Healthcare Benefit Trends Address Risk Management
Employers grapple with offering benefits that sustain their organizations’ bottom line and meet the needs of employees. It gets harder every year and last year was no exception. Managing benefits, particularly healthcare coverage, impacts profitability and as the war for talent escalates, total rewards play an important role in employee attraction and retention.
Creating and implementing a benefits strategy based on data is how the best employers are solving the benefits puzzle. The proliferation of information and the sophistication of data allows benefits managers and their trusted partners to build holistic benefits strategies encompassing more than “insurance products.” Using analytics allows the best to consider, measure and trend services used, claims filed and adjudicated, shifting workforce demographics, plan and network scenarios and funding mechanisms. From employer cost to employee usage, the ability to fully manage risk is rapidly replacing old-school transactional purchase of group healthcare or other benefit plans.
As professional benefits advisors and risk managers, we see data-driven trends across the benefits spectrum, most prominently in funding, plan design, Rx coverage, and wellness. Equally important is the fresh look at overall benefits to offer packages that resonate with and are understood by employees.
IT’S ALL ABOUT DATA
It’s one thing to gather unprecedented amounts of data, it’s quite another to analyze and utilize the information to develop strategies, make data-driven decisions and take action. We see the prevalent use of data in every area of benefits. Benefits leaders align with professional partners to provide access to meaningful information, understand the data, recommend appropriate action and measure results. No longer is the tried and true group health plan the only solution when real-time data gives the ability to more readily measure impacts.
Data also allows the examination of the relationships between benefits offerings. As risk managers, we see more employers looking across all their benefits offerings and using data-rich sources to adjust to plans and programs that best balance the benefits equation. For example, when multiple health plan options are available, benefits leaders and their advisors manage risk by analyzing which benefits have the highest utilization, comparative cost-per-use over time, and even which generate positive outcome or quality of care. The result is a more complete and sometimes complex picture of employees’ plan utilization, claims, other costs and ultimately, ongoing sustainability.
More is More…The Internet of Things
One newer data collection source that continues to expand and affect risk management is the network of medical devices, apps, consumer wearables and home monitors that allow providers to collect data for analytics. The Internet of Things (IoT) presents a collective data source and with it, very real risks for organizations, their providers, carriers and insurers.
While there is always risk associated with PHI, the IoT presents another potential source for cyber hacking. Data breaches, ransomware attacks and sophisticated phishing schemes can severely impact health care choices, care and costs. According to the recent PwC Global State of Information Security Survey, only 64 percent of respondents have conducted a risk assessment of their IoT devices – only 55 percent of those organizations have put security controls in place. The same report concludes that more than a quarter of consumers affected by a hacking incident have decided to change providers or insurers. Thirty-eight percent would be leery of choosing a hospital associated with a hacked medical device. To be used effectively, IoT analytics must start with security and guaranteed privacy.
[Sidebar: Informatics, data analytics, privacy and security, clinical documentation improvement and information governance are among the imperatives that will dominate data trends in 2018, according to the American Health Information Management Association.]
SOLVING FOR FUNDING AND PLAN DESIGN
In recent years, we have seen more employers explore and move to self-funded healthcare plans. We believe this trend will continue and we offer cautionary opinion on this change. Self-funding shifts risk from the fully insured or guaranteed cost contract to an employer participating contract in which the employer will fund the plan on a pay-as-you-go basis. Self-funding can improve cash flow. As a result, the bottom line may be healthier or other initiatives, including benefits programs, can be enriched. This funding model can also result in greater plan design flexibility to meet specific organizational objectives. In some cases, premium taxes may be reduced.
However, self-funding doesn’t increase the likelihood or improve the chances of curving the trend. Although an appropriate funding model for some, for others it’s a short-term cost control solution – a band aid. While this trend is one way to offset benefits cost , it is not for every organization and may not prove sustainable if claims skyrocket.
