When it comes to an employer’s health plan, good information is like currency. Resourceful employers analyze their plan’s medical claims data and, with a few tweaks in plan design, they can create significant savings.
Let’s consider a real-world example. One of our benefits consultants presented a claims analysis report to a client showing that only a few employees were using hospital visits. It was a high-priced service, which the company was paying for in the form of insurance premiums, and yet there was little need by employees. The employer decided to take action by increasing the deductible on hospital visits and saving the company thousands of dollars. The co-pay went up for the few employees who were using the hospital, but the employer had a solution. The employer reimbursed the employees for the difference using a health reimbursement arrangement. Essentially, nothing changed for employees, but the employer received a significant cost savings.
The point was for the employer to take on more of the hospitalization risk, instead of transferring it to the insurance company—because transferring it would have increased their premiums a disproportionate amount. In other words, it costs less for the company to pay the increased deductible on behalf of the employee than to absorb the cost through higher insurance premiums.
Urgent care was another area where a minor change in plan design can go a long way. A client had a handful of people who were going to urgent care. In order to save 6% on insurance premiums, all the employer had to do was increase the co-pay by five dollars. Through this simple change the company received significant savings.
The names of employees were not listed on the claims analysis report, of course, so employee privacy was not violated. But the report showed the employer some important information on where costs were being incurred, which allowed them to change their plan design to reflect more accurately the actual plan utilization by employees.
With the tactics described above, the employer made some obvious tweaks in plan design to save money. A similar strategy called plan design modeling identifies less obvious flaws in a health plan that might affect claim costs in the future.
Plan design modeling allows the employer to see how hypothetical changes to the group’s plan would have affected previous claim costs. This works by considering the group’s claims history and standard assumptions to estimate an approximate savings for the employer.
Suppose you receive a report that shows prescription costs are taking up most of your plan. The plan design model will allow you to hypothetically change your prescription benefit to an 80/20 co-pay with a fixed cost of between $11 and $24.
After running the report, you can see that this slight change would have saved you over $4,000. Not only can you manipulate your prescription benefit, but other changes such as co-pay amounts, deductibles and maximum out-of-pocket costs can also be altered to determine the potential effect on your plan’s costs.
A wellness or disease management program can result in a healthier workforce, which in turn results in fewer medical claims and lower health insurance costs.
An employer can analyze claims to learn whether its existing wellness programs are effective or whether the money spent on those efforts should be redirected to other products or services. In the absence of claims analysis, some employers implement wellness or disease management programs without knowing what the employees’ health problems are and without definitive ways of measuring results.
An effective claims analysis approach focuses specifically on claims and healthcare costs that are flexible and preventable through wellness or disease management programs. The report shows the employer’s actual costs and estimates potential savings. This thorough analysis allows an employer to find specific risks or conditions within its workforce, enabling the implementation of personalized wellness programs.
The system also can report health costs by risk, disease condition, age, gender, and other identifiers. Consequently, the report enables employers to identify the modifiable claims and the exact population in which problems exist.
Furthermore, the benchmarking process allows an employer to measure results at designated intervals (i.e., 12 months or 18 months) to gauge the impact of health promotion initiatives on health status and healthcare costs.
It’s fair to point out not every employer has access to the same data. For example, smaller employers are often limited on the types of claim reports they can get but may be able to use benchmarking or survey data as a reasonable substitute for actual claims data. Employers that utilize these simple design tools to assist in their plan change decisions can make significant improvements to their bottom line.
For more information, contact us.
David works with clients and consultants on a wide range of HR compliance and strategic issues with a particular focus on healthcare reform. He has previously practiced law in private practice and worked in the Minnesota court system.
David works with our clients and consultants on a wide range of HR compliance and strategic issues with a particular focus on healthcare reform. He has previously practiced law in private practice and worked in the Minnesota court system. David has a law degree, magna cum laude, from the University of Minnesota, received his undergrad from Gustavus Adolphus College and is a member of the Society of Human Resources Managers (SHRM).
Biometric screenings top the list of wellness tools that employers use today, according to MetLife’s 2014 U.S. Employee Benefit Trends Study. After biometrics, employers use other types of wellness programs as follows:
Health plan benchmarking is an essential part of your strategic plan, for two important reasons:
What are some of the critical decisions you must make when designing your organization’s health plan?
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