs and advocates for employees, HR becomes a problem-solver.

As healthcare costs continue rising with no end in sight, reference-based pricing offers a cost-saving solution with far-reaching benefits. It’s worth a closer look.

Can Your Plan Recover Money It Wasn’t Responsible for Paying?

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That’s What Subrogation and Reimbursement Are All About

When a plan member requires medical treatment following an injury or accident, their health plan is almost always the first line of defense. In some instances, however, the responsibility for medical treatment should really lie with another insurance plan, such as the member’s auto policy or workers compensation coverage.

In most cases, the health plan pays the claim and has the option to use subrogation to recover the funds from another insurance company. In other instances where a third party may have been responsible for the injury or accident, it may be necessary for the health plan beneficiary to seek compensation from the third party’s insurance carrier. This process, known as reimbursement, will require that the responsible third party pay for the damage they caused, including the plan member’s medical treatment.

Serving the Plan’s Best Interests

Diversified Group helps self-funded clients use these tools to make sure their plan only pays health claims it is responsible for paying. While some employers are hesitant to use subrogation and reimbursement, plan sponsors have a fiduciary duty to ensure prudent management of plan assets. And while there are costs associated with these activities, the funds recovered will help cover future claim costs incurred by all plan beneficiaries. To learn more about subrogation, reimbursement and other matters related to fiduciary responsibility, talk to Diversified Group today.

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How Much Are “Ineligibles” Costing Your Health Plan?

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If your plan isn’t managing eligibility at enrollment, you’re probably throwing money away!

Managing eligibility in a self-funded environment can place a big burden on HR Directors, not only at enrollment, but throughout the year. Employee benefit elections, dependents and beneficiaries must be monitored consistently and then there are new hires and terminations to deal with.

Not all TPAs are alike when it comes to managing enrollment and eligibility. While some accept existing data in an effort to save time, Diversified Group goes to extremes when onboarding a new self-funded group or helping an existing client with open enrollment. Some HR Directors find our detailed approach annoying but thank us later when their plans avoid the huge costs associated with an eligibility audit. Click on the following link to read about a local example.

http://www.courant.com/community/hartford/hc-news-hartford-internal-audit-commission-report-20190116-vdbxtfiganahnat3sa7szn3l2u-story.html

Diversified Group uses BenefitReady® technology to help employers and members facilitate many enrollment and eligibility functions. To ensure that benefits are available only to those employees and dependents who are eligible, we back this technology with knowledge and expertise.

Managing enrollment and eligibility may sound like a little thing. But little things add up, especially when they lead to costly claims your health plan should have avoided. Get the help you need to take control. Talk to Diversified Group today.

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Are You Encouraging Members to Shop for the Best Care and the Best Price?

It can be as easy as handing them a check for a percentage of savings.

In last month’s HCU, we discussed the flexibility that self-funding provides – emphasizing that within regulatory parameters, self-funding gives the employer significant power over plan design, selection of providers, ways to incentivize plan members and much more.

These days, more and more employers are choosing to reward employees who do their homework and find high quality care at more affordable prices. We’ve all heard about joint replacements in major markets ranging in price from $11,000 to $120,000 or hospital charges for baby deliveries varying from $8,000 to $35,000. Or how about the $300 nebulizer that can be found on Amazon for $118 – need we continue?

While naysayers are quick to complain about employees who seem oblivious to the healthcare cost crisis, smart employers are encouraging their members to become part of the solution.

Many incentivize employees to help lower prescription drug costs by waiving copays on generics. Encouraging the use of Telemedicine and Minute Clinics goes a long way to help reduce Emergency Room utilization.

Still other plans are giving a significant percentage of their savings back to every employee who chooses a recommended hospital for a costly procedure. This can amount to hundreds or even thousands of dollars – real money!

These measures are not rocket science. Rather they are good old-fashioned common sense – no different than choosing one credit card over another because it gives you cash back on your purchase. We respond to incentives all the time and so do your employees.

To learn how Diversified Group helps self-funded employer groups turn members into responsible healthcare consumers, just give us a call.

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There’s More to Know About AHPs

bundled-costsMany employers will find it interesting that AHPs will continue to be categorized as MEWAs – Multiple Employer Welfare Arrangements. This consideration will make association health plans subject to some state regulations that severely restrict the formation of self-funded MEWAs.

Having to comply with the rules of each state will make AHPs more difficult to organize. While associations can create a plan that extends across state lines, they will have to follow the rules of the state they are in that has the most restrictive laws. As an example, an AHP based in New Jersey that extends into New York would still have to follow the more restrictive laws of New York.

Even though the regulations are more restrictive than many would like, AHPs should enable many small employers to offer their employees better health benefits at more affordable rates.

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Is Your Health Plan a Victim of Pharmacide?

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Over the past several months, the Trump administration has introduced several ideas intended to fight skyrocketing prescription drug prices – everything from forcing manufacturers to display prices in their television commercials to having Medicare base payments for costly drugs on average prices in other industrialized nations, which are much lower than in the U.S.

While some prefer to criticize or sit silently by as prices keep rising, we say keep the ideas coming. This is a crisis requiring aggressive action, like our Pharmasense program, that tackles the real problems driving the cost of specialty drugs used to treat complex medical conditions.

Prior Authorization (Pre-Certification) is at the core of Pharmasense. It helps self-funded health plans avoid potential conflicts of interest that enable massive mark-ups and other abuses go unchecked. Pre-certifying specialty drug prescriptions prevents hospitals or PBMs from reviewing authorizations and dispensing specialty drugs without any independent review process. The same is true when providers submit specialty drug prescriptions as claims under the medical plan rather than the prescription drug benefit plan. As an independent TPA, we use these tools to deliver quality patient outcomes and significant cost savings by avoiding the kinds of conflicts described above.

If your prescription drug costs are spiraling out of control, it’s time to take serious action. Talk to us about ways to prevent Pharmacide today!

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Are Your Plan Members Sharing in Your Plan Savings?

A little skin in the game can make a big difference.

At our recent “Let’s Take Control” themed Solutions Day, Adam Russo of the Phia Group shared his story that earned front page coverage in the Boston Globe. He told the audience about a tactic Diversified Group has helped many employer groups implement over the years – sharing plan savings with employees who are willing to shop for high quality, lower cost providers.

As Adam illustrated, employees of Phia Group who do their part to lower costs receive 20% of the plan savings. A member who saves the plan $5,000 on the cost of an MRI receives $1,000. And that’s just one example – their plan places no limit on the amount of savings it will give back to a covered member.

Diversified helps many self-funded employer groups craft their plan document to include member incentives. Waiving copays on generic drugs and urgent care visits is an easy option to implement. Another powerful step is to reward plan members who speak with HR before arranging for a costly healthcare procedure such as surgery. Not only will this engage members and open their eyes to available savings, but it can often create an opportunity to better manage or perhaps even avoid a large claim in the future.

Incentivizing members is just one of the ways we’re helping employers “take control” of rising healthcare costs. To learn more about this and other solutions made possible by self-funding, give us a call at your convenience.

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