To sustainably fund benefits, employers must identify the factors that drive risk in their workforce population and implement a risk reduction strategy to impact population health and cost of goods (delivery) when health care is utilized. Using analytics based on real data can identify the true drivers of health insurance cost and serve as the basis for strategy to reduce longer term risk and increase benefits’ sustainability.
PLAN DESIGNS OFFER OPTIONS
Benefits managers and providers are looking for win-win solutions. Plan design that encompasses programs with best-in-class quality, competitively priced vetted providers, innovative delivery through centers of excellence, narrower networks, direct physician contracting and Rx carve-outs are emerging as pieces of the healthcare benefits equation.
Centers of Excellence
Rising in popularity, centers of excellence allow plan participants to take advantage of lower cost options for elective surgeries, such as knee replacements. When designed to include this feature, the plan contracts with a high-quality medical provider for certain elective procedures. The plan is billed at a deeply discounted rate when the procedure is performed and in most cases, the patient’s deductible is waived. In short, the result is cost savings for the participant, the plan and the employer.
Communication to participants is the most critical component of the success and sustainability of Centers of Excellence. Reaching participants through channels they use and repeating the message are cornerstones of driving participants to Centers of Excellence. Beyond open enrollment, reminders, comparison tools and the use of social and texting media are trends that match the uptick in the development of Centers of Excellence.
Within their overall benefits strategies, employers are embracing the innovation of narrower networks as a method of cost containment. Price and quality criteria used together can identify networks and providers can positively impact benefits spend and ultimately, the bottom-line.
For plan participants, fewer choices can make healthcare decisions easier and navigation simpler. To encourage participation, we are seeing employers are using monetary incentives, including one time payments to lower participants’ premiums and encourage the selection of narrow network plans.
Direct Physician Contracting
Even if narrow networks are not part of plan design, direct physician contracting can help an organization contain costs and maintain quality of care. This contracting technique is a trend that should continue to grow. Employees will save money when they choose in-network providers including physicians, imaging centers and other specific-use facilities.
Highlighting the actual cost savings via accessible, easy-to-understand communication vehicles is one way employers are leveraging this approach.
Gone are the days when Rx coverage was a simple add-on to a healthcare plan. Historically requiring less complex management, today’s drug coverage requires sophisticated use of data, constant oversight and real-time awareness of the prescription drug environment.
Today, organizations are finding that it may make more sense to “carve out” prescription drug plans as stand-alone plans, rather than the traditional use of the healthcare plan carrier. Even if pharmacy claims are trending lower, using different providers may lower costs for employers and employees.
There is growing concern about the increasing number of specialty drugs entering the market as well as the escalating opioid crisis in the United States. Both are expected to continue to drive up prescription costs for employers and employees.
Aggressive pharmacy plan management will continue to require specialized knowledge, attention and action.
WELLNESS TAKES ON MORE MEANING
While there is little doubt that a healthier workforce can reduce benefits costs, employers appear to be moving away from traditional wellness programs. The move from measuring participation to measuring outcomes has been a rocky road and some employers are no longer willing to stay the course.
We believe that more employers are helping employees manage their wellness efforts through integrated wellness programs that encompass more aspects of total well-being. Such programs may include financial, emotional and even spiritual wellness tools and programs. At the same time, the trend for chronic disease management, health coaching and onsite workplace events continues.
Wellness, as defined in the trending data, remains a key driver in reducing longer term benefits costs and managing the risks associated with less healthy employee populations and their families.
We expect the accelerated rate of change to continue for the foreseeable future. With that rapid pace comes an even greater need for professional partnerships that help minimize the risks associated with the shifting landscape of employee benefits. Singular, transactional insurance won’t propel your organization or your employees forward. Carefully crafted and implemented all-encompassing benefits strategies and full-service risk management will move everyone in the right direction.
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Jonathan D. Sadlier is a Vice President, Sales Executive in the Group Benefits Division at Oswald Companies. He has over 15 years of experience working with privately held companies and non-profit organizations in employee benefits and financial services. He specializes in the financial and technical aspects of plan strategy, and implementing innovative client specific objectives to assist them in reaching their long-term goals.
Connect with Jonathan on LinkedIn.