Hope on the Horizon?
It’s a funny thing about health care reform... Initially, many hoped insurance premiums would be lower but as clients approach their renewal periods they’re facing a trend in the opposite direction. Consequently, many small group clients (2-50 employees) are electing to renew early so they can kick the proverbial can down the road a bit further until things shake out and become clearer.
The funny and ironic part is that these premium hikes are leading more and more carriers to come up with alternate solutions to help control costs. An old idea with new protections and safeguards that is expected to gain much traction in the next 12 to 18 months is a self-funded plan model for small business. Most major carriers in the St. Louis marketplace have either created an offer or will have an offer as of 2014.
By offering more safety nets and revised cash flow models than typical self-insured plans, self-insuring offers small business with a solution to high premium increases and, with that, true health care reform measures. Such plans are usually reserved for larger groups.
Today, renewal increases are received with little to no understanding of why the increase is received. We hear key words like “trend,” “higher risk,” and “demographic changes,” but we don’t know how all of these factors come together to create a renewal increase. Even if we want to “tweak” the plan by increasing prescription drug copays (one of the only areas that you can semi-customize), we don’t have any clue how this will impact employees.
Under a self-insured plan, the plan administrator receives monthly data on how the plan has been used. A report can be provided that shows prescription drug purchases and can be easily determined if the drug is a generic or brand name drug… and how much it costs! This transparency leads to greater control over costs and better plan management.
Control Over Costs
In the fully insured world, cost control is achieved by shopping alternate carriers for a better deal and making plan design changes. Health Reimbursement Arrangements (HRAs) have been one of the most effective tools in managing costs but, ultimately, it is only as good as the 12-month period that the premiums are in place. While shopping carriers and implementing HRAs are effective at times, the process is not without hassles. Secondarily, a wellness plan can be implemented that will have some effect on costs but because the group is pooled with other like groups, the effects of a wellness plan can be diluted.
Under a self-insured plan, the group has the means to create the type of plan that they want for employees. Think of it like a huge HRA: Deductibles, copays and out-of-pocket limits are set by the group. State mandates, which add costs to the health plan premiums in a fully insured plan, are optional rather than required under a fully insured plan. In the self-insured world, implementing a wellness plan has a direct effect on improving employee health, which lowers plan utilization and, ultimately, employer costs on the plan.
Every 12 months, a fully insured renewal rate is issued and the 90-day process of finding the best deal and putting together the best plan ensues. Self-insured plans have the opportunity to recoup dollars at the end of the 12 months if the plan runs better than expected, meaning lower utilization of health services. This encourages an owner to view and manage the health plan as a multi-year cost to manage as human beings are dynamic and, as such, will have times of better health and worse health.
At the heart of the matter is member health. If each member’s individual health improves, health plan utilization decreases and, as a result, costs decrease. While this is also a facet of cost control, it is a reform measure all onto its own. Chronic, behavior-driven health issues are at pandemic levels in the United States. Diabetes, heart disease, metabolic syndrome, stroke and dementia are all outcomes of poor health that can be related to human behavior. While poor nutrition is promulgated by government-dictated policy (Farm Bill from the early 1900s) and information (1980’s Food Pyramid) that has made maintaining good health more difficult, the fact remains that improving this widespread problem starts with the individual. Self-funded plans encourage good health and provide incentives to employees and employers to reach for better health.
With all of this previously unavailable information, even further change can be driven. Wouldn’t it be amazing if the population of self-insured groups grew to the point that market pressures from business owners and employees made patient care more efficient?
We live in an amazing time. It is one for the history books. So, as the cliché goes, “when one door closes, another window opens.” Stay alert and open to new opportunities.