30 Oct Health Plan Costs and Savings
For years, the answer to escalating health plan costs has been to shift more and more of this cost to employees. But is there an opportunity for real savings and not simply cost-shifting? The answer is, “Yes.” However, it will be necessary to understand the basic elements of a health plan to recognize potential savings.
In this article, I listed these elements with a basic definition. Each will be examined in greater detail in subsequent articles, with an emphasis on the opportunity to control costs.
Plan Administration – The Plan Administrator is responsible for many functions. Plan selection, eligibility, claims administration, COBRA, and many other duties all fall to the Plan Administrator, sometimes referred to as the Third Party Administrator (TPA).
Networks – At this point, most health plans utilize a provider (physicians and hospital) network to ensure claims are paid at a discounted rate. Networks have often been taken for granted but are now coming under increased scrutiny.
Pharmacy Benefit Manager (PBM) – Companies that manage prescription drug benefits on behalf of health insurers, Medicare Part D drug plans, large employers, and other payers.
Claims Management – If at least 80% of all health plan cost is attributable to claims, it is reasonable to assume that managing claims is the most significant opportunity for savings. It is necessary to look across all of the plan elements for greater claims efficiency.
Compliance – There are numerous regulations regarding benefits packages that must be followed. They are complicated, but the fines and penalties make non-compliance too expensive to risk.
Transparency – It has been challenging to recognize and understand the different elements of a health plan in the past. They are often bundled, with one carrier being the TPA, PBM, network, claims management, and compliance department. A lack of transparency makes it impossible to understand where the health plan may be lacking efficiency; therefore making it impossible to revise for savings.
Fully-Insured Plans vs. Self-Insured Plan:
Fully-Insured Plans have traditionally been offered in the small group market (defined as under 100 employees). It is a plan where the employer pays a per-member premium to the insurance carrier in exchange for a complete health plan typically including a network of providers, claims payment, and pharmacy. This bundled approach, although lacking in transparency, is appropriate in certain situations.
Self-Insured Plans can offer the same services, or more, as a fully-insured plan. Instead of coming bundled together, an advisor recommends best-in-class providers for each component of the health plan such as a network, claims payment, and pharmacy. Self-insured plans are being offered to smaller groups than in the past and can be effectively utilized in certain situations.
Health plans are complicated, yes, but I hope you now have a better understanding of the basic elements in order to recognize potential savings. As always, reach out to me with any questions that might come up.