Make the roller coaster of self-funding a little more of a smooth ride with these 9 practical ways that self-funded groups can save money on their claims expenses and administration fees.
1. Choose a PBM that uses pass-through pricing
Drug costs have risen by double digits in the past few decades. No BS-ing here: the trend sucks. 40% of your medical claims on average are going towards drug costs.
A way to reduce that cost trend, is by selecting a Pharmacy Benefit Manager (PBM) that uses a pass-through pricing contract. In traditional pricing, a PBM charges the plan the price of the drug plus a markup. The markup – it’s often called the spread – is how the PBM makes money. In this pricing model, it is difficult to know if you are overpaying for prescriptions because the markup could be anywhere from 50% to 500% above the price that the pharmacy charged.
In a pass-through, the PBM collects a PEPM admin fee, and then passes through the price of the drug that the pharmacy charged, without a spread. You save money, and you have greater transparency. When we switched to a pass-through model, we saw our drug cost trend decrease to only 2-3% compared to nearly 10% year over year before.
Open the conversation today by seeing what your options are to switch your pharmacy cost model to a pass-through contract. It could save you thousands.
2. Educate employees on telemedicine
Telemedicine services have the winning combination of ultra-convenience and major cost savings. Most plan administrators (such as a TPA or an insurance carrier) offer telemedicine, though they vary in strengths and costs.
About 70% of doctor office visits and 40% of urgent care visits could be replaced by patients opting for telemedicine services instead of in-person visits. That could translate to thousands of dollars saved annually for your claims.
If every urgent care visit cost $150 and your group of 2,500 members visited an urgent care clinic just once per year, you would have incurred $375,000 in one year. If you had just 10% of your members try TeleMed instead, it would reduce your costs by $37,500. If 15% did, you’d save $56,250. 20%? You save $75,000!
Maybe you have a smaller group, maybe of 500 members. Your cost breakdown looks like this:
500 members visit urgent care once in a year: $75,000
10% choose TeleMed instead: you save $7,500
20% choose TeleMed instead: you save $15,000
No matter your size, these are dramatic savings.
How do you teach employees to use telemedicine over urgent care?
Lead by example. People are wired to remember stories, so if you have a story to share about calling telemedicine in the middle of the night when your son had the flu, sharing it may help your employees to remember telemedicine when their kids are sick in the middle of the night too. Use multiple channels to share these stories (emails, HR announcements, posters, etc.).
3. Choose a plan administrator with a concierge service
One of the costs that can be really frustrating is when members go to out-of-network providers without meaning to. Find out if your plan administrator offers a concierge style customer service line for your employees to call if they need advice on medical procedures or treatments. It may be through a 3rd party, but often they have a concierge team to guide members on things like managing chronic diseases, transitioning after a major surgery, and getting healthier in general.
Good concierge teams have professionals from different fields who look at cases and evaluate what is necessary to do and what isn’t. This can save you and your employees a lot of money because you are avoiding the “trial and error” approach to health care.
Used effectively, you only incur costs for the services with the greatest likelihood to work effectively, and avoid unnecessary tests and treatments. Bonus: your employees will appreciate having a team behind them as well as they face tough medical decisions.
4. Understand what is & isn't included in your admin fee
TPAs and insurance carriers offering Administrative Services Only (ASO) typically cover their costs of claims processing, customer service, etc. through a PEPM administration fee. Depending on how their fees are defined, the base fee that you are quoted may not be the whole story.
Your plan administrator may have hidden fees or surcharges for plan services that you didn’t know weren’t included. Here are some examples of hidden fees that could be costing you.
Plan amendments: you are charged every time your plan document changes
Fraud and abuse detection: you are charged a percentage for the administrator to monitor for fraud
COBRA administration/notifications: you are charged every time a letter is sent out or charged every month a termed employee remains on your plan
Overpayment recovery services: you are charged every time the administrator has to recover money given to the provider in error
Claims appeal: you are charged every time a claim is appealed, or if there are errors found that requires processing the claim again
Network access fee: you are charged for having a provider network
Large discrepancies between quoted rates often show up because the administrators have different fee breakdowns. Ask you administrator for a detailed fee breakdown. Awareness of hidden fees will help you to not pay for more than what you need.
5. Evaluate options for stop-loss coverage
Another way to save money is to understand stop loss coverage and evaluate the options for coverage that are available to you.
If you are familiar with stop loss, skip to the next paragraph, but if you aren’t familiar with stop-loss coverage here is a brief explanation: stop-loss coverage is additional insurance against high claimants for self-funded plans. This type of coverage protects you from having to pay above a determined amount in a determined time frame (usually 12 months). So if you purchase stop loss coverage for expenses exceeding 5 million dollars and you incur 5.1 million dollars, your stop loss carrier will cover the additional 100,000 and anything else incurred until the end of the plan year.
Stop loss coverage comes in two forms: specific and aggregate.
Specific Stop-Loss: This form of stop-loss coverage protects a self-insured employer against large claims incurred by a single individual. Under a specific stop-loss policy, the employer will be reimbursed when claims for an individual exceed a specified deductible.
Aggregate Stop-Loss: This form of stop-loss provides a ceiling to the amount that an employer would pay in expenses on the entire plan, on an aggregate basis, during a contract period. Under this policy, the insurance carrier reimburses the employer after the end of the contract period for aggregate claims.
