The fact is, most people don’t look at the true cost of healthcare. Rather, consumers often rely on their health plan administrators or insurance carriers to catch these expenses that are typically flying under their radar. This lack of cost oversight is surprising since most people care deeply about what they pay for goods and services. For example, when buying a new car, people generally ask how much a sunroof or an entertainment package will cost before adding those items to their vehicle purchase. For some reason, when it comes to healthcare, consumers often fail to ask for cost breakdowns and instead, they simply let their providers bill their insurance carriers for services received. So how can employers create smarter healthcare consumers and help protect their group health plans from some of these shockingly high hidden costs? The resources are out there – you just need to look below the surface and start taking advantage of them!
Education and Transparency
In recent years, considerable effort has gone into engaging consumers and focusing their interest in the financial aspects of their healthcare choices. Many employers offer transparency tools that help employees locate high quality, cost-effective healthcare providers and prescriptions. Most insurance carriers also offer transparency tools in the hopes that members will take the initiative to better understand how much they are paying for their medical care. These steps have proven valuable and more consumers are better understanding their healthcare costs.
Insurance carriers are also partnering with healthcare providers to form Accountable Care Organizations (ACOs) with the hope of driving quality and affordability. Some insurance carriers have implemented special networks of providers that meet quality and affordability standards and are offering those networks to customers.
While it’s important to educate employees on the true cost of their healthcare benefits, it’s equally important for employers to know how their plans are performing. Today’s technology gives employers access to real-time data that provides a big-picture view of their health plans’ overall performance. For example, SilverStone Group utilizes Decision Master Warehouse (DMW) to help our clients understand and more effectively manage their group health plans. DMW provides healthcare data analysis, as well as reporting and benefit modeling tools. This level of insight allows employers to see what drives their healthcare costs and can help guide future plan decisions and claims management.
Controlling Healthcare Costs
While education and transparency are important, another key element is cost control. For employer groups, there are two options:
- Purchase an insured product; or
- Self-fund their plan and pay a third party administrator (TPA) to administer (pay) their claims.
Considerable responsibility is placed on insurance carriers and administrators to provide cost-effective programs that cover these excessive costs (like the $200 Tylenol). And what’s even more concerning, healthcare costs are continuing to climb. However, cost-containment strategies are emerging that many self-funded employer groups are using to help curb these rising healthcare costs while also engaging consumers.
Reference-based pricing (RBP) allows employers to set a pricing cap on the maximum amount they will cover for certain medical services which have wide variations in cost (such as knee and hip replacement surgeries). The costs for these services can vary by nearly 50% within the same ZIP code. This type of procedure can be considered “shoppable,” meaning patients have time to better understand where they can go for medical care and how much that medical care will cost. RBP savings happen when patients elect to see providers who will give them the reference price. Some employers take this a step further by partnering with specialty medical providers to encourage employees to select providers with pre-negotiated reference pricing.
Another RBP strategy allows the employer to set a reimbursement percentage based on Medicare for facility claims. The employer medical plan includes a network for physician services. Both inpatient and outpatient facility services are covered under the plan and consumers have no network restrictions. For non-emergency facility services, reimbursements are negotiated during the pre-service process. For emergency facility services, negotiations occur post-claim. This approach works because preferred provider organization (PPO) networks typically pay much more for contracted services. Employers who negotiate a significantly lower percent of Medicare stand to save healthcare dollars simply through reduced payments. In this strategy, it is important to understand who keeps these savings. Some vendors charge a percentage of savings and others charge a flat, per employee per month fee. In addition, some stop-loss vendors will offer a 15% to 25% savings on rates under these programs. Stop-loss contracts should include terms and provisions that protect the employer in case large claim payments are delayed due to negotiations.
No More Hiding
Knowing about and trying to contain the hidden costs of healthcare is a constant challenge for employer groups. Partnering with a consultant who understands the market and can deliver sophisticated strategies and advice is critical. The Group Benefits Team at SilverStone Group works hard to help employers build and maintain competitive group benefit plans for their employees. For more information, contact one of our group benefits experts.
This article originally appeared in the 2017 | ISSUE ONE of the SilverLink magazine under the title “What’s Hiding in Your Healthcare Costs?” To receive a complimentary subscription to the SilverLink magazine, sign up here.