Inertia can set in as employers struggle to balance escalating benefits costs with organizational financial targets. For employers, passing along higher costs to employees seems to be the easiest and most traditional way to sustain benefits programs. Meanwhile, employees often passively enroll in same original plan they chose when first eligible for benefits, even though their needs may have drastically changed.
Status quo won’t cut it in these times of rising costs and evolving healthcare options. Understanding the data behind escalating benefits costs, particularly medical and pharmacy, is the first step in breaking through inertia and developing a more sustainable total rewards benefits strategy.
Data-driven decision making is getting easier. High level summaries can benchmark performance and deliver actionable recommendations supported by more granular data. Sophisticated modeling produces results in customizable output that can examine criteria such as usage, segment populations, evaluate networks, inform plan design and give rise to innovative health care strategies.
Price inflation, or cost of care, is the major driver of rising healthcare and medical benefits costs. How employees access and use their benefits, utilization, is another key contributor to rising expenses for employers and employees. Cost and utilization must be examined with equal intensity to grasp the full cost of benefits offerings.
However, of these factors, utilization is more controllable and appears to be flattening over time. Carrier data, national databases and proprietary research can help employers and advisors understand this key element of benefits management. Taking a deep data drive should uncover how, when and where the majority of the medical benefits usage occurs. Innovative plan designs, targeted communication, education and intervention can lead to more efficient utilization.
At the same time, costs continue to rise for plan participants. Many delay or forego necessary care due to unaffordable cost, further contributing to overall cost escalation as more complex, costly care is required when conditions worsen. The result can be catastrophic, creating a potentially dangerous cost avoidance loop.
Data analysis helped an Oswald client realize that cost disparity was driving escalating health care costs for both the organization and its employees. As cost of coverage and care escalated, a detailed analysis layering cost of care over quality scores revealed disparities in cost between facilities offering the same services. Utilization and claims analysis told our researchers that employees were receiving the care at a major healthcare facility with the highest cost but without the highest quality scores. Today, the organization’s employees can call a centralized number and compare the cost of care, their own out-of-pocket expenses and review facility quality scores.
Going one step further, when employees choose the higher quality care facility, and in many cases at significantly lower cost, there is no cost to the member, including costs for travel to the facility and overnight accommodations if necessary. These costs are 100% paid by the employer.
When employees elect a lower cost choice while maintaining high quality rankings, the cost to the employing organization is less, too. For example, if an organization self-funds claims up to a $100,000 specific stop-loss level and an employee requires a knee replacement, it is worth considering the hospital options. If Hospital A costs $60,000 and Hospital B costs $20,000 and rankings are similar, the organization clearly pays less if the employee selects Hospital B.
“Cost disparities are a real concern,” said Michael Clark, Consultant, Oswald Companies. “Easy to access transparency tools provide the information and guidance employees need to take advantage of high quality, lower cost care. It ends up being a winning scenario for both the employer and employee.”
While the days of physicians making home visits may be long gone, designing and communicating benefit plans so that employees have access to the right care at the right time at the right price is still a viable option.
While concierge service is wonderful, it can also be expensive which leads to balancing cost versus reward. Offering concierge services to all employees covered on an employer’s medical plan instead of the more traditional approach of offering the service to only executives can not only help lower your healthcare costs, but also have a major impact on improving your employee retention. When properly implemented and supported, the approach has led to average cost savings on overall medical spend of up to 20% and rising member satisfaction ratings. Ease of use, immediate service and personal Healthcare Navigators who are incentivized to maintain or improve the health of the patient are keys to this innovative approach.
Oswald’s Direct Primary Care (DPC) has proven a popular solution for employers looking to drive down employer cost of medical benefits while helping employees not only spend less and achieve better health outcomes but provide ease of use through same day and next day appointments. The network agnostic program is designed to ultimately deliver healthier outcomes and drive down employer health care costs. Originally built and designed for our clients with 1,000 or more employees, is now available to clients with as few as 40 employees. DPC uses proactive population health management, retail pharmacy management, transitions of care and value-based referral management. Employers pay for employees who enroll and select a DPC physician as their primary care provider. Health insurance and other benefits remain unchanged.
“The results are impressive. One client organization has been able to enjoy cost-savings on claims and provide their employees better access to high-quality healthcare. In the first year, using a risk-matched control group of members not enrolled in the program, the enrolled patients had 22% lower per member per month total healthcare costs. Additionally, as measured by Net Promoter Score, employees have shown much greater satisfaction with their benefits,” said Michael Clark, Consultant, Oswald Companies.
It’s no surprise that employers feel the pain of pharmacy management. Managing prescription drug programs to provide the most needed drugs at the most reasonable costs can be challenging for employers of all sizes. There are many different levers that can be pulled when it comes to Pharmacy Management such as step therapy, GoodRx, mandatory mail order, point of service, and so on. Right now, we are just going to focus on the foundation here – the PBM relationship.
When analyzing the possibility of partnering with a Pharmacy Benefit Manger, consider these four performance factors:
An Oswald client faced the challenge of identifying the source of their skyrocketing healthcare spend. At the same time, they experienced extremely high medical benefit drug charges due to the network paying a percent of charges that the outpatient facility determines.
Our analytics experts and service team worked with the client to obtain medical claims data; conducted an in-depth analysis on paid medical claims data and identified several claims administered in a high cost outpatient facility. The findings included total overcharges of approximately $500,000 for one member for IVIG infusion during a one-year period.
Using the data, Oswald developed and recommended the appropriate strategy for site of service solutions resulting in real cost savings. The use of a new pharmacy has produced savings of $199,000 for each two-day infusion.
Today, doctors, hospitals and healthcare professionals are driven by Fee for Service (FFS) reimbursements. In many cases, services are provided in isolation instead of collaboration. Future cost containment and the ability to design and implement cost effective, sustainable benefits plans will rely on a deeper understanding of cost drivers, careful consideration of coordinated service providers, continued innovation in the delivery of healthcare, and importantly, sustained consumerism for participants.
Our clients’ success is our success. We will continue to innovate solutions and engage the best partners to meet the challenges of this new era of employee benefits.
Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. View our communications policy.