You will pay a monthly premium for this stop loss coverage, so it’s important to know what you’re paying for. It’s a good idea to evaluate the different options for stop loss so you are managing your risk most effectively.
6. Make decisions based on detailed claims data
When all you have are assumptions, it is difficult to make any decisions with confidence. When you have data that can tell you a story of what is truly going on, you have a lot less guess work, and a lot fewer headaches.
Ask your administrator in-depth questions about the types of reports you can get access to consistently throughout the year. Here are some questions you can ask:
How often will I receive reports on the health of my employees?
How detailed are your reports on utilization and major cost drivers?
What type of forecasting reports can you provide me on a regular basis?
Do you have sample reports I could review? (Most important question)
To be frank, there has been a tradition in the healthcare industry of keeping data locked up in a safe. Depending on the TPA or insurance carrier, they may push back with jargon and ambiguous language. That’s why requesting sample reports will give you the best idea of if your administrator is committed to arming you with the data you need to make informed decisions.
Being with a plan administrator who gives you access to robust reporting could be the difference of tens of thousands of dollars, as well as could make a huge impact on your employees’ health and well-being. Check out these examples:
Example 1 - 150 members
ABC Company is self-funded with about 150 employees, and a total of 400 members covered through their plan. Halfway through the plan year, ABC Company gets a report that shows a lot of their members are going to the emergency room for routine things (flu symptoms, stomach viruses, and fevers). ABC Company puts together a campaign internally to remind their employees about telemedicine, and 3 months later, emergency room trips decreased by 20%.
Example 2 - 1500 members
XYZ Corp is a school district with 1500 employees and 4000 total members covered through their self-funded plan. They got a report on an increase in diabetes and high blood pressure diagnoses, that are causing claims to rise year over year. XYZ Corp decided to invest in providing healthy meal options, hosting weekly fitness classes for employees, reimbursing employees for gym passes, and other initiatives to help employees be proactive about their own health.
Within a couple of years of consistently celebrating a healthy lifestyle and empowering employees, that diagnosis trend was reduced to a normal level.
With data, you can be proactive instead of reactive. This guide is all about saving money, but this shift could also bring a huge impact in your employees’ lives. Robust data reporting is definitely worth asking for, and maybe switching to a plan administrator that gives you reports regularly is the right call for your long-term self-funding strategy.
7. Get a Surgery Benefit Program
Cost and level of quality can vary significantly between providers and facilities. But since the healthcare system was started, we have followed the tradition of “whatever the doctor says is what I have to do,” and we haven’t really questioned where they tell us to go. Providers have held all the cards, and the patient is at their mercy.
But in today’s world, patients are wanting to shop for the best value with their healthcare. So what can be done to motivate them to choose a lower cost provider?
What your employees need is an easy and accurate way to find the best value. They need a way to evaluate which doctors have the highest quality at the most affordable price. This is exactly what a Surgery Benefit Program is for. It’s a program where your employees get advice on which providers and hospitals offer these expensive procedures for a good quality to affordability ratio.
Both the members and the plan save thousands of dollars for receiving the same services. It is a win/win.
8. Get a system for reviewing & resolving billing errors
With over 71,000 medical procedure codes, it’s no wonder that between 65-80% of medical bills contain errors. Both the plan and the member could be:
These errors could be costing you and your employees a lot of money. However, how do you know when you are paying for one of these errors? The answer lies in the standard of accuracy that your plan administrator has.
Unfortunately, TPAs and insurance carriers widely differ in their standards of thoroughness in claims processing. With those who have a low standard, the burden of due diligence often falls on the patient to figure out if they are paying the right amount on their bills. It’s a frustrating and discouraging process for the patient to have to work with the provider and the plan administrator to sort out errors on their bills.
Carriers and TPAs with a high standard for accuracy in claims processing are much more likely to catch errors and get them resolved before the patient ever sees a bill. When you are shopping for plan administrators, ask them specific questions on their claims review processes. Ask for statistics on their accuracy and the average number of times they successfully reduce a bill.
9. Invest in mental health resources for your employees
Our mental health has a huge impact on our physical health, more than we realize. Just as we exercise and feed our bodies good things to prevent illness, we need to give some attention to how we exercise and feed our minds to prevent struggling with mental illness.
The research in the past few years on mental health in the workplace is astounding. It’s estimated that 1 in 5 employees have a diagnosable mental illness. The toll of a mental illness on physical health is substantial.
Data shows that the average cost of medical and prescription claims for a member with a mental illness ($874) is nearly double that of a member without a mental health condition ($417).
Employers have a responsibility as well as a financial incentive to invest in ways to empower their employees to take care of their mental health. While there still is a lot of stigma surrounding discussing mental health, you as an employer can do a lot to pave the way for your employees to speak up and get help.
We can be your partner
When your employees feel the security of good healthcare benefits, they are able to relax and give you their best work. You can deliver that to them, without it costing you more than it should and while providing them with tools that give them control over their personal healthcare costs.
EMI Health has 85 years of expertise working with large self-funded groups. We started as a health fund for school districts in Utah and have since grown to be a benefits partner for thousands of groups.
We care deeply about the success of your self-funded plan and we know that when you save money, we save money. Feel free to contact your broker or EMI Health Account Executive to request a more in-depth guide on our products and services, as well as our programs to help you accomplish the 9 things in this guide.