On blogs like this, people like me write analytically about issues which are often, at best, conceptual to us.Not so to the guys in the rough and tumble world of health care finance. I remember that the first time I went to dinner with Lynn Jennings, I only knew that he was CEO of Alliance Underwriters, working in reinsurance, and that he is a former President and a current Board member of the Self-Insurance Institute of America (SIIA). SIIA is the national association of third party administration firms, the organizations that administer health plans for self-funded employer health plans. As we were walking into the restaurant, he turned to me and said, "In reinsurance you make a very sizable bet and find out three years later how things turned out."Over time, though, as I’ve come to know Lynn better, I’ve found he has a profoundly practical view of the world, supported by a belief that careful management makes it possible for health care to work far better than it usually does.Here is his advice to employers on managing employer-sponsored health plans. Whatever your philosophical orientation, these are sound recommendations for employers who must grapple with the difficult choices associated with employee health benefits.
For 40 years, I have worked in the complicated world of self-insured
group health plans. I have led a third party administrator (TPA),
underwritten stop-loss coverage and, with my wife Judy, overseen a
utilization management firm. Now I’m also building employer-based
Over time I’ve been struck that most interests in the health care equation want care to cost more, not less, and that it is difficult for the responsible employer to navigate through this system. Some employers don’t believe that they can control costs, and have simply lost faith in their power to impact how the care delivery and administrative processes work.
I strongly believe otherwise. Here are some principles that I think can help any employer gain control of health plan quality and costs.
1. Make your plan affordable!Design your benefit plan – including the required contributions and the deductibles – to work for your least compensated employees. If your company has a wide compensation range, consider a tiered plan that ties contributions and benefits to one’s ability to pay.
Cover ancillary benefits only if the basic package remains affordable. Adding dental coverage isn’t helpful if it results in contributions that are unaffordable to your rank and file employees.
2. Dollars paid through benefits are dollars unavailable for salary!Strive for balance in your health plan. While “frequent flyers” may appreciate a “top drawer” benefit structure, most employees will see no benefit. Money saved can be applied to better pay.3. Don’t insure what you can self-insure!The cost of self-insuring predictable risks is nearly always less than insuring that risk. Budget internally for known losses and insure the unpredictable and unaffordable. This is true in auto, homeowners and health care insurance.
4. If your vendors’ interests aren’t aligned with yours, don’t expect them to reduce your health care costs!Understand the motivations of your health plan partners and suppliers. How will your insurance company (health plan administrator), hospital and doctor be affected if your costs dropped 25 percent? If your broker is paid by the insurance company, what will his/her reaction be?
A rate increase to you is a raise for everyone else. Only the employer, your employees and the consultants you pay directly have a vested interest in lower health care costs.5. Pay your brokers & consultants directly!Your advisors work for whoever pays them, so if you don’t pay them directly, they don’t work for you!
Insist that you – and only you – pay them. Only then can you be assured of how much they are receiving and whom they are loyal to. Ask all health plan related vendors – e.g., your administrator, insurance company, health management company, network, pharmacy benefit manager – for compensation disclosures.6. Let vendors know that you expect and will measure results!Set meaningful, attainable and measurable goals for your plan, like a specific reduction in ER visits, inpatient admissions per 1,000 members, or participation in health risk appraisals. Then communicate them to vendors so they understand what you expect and are motivated to find solutions that will help achieve them.7. Control your data, externally!Health care is expensive. If you self-fund your health plan, the risk and cost are yours, and the claims data that result are yours too!
Many independent data warehouses can collect the data from your administrator monthly or even daily, and then store it in a standard format. Your administrator should willingly and, at no additional cost to you, transmit your data to your warehouse. Make sure the transmissions include all relevant data: enrollment, medical, PBM, dental and vision claims. By having ready access to your own data, you can always know your actual numbers. The ability to measure is the ability to manage.8. Audit your vendors!You spend significant dollars on health care. At least every two years, engage an independent auditor to review your health plan’s performance. If your administrator will not agree, change.
9. Don’t be held hostage by vendors!Doctors and hospitals whose fees are excessive, or who insist on referring outside your network, do not need to be included in your plan.
Take charge. Refuse to include providers who would hold your plan hostage. Let providers know that abusive practices won’t be tolerated. 10. Be wary of a health plan’s “packaged” services!Health plans are typically built on an array of specific functions: administrators, stop-loss carriers, provider network, utilization management programs. Sometimes plans require that you use arrangements that bundle one service with another. Seek best-in-class products and services whenever possible. Every service and product should stand on it’s own.11. You’ll get what you accept!You have the right and obligation to insist on excellence.
Penalize vendors – e.g., health plan administrators consistently unable to pay claims accurately the first time, or disease management programs that cannot prove savings and other programs – if they don’t perform as promised. 12. You can’t please everyone all the time!No matter what you offer, some employees still won’t like it. Get over it. Do what is right and what you can afford. Most will appreciate it.
13. Innovate! Experiment! Try new things. The definition of insanity is doing the same thing, over and over again and expecting a different result. Not everything works for everyone and the “tried and true” may be obsolete!