Putting Personal Healthcare First Benefits Employers and Rates

Kate Genovese, SVP, Employee Benefits Strategist at Risk Strategies Company

Do you know the saying, “don’t hate the player, hate the game”? While healthcare should not be a game, most employers and benefits teams must work within the current healthcare system; operating with insurance companies, third-party administrators (TPAs), and prescription benefit managers (PBMs) - can prove challenging.

Managing healthclaim expenses is not an easy task, and many large employers take it on by choosing a self-funded arrangement for group health insurance. This means employers are on the hook for claim liability – until the deductible is met and stop-loss insurance kicks in to offer financial protection for claims exceeding this amount.

The current predicament we are in - our collective inability to manage our own personal healthcare, as evidenced by recent headlines indicating Americans’ average life expectancy saw the sharpest two-year decline in nearly 100 years, directly influences how our healthcare system operates. Prioritizing personal healthcare improves insurance rates and employee benefits, ultimately building a happier, healthier workplace.

Let’s review the contracts, coverage, and cost-sharing employers should consider having in place to best support employees’ health journeys.

Optimize Your Contracts

Administration contract optimization for medical and pharmacy policies can ensure your organization is getting the most value. Within traditional medical network management, evaluate the network discounts based on your population’s demographics by requiring your health plan network provider to establish a discount guarantee. Want to push the envelope a bit? Reference-based pricing allows for payment based on a percentage of Medicare Allowed Cost, which is significantly lower than billed charges less discount. A word to the wise, careful consideration of this model is key as there are pros, such as significant cost savings, and cons, such as employee friction, including potential balance billing. Have a large population that is geographically dense? Consider direct contracting, leveraging large population steerage to drive deeper discounts.

The frequency with which the pharmacy landscape changes can cause whiplash. The terms within a PBM contract alone can make or break your pricing deal. Do you continue with traditional rebates or move to a pass-through rebate model in exchange for an administration fee? Do you explore an open pharmacy network or a narrow network in exchange for more favorable pricing terms? Including an annual market check within your PBM contracts may help your organization get better terms even 12 months after your initial contract is inked.

Coverage and Cost-Sharing Provisions

Somewhat trickier is setting the right coverage and cost-sharing provisions. What is your company’s philosophy about offering healthcare coverage? Do you want to ensure employees can have anything covered for low out-of-pocket expenses? A better question might be whether you want to be at, above, or below the median offered to employees within your preferred benchmark (geography/employer size/industry). Do you want your benefits to show you as an employer of choice? Or is it simply a check-the-box offering? Consider where you fall for the type of plan(s) you offer, the coverage levels within the plan(s), and the employee cost-sharing.

"Administration contract optimization for medical and pharmacy policies can ensure your organization is getting the most value"

For employee cost-sharing decisions, there are very few rules for setting payroll deductions, but make sure there is an affordable option for ACA compliance purposes. You will also want to avoid IRS discrimination issues, ensuring you do not favor highly paid employees. Also, look at contribution structures for those covering dependents; how much you charge will influence how many dependents you will cover.

Now, back to my earlier point on our collective inability to manage our own personal healthcare. Claim cost is made up of contract terms, utilization, and severity of claims. It is those last two posing some of the biggest challenges.

Where and How People Receive Services

Let’s now look at utilization. An easy example is telehealth v. primary care v. urgent care v. emergency room (ER). Plan design can create some steerage through cost-sharing; however, we still see ER visits for non-emergent care.There continues to be a lack of trust around generic medication and not enough time spent researching the cost and quality of healthcare providers and facilities. While plenty of healthcare utilization is appropriate, inappropriate utilization has an impact on overall claim liability.

Last, and certainly not least, the severity of claim. If you have a healthy person going for their annual physical with in-range biometrics (weight, blood pressure, cholesterol, blood sugar) and an occasional sickness or accident, their claims are generally not severe. Pair these people with a healthy diet and moderate exercise and we would largely expect them to remain healthy with lower cost claims. While others who are not as healthy may require additional medical services and prescription drugs. These people often are more sedentary and make lifestyle choices that may lead to chronic conditions. In these cases, lifestyle changes may result in these same conditions being mitigated or reversed. Alternatively, ignoring your health and preventive guidelines alongside a less healthy lifestyle may lead to a surprise – and sometimes catastrophic – diagnosis, e.g., stage 3 cancer versus stage 1, which could be more easily treated.

Changing the Tides

So, do you hate the player or hate the game? How do we change the tides? There are solutions to address nearly every common condition. However, the answer is far more evasive; we must find a way to encourage people to prioritize their own health and wellness. We have to find a way to achieve this lofty goal, but we must continue to help employees navigate their own health journey. We must all work together towards improving employees’ health which will directly impact employee benefits and improve rates.

Kate Genovese is the SVP, employee benefit strategist at Risk Strategies, a leading national specialty insurance brokerage and risk management firm. Genovese's 25+ years of experience are a testament to her passion for employee benefit plans. With her deep knowledge of employer-sponsored health and welfare programs, she helps employers build, maintain, and improve their programs.

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