What I Did Not Know About My Health Plan

by | Mar 20, 2024 | Uncategorized

Starting out in the benefits world, everything I knew about self-funding came from my broker. Looking back, I realize there was a gap—I was getting the playbook but not the insights needed to manage costs effectively. Honestly, I didn’t even know which questions to ask. So, today, I would like to share a few key insights I discovered along the way to shed light on traditional health plans and to guide you toward a more modern benefits management approach. I’m thrilled to help you bypass the learning curve I had to navigate. Let’s dive in and shake things up together.

A Review of Self-Funded Health Plans

First, let’s review self-funded health plans. Instead of paying a fixed amount to an insurance company to cover all your employees’ healthcare, you decide to handle it yourself based on your employees’ needs. The third-party administrator (TPA) manages the payments, but you (the employer) pay the claims.

If you’re reading this, this doesn’t scare you. Hopefully, because you understand, you can enjoy significant savings compared to paying high premiums to an insurance company by only paying the claims incurred by your plan participants.

Embracing self-funding means taking an active role in how your health plan is managed and striving for transparency in every facet of the process. It’s not just about cutting costs—it’s about smarter, more tailored healthcare financing that benefits everyone involved. With that in mind, let’s move forward with questions and practical advice to empower your journey into self-funded health plans.

1. How is Your Broker Paid?

Initially, I didn’t give much thought to my brokers’ compensation or inquire about it. I should have, and here’s why. Brokers are compensated through various methods, including a percentage of premiums, fixed per-employee cost, bonuses for new business and renewals, and, occasionally, a percentage of savings.

Understanding how your broker is paid is crucial, not just to ensure fairness for their work but because their payment structure can influence their recommendations. For example, the common practice of brokers being paid a percentage of the premium means the higher your premium, the more they earn, which seems counterintuitive to cost containment.

The Consolidated Appropriations Act of 2021 now mandates brokers to disclose their compensation from insurance carriers and vendors, bringing much-needed transparency to what was once a murky aspect of broker compensation.

Be cautious of brokers who are heavily aligned with specific carriers. The deeper the broker’s ties to a carrier, the larger the potential bonus. If you’re ever told other carriers refuse to quote your group, it’s a red flag worth investigating.

2. Network Discounts…From What?

I remember being initially impressed by the 40% savings my broker boasted with our network. However, as we faced continuous rate increases, I began to wonder about these so-called “savings.” The chargemaster, or the list price for medical services, turned out to be an arbitrary starting point hardly anyone pays. The substantial discounts boasted by PPOs were revealed to be more of an accounting strategy than actual savings.

And here’s the kicker: networks don’t address quality. They resemble the outdated Yellow Pages, listing all healthcare providers without regard for quality. To illustrate, knee replacement costs within the same area can vary widely, with no link to the quality of care.

To address this gap and enhance health outcomes, self-funded plans should strongly consider adopting Patient Navigation strategies. This plan feature actively guides participants to high-quality providers, ensuring successful health outcomes and more efficient healthcare spending.

We continue to observe tangible results from effective patient navigation. Members have become savvier healthcare purchasers as out-of-pocket healthcare costs continue to soar. They’re asking for cash prices upfront, and often finding it’s actually cheaper than going through their insurance. This trend towards informed healthcare consumption empowers patients and signals a significant shift in managing health benefits.

3. Is Your Wellness Program a Good Investment?

A frequent cost containment strategy that brokers present to HR and Benefit Directors involves wellness programs. However, the practical impact of such wellness programs became a point of reflection for me when managing a self-funded plan for a large multi-state non-profit.

Our annual ‘Know Your Numbers’ health screenings were a significant investment for the organization, both financially and logistically, involving tens of thousands of dollars. This effort underscored our commitment to our employees’ health.

However, we recognized the need for strategies that not only show we care but also enhance employees’ access to the necessary care. Additionally, we did not experience the ROI on our wellness program that is consistent with the outcomes of most wellness programs, according to RAND’s Workplace Wellness Study.

Investing in accessible and affordable primary care is a more effective strategy to control costs in a self-funded plan as it identifies and treats the underlying risk. Untreated conditions can lead to ER visits, hospitalizations, and chronic conditions that drive up costs. An effective self-funded plan design will lower financial barriers to primary care, like reducing co-pays, and encouraging early treatment to significantly improve health outcomes.

The Direct Primary Care (DPC) model, with its smaller patient panels and more personalized care, offers an effective way to enhance employee health and, ultimately, your bottom line. In our upcoming self-funding blog post, we will take a closer look at Direct Primary Care, and the role it plays in minimizing healthcare costs.

Conclusion

Reflecting on my journey through the complexities of benefits management, it’s clear that knowledge and the right advisor partnerships are key to effectively navigating this landscape.

These insights, learned through firsthand experience, highlight the importance of questioning the status quo and seeking innovative solutions. As we continue to explore the potential of independent self-funding strategies, our goal is not just to manage costs but to enhance the well-being of your employees.

The journey to better benefits management is ongoing, and I look forward to sharing more discoveries and strategies in future blogs. Together, we can make a lasting impact on how benefits are designed and delivered.